International investors continue to demonstrate their faith in the value of innovative technologies from Israel. During the third quarter of 2019, investments in Israeli startups reached a record high of $2.24 billion. Although Indian investors contributed little if any to this amount, I believe we will see more and more investments from India in Israeli startups over time, to the benefit of all.

But why invest in Israeli startups, when India can take pride in its very own multitude of successful startups in various domains? Here are four reasons to do so. The first two are the more obvious motives, while the last two might sometimes be overlooked, although these are the ones that often finally turn the needle:

  1. Technological edge – what more needs to be said about the strength of Israeli innovation? The audacity of Israeli start-up founders, along with their military background (especially of those coming from Israeli intelligence units), result in a level of sophistication and originality that makes them stand out on a global level. This extra edge can mean a big advantage over competition.
  2. Return on investment – Investing in startups is always risky, but on a world scale, Israeli startups foster good returns. Israel is among the world leaders not only in the number of startups but also in the value of exits. According to one recent study Israeli exits in the last decade surpassed in value those of France and Germany combined.
  3. Research and development – An investment in an Israeli startup often gives the investor access not only to the technology the startup developed, but to the startup’s R&D capacities. The heart of the best Israeli startups is their R&D, and joining hands with them can lead to joint R&D projects (which can receive further funding from government funds such as the I4F), or even to a focused R&D effort on specific pain points for the investors or for their group or portfolio companies. In some cases, such investments even led to the creation of a targeted R&D center. One recent example of such a partnership was Flipkart’s acquisition of Upstream Commerce last year, which led to the establishment of an R&D center in Israel. Other Indian companies with R&D centers in Israel include Tech Mahindra, Infosys, Wipro, L&T and more.
  4. Network and access to new markets - Israeli startups often attract international investors, and joining an investment round in a leading Israeli startup also means entering a very exclusive circle. Investing along with world class corporates and VCs from around the globe is a way of partnering with them, and accordingly opens special opportunities. In addition, investing in an Israeli startup is sometimes a means for investors to create an opening for the international markets in which the startup is operating, mostly the U.S..

With a true and growing friendship between the two nations and a huge market to cater to, Indian investors are sure to tap into Israeli innovation for new opportunities.

Views are personal. The author teaches at Tel Aviv University and is the founder of Lucid IL, a business-development firm promoting Israeli technology in India.

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