A Venture Capital Paradise – Can the Israeli Model Hold the Key to Success?

On its journey to become the most attractive country for research, innovation and new technologies in Europe, France has become a formidable fundraiser. Innovative companies in the country have raised approximately two billion euros in the first half of this year alone. However, when looking at venture capital investments as a percentage of GDP, when compared to other OECD countries, France ranks in at number 8 with roughly 0.05 percent in 2017. In Israel for comparison, venture capital investments made up nearly 0.4 percent of the GDP during that same year, and the percentage of investments in the seed/start-up/early stage was the highest among OECD countries, surpassing the United States.

The fact that Israeli companies have been so successful in attracting venture capital investments has made it a preferred stomping ground for investment hungry entrepreneurs. Israel is home to a flourishing entrepreneurial society, and has produced venture-backed companies such as GPS navigation software Waze Mobile, which had been acquired by Google in 2013 for $1.3 billion. This boom has prompted more than 250 multinationals to establish research and development centers in Israel, such as Amazon, Alibaba, Apple, Facebook, Google, Microsoft and the list goes on. According to some major entrepreneurs, the Israeli startup landscape is most appealing, as top-quality deal flow in other locations such as Silicon Valley, is mostly restricted to a handful of companies. This means that entrepreneurs who are not locally based lack market access in the Valley, which fuels their desire to search for good business opportunities elsewhere.

And why is this important to France? The answer is that France too can become an attractive destination for venture capital investments. Within the OECD European countries, France is one of the countries leading the way, lagging behind only the United Kingdom (which will not be considered a European nation per se much longer) and Sweden. France has made great strides in its effort to become tech-friendly, as French President Macron stated many times and even inaugurated the renowned Station F, Parisian based mega-campus for startups.

The fact is that demand is soaring, a fact further demonstrated by mass multinational investment in Israeli tech companies. It is well known the tech companies in Europe face troubles scaling up unlike their American counterparts, if due to language barriers or bureaucratic hurdles. However troublesome it might be for French tech to scale up, for the time being it can assert itself as a top destination for venture capital investments, focusing on early stage endeavors, or startups.

France is abundant in engineers, and takes pride in a long innovative history which plays to its favor. This could provide a great breeding ground for preliminary tech ventures. Indeed, Israel too faced and still faces problems when it comes to scaling up startups. However, as the Israeli tech ecosystem develops and matures, diversification is apparent in skills and experience appropriate for different phases in the companies’ existence. Israeli matured companies include Fiverr, IronSource, Wix and others, signaling that the way there is possible. Certainly, Silicon Valley was not build in a day.

If French companies seek to compete internationally for venture capital investments, perhaps it would be better to primarily focus on investing funds in startups and new initiatives, appealing to international buyers. After a local industry is well established and asserted, scaling up could be possible, once a skilled workforce, invaluable expertise and ease of doing business take root, there is nothing that could stop France’s leap towards its coveted “Startup Nation” prominence.

About the Author
Sharon holds a Master's degree in Political Science from Tel Aviv University and the prestigious Paris Institute of Political Studies, commonly referred as Sciences Po. During her studies in Paris, Sharon had interned at the Permanent Mission of Israel to the OECD, and was selected as spokesperson on behalf of the European Union of Jewish Students at the Human Rights Council at the United Nations in Geneva.
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