Michel Abadi

Independence, Melons, and the Best Conditions for Israeli Hi-Tech in Years

Hot, arid, and rocky. Welcome to the Arava region in the south of Israel. When the state was founded, conventional wisdom held that you couldn’t grow anything in this inhospitable environment. A few intrepid pioneers were determined to try anyway, and petitioned Prime Minister Ben Gurion for permission. 

I See Your Lab Results, and I Show You… One Melon

The story goes that Ben Gurion agreed to have samples of the soil and rocks sent for laboratory testing. The very same day that the envelope came with the results declaring that it would be impossible to grow anything in those conditions… was the day the determined little group in the Arava opened their first melon to discover that it was not only edible, but tasty. 

They hadn’t waited for the lab. They’d gone ahead and discovered they could do it. Afterwards, they worked out how to do it better, and more efficiently. 

I don’t know if that story is true or apocryphal (anyone who has a source for the legend, which I’ve only heard by word of mouth, let me know!) but it certainly rings very true to the ear of someone who has been working in Israel, and especially with Israeli startups, for many years. 

What is certainly true is that almost every expert advised against attempting agriculture in the Arava, because it would be impossible. Only one single agronomist said it could work, if you could find creative new ways to use the soil and water. That was enough for Ben Gurion, and for the enthusiastic young pioneers, and they set out to find out how to make it work. 

Today, there are 600 agricultural farms in the central Arava region, and they produce between them an astonishing 50% of the fresh vegetables Israel exports, as well as a lot of cut flower exports. The peppers grown there are especially well known, but everything from broccoli to eggplants to dates to melons to asparagus and much more now come from the Arava. And the average rainfall? About two inches. 

“Where Fertile Minds Meet Barren Soil”

The JNF slogan “The Arava is where fertile minds meet barren soil” says it best. The scientists who advised against attempting agriculture in the Arava had good reason to do so. Nothing about making the desert bloom sounds logical. 

The fact is, though, that as pioneering farmers, scientists and ecologists have discovered, in the Arava, almost anything can be grown, if you provide the conditions for it. Biotechnology, aquaculture and ecology research are well established there to work out the conditions and how to create them. This benefits not only Israel but countries around the world, who send students to the Arava to learn from the techniques, technologies and experiments there. 

The story of water in Israel follows the same pattern. During the period of the British mandate, the governing British authorities estimated that the entire geographical area of the mandate time could support only about 2 million people, max, due to water scarcity. 

Today, Israel alone has a population of more than 9 million, supported by the fact that, among other things, 50% of the drinking water in Israel comes from 5 large desalination plants and about 85% of sewage is recycled. Moreover drip irrigation, developed in Israel, has not only enabled crops to grow in the desert, it is also far more sustainable and efficient, and has provided a ground-breaking direction for water-scarce locations all over the world.

Harsh Conditions Can Be Ideal for Growth

When people tell the story of the Arava, or water scarcity and solutions in Israel, they focus on how amazing it is that people manage despite adverse circumstances. They focus on the Israeli characteristics of determination, resourcefulness and resilience. All of those are important – and true – takeaways. 

What people usually miss, though, is that it is precisely the harshness of the geographical conditions that have impelled the breakthroughs in science, technology, ecology and agriculture. 

It’s not that people succeed despite these conditions. With the right people these conditions result in exceptional levels of success that could not be achieved in easier situations. If things were easy, there would be no need, and thus no motivation, for counter-intuitive creative solutions and perseverance against all the odds. 

The same is true in hi-tech. A lot is being said and written at the moment about companies struggling, and how companies without the runway or strength or market fit to make things work are running out of time and the ability to adapt. The global conditions for hi-tech are tough in many ways, and resilience and determination notwithstanding, Israel is at war, and that has consequences. 

The harsh reality is that companies will close during this testing time. Some will be genuinely unfortunate losses, down to bad luck in timing and situation. Looking at the bigger picture, however, this period isn’t just something that Israeli hi-tech will survive – it will be actively beneficial for ensuring the strength and maturity of the ecosystem going forward. 

A Time of Correction: Beating Burn & Churn 

The boom period in 2021 was greeted with delight by many areas of the global tech field, but an excess of funding being invested without due caution isn’t good for individual companies or for the ecosystem as a whole. Just look at the embarrassing and in some cases tragic court cases resulting from huge investments undertaken without due diligence, or the fact that a number of companies who went public via SPAC in that time are now going private again. 

