Checking Retail Tech in Israel

Checking Retail Tech in Israel

By: Judah Taub, Managing Partner, Hetz Ventures

Judah Taub is the managing partner of Hetz Ventures, a $50 million international fund focusing on early-stage Israeli start-ups. Judah has acted as a senior consultant on data and technology for Lansdowne Partners, a $20 billion hedge fund, as well as advising multiple young start-ups. During his tenure in the Israel Defense Forces Judah served as an officer in a classified intelligence unit, where he had responsibility for running large-scale projects. He has demonstrated his capabilities as an established lecturer on time-management and creative thinking. Additionally, he has authored a book for new IDF soldiers published by Yediot, Israel's leading publisher.

On the face of it, Israel is an unlikely place for retail innovation to thrive. The local market is tiny and there is not an obvious link between retail and the security and defence technologies (such as cyber security) that spinoff much of Israel's start up business. However, the data indicate otherwise showing over 500 Israeli start-ups specialize in retail tech; together these raised $428M in 2018 alone ($14.5M mean), representing a 20 percent YoY growth and 10 percent of the total investment in retail tech worldwide. And this, for a country with only 8 million people.

"Gradually, the Israeli retail-tech scene is becoming one that international retailers cannot afford to ignore"

Why The Sudden Interest In Retail Tech?

The surge is largely driven by retailer interest. The retailers quite simply do not have a choice; it is innovate or die. At a recent forum attended by some of the largest European retailers, one of the panel discussions was titled ‘who won't be here next year?’ The need for innovation, digitization, automation and personalization are being discussed regularly at a board level, often led by the Chief Innovation Officer, a C- level position that barely existed a few years ago.

Why Is This Exciting For Israel?

The typical retailer has an abundance of data and is willing to invest large sums of capital in the right project but usually has very few cutting edge data scientists. As one FTSE CEO said to me; “Matching Amazon’s tech salaries would not solve my problem, the reality is that no brilliant data scientist wants to work in my company. For a country made up of enthusiastic, risk-taking, deep-tech entrepreneurs, this market dynamic is a powerful calling card.

Where Is Israeli Retail Tech Heading?

Gradually, the Israeli retail-tech scene is becoming one that international retailers cannot afford to ignore. Amazon, Alibaba and eBay have all opened large R&D centres and are rumoured to be planning to double their local headcount over the next 18 months; Walmart recently made its first acquisition and hundreds of others are partnering with local VCs and platforms such as Re- Tech, The Shelf or BIG to facilitate innovation.

What To Look For In Israeli Retail Tech?

Local market know-how is not strong, but the tech talent is extraordinary, so as a rule of thumb, Israeli start-ups tend to perform better when the core challenge is technical rather than market-related. From in-store technology such as Trax or Trigo, to ecommerce data providers such as Market Beyond or Syte, if technology is the key driver Israel will be relevant. The fashion influencers with millions of followers may stay in Paris but if you are interested in the systems used to collect this data then Israel should definitely be in your sights.

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