Meeting the challenges of accelerating Jerusalem hi-tech
With its high-rise towers and non-stop energy, Tel Aviv grabs the majority of Israeli hi-tech headlines. Yet 70 kilometers away and more often associated with religion and history than hi-tech, Jerusalem is enjoying a boom in cutting-edge innovation.
Some of Israel’s entrepreneurial ecosystem may have raised an eyebrow in 2015 when global start-up accelerator MassChallenge announced that its first location outside of the United States and United Kingdom would be in Israel’s capital.
Four years later, and after successfully accelerating 200 start-ups, the Boston-headquartered nonprofit has become an important element in Jerusalem’s burgeoning business surroundings.
Led by managing director Yonit Golub Serkin from a modest office near the city’s Mahaneh Yehuda market, MassChallenge is determined to identify and embrace the best innovators in the city and further afield, no matter their background.
“MassChallenge is all about creating economic development, change and thus creating jobs for the future,” Serkin told The Jerusalem Post. “Jerusalem has so many incredible, inherent ingredients for an active and vibrant ecosystem – universities, hospitals, an educated population and government leadership.”
According to data gathered by the organization, start-ups graduating its four-month, zero-equity Jerusalem accelerator program have directly or indirectly created 7,000 jobs, including 2,000 within the city, and raised in excess of $200 million in funding.
Some 83% of graduate start-ups are active today, an impressive figure in the world of early-stage entrepreneurship. In addition, Serkin proudly states that three companies have successfully recorded “exits” to date, including NetApp’s May acquisition of data protection start-up Cognigo for a reported $60 million.
“When we launched in 2016, working very closely with then-mayor Nir Barkat, we were given the opportunity to establish this worldclass, global brand in the city of Jerusalem,” said Serkin, who previously served as deputy chief of staff for economic development at the office of former New York City mayor Michael Bloomberg and as spokeswoman for the New York City Economic Development Corporation.
“Now, four years later, we are working with very closely with Mayor Moshe Lion’s team, and seeing where changes are taking root,” she said.
Exceeding expectations, MassChallenge’s accelerator in Jerusalem has proved capable of not only attracting start-ups from across Israel, but also many from abroad.
Over one-quarter of all start-ups participating in the program are headquartered outside Israel, but have returned to their places of origin with connections to Jerusalem that previously did not exist. Numerous companies have brought Israeli businessmen and women onto their board of directors, carried out pilot programs in Israel, and have received financial support from angel investors in the country.
“We had never previously seen such a model where entrepreneurs choose with their feet to come to another place that doesn’t represent a market – but they chose to relocate and absorb the Start-Up Nation,” Serkin said.
As a matter of fact, attracting population groups that are not as prevalent in other accelerators has become an important feature of MassChallenge Israel’s activity. Approximately 40% of participating start-ups have included at least one female co-founder, far exceeding the national average of approximately 10%.
“We made a concerted effort, without quotas, to attract female entrepreneurs to join the accelerator,” said Serkin, who is currently preparing to open applications for the program’s fifth cohort of start-ups. “But they have to get in by every same measure as other entrepreneurs.”
Challenges still persist in fundraising equality, with women worldwide less likely to raise capital at the same level as their male counterparts. More than 25% of capital raised by MassChallenge Israel start-ups has been secured by female graduates, surpassing funds raised in other locations but still disproportionately low. In the US, a recent Pitchbook report revealed that female founders received just 2% of venture capital funding in 2017.
Yet a study earlier this year by MassChallenge and Boston Consulting Group revealed that start-ups founded or co-founded by women prove to be significantly better financial investments. For every dollar of funding, the study revealed, female-founded startups generated 78 cents, while male-founded start-ups generated only 31 cents.
Inevitably, not every start-up that completes the program will opt to remain in Jerusalem or subsequently relocate to the city.
Ultimately, Serkin added, the continued economic development of the city will take time. The process is a “journey, not a road,” she said, and the city needs to continue to make itself a leading place to work, live and play.
“Jerusalem doesn’t need to be Tel Aviv,” she said. “It does need to be, and can be, a really great Jerusalem that brings together global companies, governments, international players and entrepreneurs, and connects them with the best minds at universities and hospitals. We’re witnessing the birth of more start-ups in Jerusalem, they are growing for a sustained period of time in the city, and we’re seeing more infrastructure come to Jerusalem. MassChallenge is part of that. We’re bringing the experts, mentors, investors and stakeholders necessary for a young start-up to Jerusalem.”