Over decades working in finance and hi-tech, I’ve seen what happens when companies are given too much money, too easily. It’s rarely good. Here are some of the main things that often go wrong:

  • Burn. If there’s a lot of money, too much gets burnt on the wrong things, like huge splashy office spaces and events that aren’t appropriate for a young company still finding its feet.
  • Churn. Products are built to suit the ego or preferences of founders, not the needs of customers.
  • Grow, grow, grow! Growth at all costs becomes the mindset, rather than strategic growth with a plan towards eventual profitability and long-term success. Growth and profit are in a tradeoff relationship – you need to make conscious decisions around that.
  • Entitlement. From leadership down, there’s a company culture that feels entitled to success rather than focused on proving they deserve it.
  • Runway blind spot. Young and even mature startups always need an eye on their runway and how they can extend it. You never know when you might need to pivot, or to lengthen the time before you look for funding. Overconfident companies ignore this and some die simply because they didn’t conserve cash when they could and should have.
  • Hide the bad. When things are good, it’s easy to project a very rosy picture that conceals the things that aren’t so good. That can carry you along for a while, but when things get tough, that practice can be seriously problematic.

All of this was why Maverick Ventures Israel was very cautious about investing during 2021 and early 2022. My partner Yaron and I know how easy and how tempting it is to get caught up in the swell of a boom. It took a conscious effort to avoid it, worrying all the time about whether we were missing out because we weren’t seeing the glitter for real – but it was an effort that we’re now glad we made. 

Why I’m Optimistic About What I’m Seeing

The Israeli ecosystem was never the poster child for the absolute worst versions of the mistakes and abuses I’ve just talked about. But it wasn’t immune from them, either. After the last year of challenges that many of us never expected to experience, there’s been a huge change. 

This is what I’m seeing now:

  • Sane valuations. For good companies, with strong products, there’s still funding to be found. The large rounds that have been seen over the last several months show that, and there are plenty of smaller but significant rounds that indicate the same thing. They are numbers that make sense now, while still offering fair terms to founders. 
  • Realistic founders. Entrepreneurs are acting and planning with pragmatism, not taking on more employees than makes sense, and producing quarterly and annual goals and strategies that match reality. 
  • Runway extension. Companies are conserving their capital, especially by jettisoning things they are now able to see as “nice to have” rather than necessary, such as over-large office space.
  • Focus on customer need. Products, sales and customer success are being driven by customer need and satisfaction. If they don’t like it enough to pay for it – the company needs to do it differently.
  • Strong new ideas. There’s been no slow down in the new companies we’re seeing and evaluating. The strength of the initial pilots and concepts we’re seeing is impressive.
  • Listening mindset. Founders who might have been too confident to pay attention to experienced investors previously, are now listening to and soliciting advice, which is in turn engendering a trusting relationship that makes it easier to share bad news transparently.
  • Lean operational mindset. This applies across departments and industries, and is reflected in both management and employees, including a return to predictable and reasonable compensation agreements.

You wouldn’t think it from what you see on the news, but when you look at Israeli hi-tech and discount the volatility from 2020 onwards, and think about the current period as a continuation of 2019, everything feels… stable.  

Strong Roots for the Future

What we’re seeing right now in Israel is accelerated natural selection – even more so than elsewhere in the world. Those companies too weak to survive, probably won’t. The lessons people learn from that will benefit future startups. In fact that’s already happening; I have started hearing it echoed by founders who come to pitch. 

Companies with strong teams, products and market fit are still able to make sales, find funding, and achieve M&A as appropriate. It may take them longer than it would in other market conditions, but this is not a bad thing. It enforces discipline around spending, realistic budgeting and planning, and the need to ensure customer satisfaction and the creation of products that people are willing to pay to use. It’s happening already. No one is waiting to be told what to do. Like the early Arava farmers and their melon – they’re already doing it.

The pioneering insistence of growing fruits and vegetables in the arid Arava region didn’t just result in plants in an inhospitable terrain. It created a huge section of Israeli agriculture and export, and drove research that has had huge benefits in Israel and around the world and continues to do so.

The startup founders and workers of today, who persevere with ground-breaking ideas with a pragmatism, frugality and focus on customers made indispensable by the current conditions, will benefit in the same way. They won’t succeed in spite of the challenges. They, their companies and the ecosystem, will be stronger, more profitable and more robust because of exactly these challenges. 

I’m a realist rather than an optimist by nature. And when I look at Israeli hi-tech today, that makes me feel confident.  


About the Author
Michel is Managing Partner at Maverick Ventures Israel, working with startups across the Israeli startup ecosystem. Before that he spent over a decade at and was the Global Head of Product Development at Gems Fund of Funds, which at its peak managed over $7.5 billion. He previously worked at Banco Patrimonio, Chase Manhattan Bank and J.P. Morgan. He has been responsible for the design, structure and implementation of a local fund of hedge funds worth US$ 1 billion, in addition to an advisory desk for local markets, currency trading and creating structured trades. Michel holds a Production Engineering degree from the University of Sao Paulo, and a Master of Business Administration conferred jointly by Kellogg School of Management and Leon Recanati Graduate School of Business Administration. Michel is the Chairman of Aish TLV, which bridges the gap between religious and non-religious young leaders. He is also the Chairman of Beit Brasil, which helps Brazilian Olim in their first year in Israel.
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