New York's 'Silicon Alley' Gets an Israeli Makeover

The number of Israeli startups in Manhattan has increased fivefold since 2013. Who are the main players who think that if they can make it there, they'll make it anywhere.

There are currently more than 300 Israeli startups in New York.
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When Guy Franklin decided to create a digital map of Israeli startups in New York four years ago, there were 60 such enterprises. Now there are about 300.

How many Israeli high-tech people are there in New York? Franklin – a one-time accountant at Ernst & Young – reckons there are several thousand, with the influx of this vibrant community continuing apace. As you wander through Manhattan's high-tech ecosystem, you could be forgiven for thinking you're in Tel Aviv. Most of these people work in startup companies, but many also work for the larger tech giants like Facebook and Google.

Is this part of a brain drain from Israel? Or is it a normal feature of the high-tech world? The answer seems to be a bit of both.

Franklin, who monitors Israeli tech companies across the United States, estimates that in addition to the 300 companies in New York, there are also 300 Israeli startups in the San Francisco area and a further 150 in Boston. Dozens more can be found in Los Angeles, Philadelphia, New Jersey, North Carolina, Chicago, Texas and Atlanta. High-tech and biotech Israeli communities have developed in Silicon Valley and Boston over the past 20 years, at a time when only a few people from Israel were operating in New York. Everything changed during the tenure of former Mayor Michael Bloomberg, who decided to turn his city into a high-tech hub.

New York’s Silicon Valley was dubbed Silicon Alley and was located in lower Manhattan. High-tech people from Israel – mainly in the areas of media, advertising, video platforms and more – began to flood the city.

Guy Franklin's digital map of Israeli startups in New York.
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To make things clear: When we talk of an Israeli startup opening an “office” in New York, we are talking about small numbers – perhaps one to three representatives. A few offices have a dozen or more employees, like video startup Kaltura and content-sharing company Tabula.

Company representatives arriving from Israel are typically senior ones, occasionally the CEOs. Companies in Israel have realized it pays to be close to the markets, and these are often found in New York. Besides, who wouldn’t want to enjoy a couple of years or more in New York? It's worth noting that it’s not usually the entire company that moves to New York: R&D typically continues in Israel; marketing and working with investors is done in New York.

Drawing the digital map completely changed Franklin’s life, and he left Ernst & Young in search of something new. He recently joined Sosa, an Israeli company that arranged a coworking space for startups in south Tel Aviv. Its CEO is Roy Oron and its financial backing comes from veteran venture capitalists like Rami Beracha, Chemi Peres, Tal Barnoach and Barak Pridor. The idea was to create a modern "town square" for startups, which would link different and diverse groups in the high-tech world, promoting the advancement of startups.

The idea spread from Tel Aviv to New York. A few weeks ago, a kind of incubator for Israeli (but not exclusively) high-tech firms opened in Silicon Alley. Typically, incubators deal with companies just starting out, but in this case developed companies looking to expand overseas will also be included.

Sosa New York now occupies a pleasant albeit temporary location, with offices containing 70 work spaces. Next year, its permanent building will open, close to Barneys flagship fashion store in Chelsea. The building will have eight floors, with a total area of 43,000 square feet (nearly 4,000 square meters).

Sosa New York
StorySmith
Sosa in Tel Aviv.
Amit Geron

Sosa New York isn’t the end of the plan: Oron is planning to open further incubators in key cities around the world, though won’t reveal which ones he’s thinking of, or when they’ll open. In any case, one can understand why New York is Sosa’s first stop.

Sosa is joining a trend of companies that provide shared work spaces. The most prominent is WeWork, whose CEO is an Israeli, Adam Neumann. WeWork inspired imitators, some more successful than others; Sosa will target those wishing to rub shoulders with Israeli high-tech culture.

Some of the partners in Sosa New York include prominent Israelis who are active in New York’s real-estate market. This includes developers Ben Ashkenazy, Roni Yitzhaki and Harry Gross. A building purchased a few years ago by Ashkenazy is currently being renovated for Sosa, for $60 million (partners in the project purchased their part of the building from Ashkenazy).

Israeli startups currently operate in offices owned by companies such as WeWork, which is concentrating on such firms. There are also offices owned by Israeli or Jewish developers who are attracting Israeli startups. Sosa’s big idea is to try and attract them all to one central location, where Hebrew is spoken and the Israeli work culture is understood – something that could pave the way for Israeli ventures in the United States.

The appointment of Franklin as CEO of Sosa New York was a natural move. Very few people are as familiar with the Israeli high-tech scene in the Big Apple as he is.

“When Israelis arrive here, their challenge is to link up with the local ecosystem," he says. "The aim is that Sosa New York serves as a landing pad for Israeli startups showing up here. To make things clear, the location will be open to all-comers. Americans and others who want to rub shoulders with the Israeli startup scene won’t have to travel to Tel Aviv or Herzliya to do so. I’m in contact with some Australians, Brits and Serbs who are considering joining us. But even if there are people from other countries in Sosa New York, the place’s DNA will undoubtedly be Israeli.”

Sosa New York currently hosts seven startups – six of which are Israeli. Among these is Pq, associated with designer Ron Arad. It does 3-D printing of glasses, including individual fitting to customers’ faces.

Others using Sosa New York include Swift Shift, which has an app that helps hospitals and health-care firms manage employees; Idomoo, which provides online platforms for creating personalized or commercial videos; and developer Ran Harnevo, formerly the CEO of 5min Media, an online video syndication platform he sold to AOL in 2010. He is currently working on another project.

Israeli high-tech is faring well in New York. According to Franklin, five Israeli startups were among the 10 firms raising the most money in last year's round of venture capital. Gett raised $300 million; WeWork raised $260 million; Payoneer raised $180 million; Via raised $100 million; and Compass raised $75 million. Other successful companies like Kaltura and Outbrain also raised $50 million apiece.

However, Franklin cautions that anyone thinking "that anyone who comes here makes it would be wrong. Over the last four years, 50 startups from Israel closed down here.” In most cases, he says, these were Israelis who had worked in New York before and decided to embark on a new venture, but couldn't raise the capital. Only three new startups from Israel had to close down. “In any case, money isn’t just lying around here,” he concludes.