Up until a few months ago, it was an all familiar path. Israeli founders team up to create a technology that solves an existing problem in a big market, and immediately look to expand to either New-York or Silicon Valley in the search for US funding, customers and talent so they can build a global business. This is a model that’s been proven time and time again, with much success. In fact, it’s been so successful that Israeli tech has changed its nickname from Startup Nation to Scale-Up Nation. Then, Covid-19 hit and everything changed.
Suddenly, these US tech hubs aren’t quite as attractive. NYC suffered a major economic hit as many fled the city and thousands of businesses closed, while California is projected to take more than two years to recover from the effects of the past seven months, if not more. The coronavirus pandemic also slowed down some of the momentum New York had built over the past few years in terms of nurturing Israeli tech. While the VC community in the city is still extremely active, and funding for enterprise tech startups has remained surprisingly steady despite Covid-19, according to a recent report by work-bench, some of the latest initiatives such as the creation of Cyber NYC and the establishment of a robust Israeli tech ecosystem in New-York have taken a hit given the travel restrictions and safety measures.
This shift – along with the new normal of business functions operating virtually – has opened the door to new, under the radar tech hubs eager to attract great Israeli talent. This new opportunity has the potential to accelerate growth of these lesser known tech hub cities and surrounding areas, while offering a much more affordable living, a balanced lifestyle, and a supporting community for promising entrepreneurs..
Three hubs in particular are making a run at Startup Nation – Tulsa, Cleveland and Miami.
Tulsa – Affordable, Welcoming, Livable
Located in central Oklahoma, Tulsa is an energy powerhouse, positioning itself as a center for interconnected verticals such as virtual health, energy tech, drones, cyber, and analytics. A big driver of innovation is the University of Tulsa, one of the largest feeder programs to Homeland Security and the NSA, as well as other world-class academic institutions, which helped develop a significant amount of talent in the area.
Elon Musk actually considered opening Tesla’s truck Gigafactory in the city. Add to that the newly launched Tulsa Remote, which provides workers a financial incentive and soft landing in a new city, as well as a thoughtful community-focused approach to attracting talented remote workers to Tulsa and you can see why more and more young people are attracted to a city that offers affordability, livability and job opportunity.
Yet, building a brand and rising above the noise is still a tall task. This is where tapping into Israeli tech talent can make the story a lot better. Michael Basch, Managing Partner of Tulsa-based Atento Capital, knows that there is a short window of opportunity to attract Israeli talent to Tulsa and has made it a personal mission. “We feel that we have the foundation of a great tech ecosystem – venture backed startups, a strong university, software and sales talent, state of the art coworking space, are all here. We feel Tulsa to be a hidden gem in the Heartland.”
Atento Capital recently invested in a couple of high profile Israeli focused venture firms, Team8 and Hanaco Ventures, both committing to exposing their startups to the growing tech talent in Tulsa. But for Basch, this is just the beginning. He wants more and is willing to commit more resources to this mission. “For Israeli companies looking to expand to Tulsa, we offer relocation matching, assistance with visas, free recruiting services, free office space, introductions to potential customers and potential investors, among other perks. We want to provide Israeli companies with an unfair advantage in their expansion by choosing Tulsa.”
Cleveland – The Comeback City
Over the past few years, Cleveland has gone through a shift as tech startups are replacing decades-old factory businesses and the jobs associated with those industries. Led by Cleveland Clinic and it’s accelerator program, Cleveland has become a health tech powerhouse, accelerating the development of scientific discovery into commercial products that improve health for patients. In addition, an active VC community focused on Midwest innovation, hungry entrepreneurs, and support from the local government and suddenly the heartland is a tech hub worth considering for Israeli founders.
Scott Shane is a Mixon Professor of Entrepreneurship at Case Western Reserve University and Managing Director of Comeback Capital, an early stage fund with a complete focus on funding and accelerating startups in the Midwest, so they can grow and attract funding from the larger VCs in New York and Silicon Valley. Shane is confident that the latest pandemic is a pivotal moment in time for the development of this tech scene. “Covid-19 has dramatically changed the places in the US where Israeli tech startups want to go”, he states, citing the need to get customers and sales talent as the most attractive elements in choosing to come to Cleveland.
Shane mentions that things are dramatically different in a post coronavirus world: “prior to the coronavirus, if companies were focused on manufacturing tech or technology companies serving consumer packaged goods or logistics businesses, they would want to locate near their customers, which was typically places like the Midwest or Southeast. But pushing them in the direction of New York and the Bay Areas was the need to get talent and money.
The money is still concentrated in the Bay Area and New York but the VCs are getting more comfortable investing in companies outside of New York and San Francisco, taking initial meetings virtually, and seeing that founders working in Tel Aviv and Indianapolis aren’t really that different from founders working in Tel Aviv and New York. The end result is a broader geographic spread of Israeli startups’ US location to more of the American heartland.”
Miami – The Sunshine State
Outside of New York and Los Angeles, Miami boosts one of the largest Israeli communities in North America. Yet, tech has never been a big part of it. Now a group of Israelis are looking to change that, by building a tech community in the Sunshine State. Miami offers a lot to Israeli entrepreneurs – a bridge to Latin America, a strong pro-Israel community in southern Florida open to supporting Israeli startups, and abundant sunshine.
Now, a group of Israeli real estate entrepreneurs, the city and local tech communities such as Refresh Miami are looking to build a ‘tech-bridge’ between Miami and Israel, mainly around four verticals – digital health, proptech, logistics, and travel tech. Uri Adoni, Managing Director at Mana Tech, is a long time Israeli venture capitalist and the author of the recently published, The Unstoppable Startup, which shares the secrets to Israel’s incredible track record of success in building game-changing startups. Recently, he joined the effort to help build a bridge between Israel and Miami.
For Adoni, expanding to the US is one of the hardest tasks of a small Israeli startup, and this is where Miami can make a difference for Israeli founders. “Since Israel is a relatively small country, one of the main challenges that almost every Israeli startup faces is how to expand their activity internationally at a relatively early stage.
This global expansion includes various aspects such as setting up the legal entity, recruiting the right people, having the right tax structure, plan the right marketing campaign, and probably most importantly, make sure there’s a right market-product fit by talking to as many potential customers as possible. Local tech-hubs in the US such as Miami could be a great “landing pad” for such startups, providing they could assist them with their expansion and penetration to the US market.”
These three tech hubs are making a concentrated effort to attract Israeli talent, and seize the opportunity Covid-19 has presented them with. Will Israeli startups answer the call? It’s still yet to be seen.