By Charlotte Henry
From Silicon Valley to Shoreditch, and Tokyo to Tel Aviv technology firms are constantly looking for the next big thing. At the moment, many of the greatest minds and deepest pockets in technology are turning their attention to Artificial Intelligence (AI), and Israel is playing a key role in this sector’s burgeoning development.
This much was clear when Intel announced that it was going to spend US$15bn (£12bn) on Israeli firm Mobileye, which makes AI products for autonomous vehicles. The deal will be the most lucrative sale of an Israeli firm ever. It also reveals the strong international trade relationships Israel is building based on its high-tech capability.
The significance of Mobileye
The announced takeover of Mobileye by chip-making giant Intel on March 13 showed very clearly that Israel is at the forefront of the AI revolution. It also shows that the technology sector in Israel is continuing to expand in new and lucrative directions.
Professor Ben Gomes-Casseres of Brandeis University’s International Business School told the Jerusalem Post that this deal did not feel like a normal exit by a technology startup, but the beginning of something much bigger. He said: “It feels different – like an entry. It seems like a scale-up. This is an industry where being small doesn’t pay.”
More than just being the country that graduates people from the army to cybersecurity companies, Israel is now producing products and firms of at the forefront of development in a wide range of technology. In the case of Mobileye it is systems for autonomous vehicles, which are going to be very significant in the future.
Some have queried why Israeli companies seem keener to sell out to major international firms than continue to grow. Put simply, why do Israeli entrepreneurs want to sell their company to Facebook, instead of trying to be the next Facebook?
After all, the sale came after Mobileye had already combined with BMW and Intel and boasted a 49 per cent increase in sales that year, bringing in US$358m (£287m) in 2016. Perhaps it could have continued to stand on its own?
“A concern over the years has been that compared to the US, Israel cannot produce outsized returns,” Adam Fisher, a partner who manages the Israel office for California-based venture capital fund Bessemer, explained to Reuters.
Mobileye co-founder Amnon Shasuha explained his decision to Reuters: “All of these [new products] need time to build and time to get resources and Intel already has these resources. If we want to … be the key player in autonomous driving, we need to think about it as an industry and not as a product.”
Days after the Mobileye deal was announced, Teddy Sagi, the Israeli tech entrepreneur who founded Playtech, revealed that London based hedgefund Boussard & Gavaudan bought 4.1 per cent of the online casino in a deal that netted Sagi £113m. The firm is officially headquartered in the Isle of Man, not Israel, trades on the London Stock Exchange, and Sagi himself is based in London.
Ultimately Israeli companies want to, and need to, expand internationally in order to compete.
A partner to Brexit Britain
This international outlook puts Israel in a strong position when it comes to trade deals. Tomorrow, UK Prime Minister Theresa May will trigger Article 50 and formally begin the UK’s journey to leave the EU. The Government has made it clear that it sees Israel as a key trading partner for Brexit Britain.
As BICOM CEO James Sorene explained on the Huffington Post: “Bilateral trade is booming, in 2016 it reached a record high of £6bn. Every Government minister who visits Israel returns to Britain energised by the increasingly exciting joint ventures in science and hi-tech that bring a slice of Israeli innovation back home. Hundreds of Israeli tech companies have set up in the UK and they are continuing to expand.”
The high-tech trade relationship between the UK and Israel is paying dividends for both countries in other ways too. For example, the UK Government recently announced that it would create five new digital hubs, based on the model of the Israel-UK tech hub that has been so successful in Israel.
As is the case in other areas, Israel is turning disadvantage and necessity into an advantage when it comes to high-tech trade. Companies like Mobileye are positioning themselves at the forefront of technological revolutions, while Israeli entrepreneurs like Teddy Sagi have built hugely successful companies, and personal fortunes, trading on the international markets.
The ever growing list of successful Israeli technology firms are now covering a wider range of sectors too, areas such as fintech, medtech, and education, not just sectors like cyber security that the country has traditionally been associated with.
With Britain’s exit from the EU fast approaching, Israel’s outward looking technology leaders are in prime position to build on the countries’ existing relationships, and be a leading trade partner.
Charlotte Henry is BICOM’s Senior Press Officer.