Israeli Hi-tech Startups Are Booming. This Is What It Takes to Raise a Unicorn

Fifty startups in Israel now exceed $1 billion in value, with half of the total crossing the threshold since 2020. Who are the entrepreneurs behind the companies and to what can their success be attributed?

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A unicorn mask in a startup office
A unicorn mask in a startup officeCredit: Max Whittaker/The New York Times
Omri Zerachovitz
Omri Zerachovitz
Omri Zerachovitz
Omri Zerachovitz

One of the most successful companies in Israel in recent years is Wix, whose platform lets users easily build their own website. Fifteen years ago, two friends, both veterans of the Israel Defense Forces’ 8200 intelligence unit, Avishai Abrahami and Giora (Gig) Kaplan, were sitting at the Banana Beach seaside bar in Tel Aviv after having raised the initial capital for their startup and wondering if they should change direction. At the time, they were 34, had already founded several companies each, and likely didn’t think that their latest project, a company they almost didn’t follow through on, would reach a $19 billion market valuation and come to employ 4,500 people around the world.

There are many reasons why entrepreneurs and companies can fail to find success, such as a lack of need for their product, losing out to competitors, problems with the business model or product pricing, inadequate development, or relying on the wrong team, to name a few. Often, just one reason is enough to cause a company to fail, but in order to succeed, you need a combination of things to go right.

Wix's Tel Aviv officeCredit: Moti Milrod

What led Avishai Abrahami, Kaplan and the third member of the team, Avishai’s brother Nadav Abrahami, to succeed where so many others have failed?

“A good entrepreneur needs a brown belt in practically everything that the company does,” Abrahami said in a recent interview published in Globes. But that alone certainly is no guarantee that a company will succeed. Successful entrepreneurs and CEOs bring an array of traits and talents to the task, along with a certain mental disposition. It’s not an exact science – Does an entrepreneur need technological capabilities or leadership skills? Do they need to be able to recruit good people right from the start, or to figure out what the rest of the team is missing? Maybe the key skill is being able to tell a story? This is the million- (or billion-) dollar question of the startup world, as well as the local high-tech industry as it matures.

In the past two or three years, a growing number of large companies have flourished in Israel. While most are not on the scale of Wix, they do employ hundreds of people or more and are valued at at least $1 billion. In all, there are nearly 50 such companies in Israel, half of which achieved this valuation since the start of 2020. Among the largest companies, those valued at $5 billion or more, an unprecedented process has occurred, which some are calling a “big bang.”

After many years in which the industry here did not produce any large companies aside from CheckPoint and Amdocs, in the past year or two, seven more companies have joined the $5-billion club: Wix, Lemonade, Fiverr, JFrog, Playtika, SolarEdge and CyberArk (NICE Systems preceded them by a little bit).

This growth is not to be taken for granted, given the stigmas that have come to be attached to Israel entrepreneurs over the years: that they are very technologically savvy but don’t necessarily know how to bring the right products to market; that they lack the knowhow to market to consumers; and that they’re looking for a quick exit; among other notions. The 100-150 Israeli entrepreneurs who’ve succeeded in founding companies with a high valuation are proving that this is not necessarily the case. Who are these entrepreneurs and to what can their success be attributed? Personality traits? Career paths? Or some confluence of events?

Early competitive advantage

Let’s begin with a basic survey of these entrepreneurs’ professional backgrounds, which appears to be a key component of their success. A survey by TheMarker Magazine of 50 private and public companies founded in Israel in the past 15 years and which are currently valued at $1 billion or more found that for half of the entrepreneurs, this was not the first company they founded. Their previous companies may not have been major successes, but they did provide the entrepreneurs with valuable experience.

“Ten years ago we couldn’t have done what we’re doing now,” says Alon Bloch, one of the founders of K Health, which developed an app that provides people with an initial medical opinion. Bloch, 51, worked as a venture capital investor, was CEO of Wix for three years and also founded Vroom, which sells cars online and is currently trading at a $6.2 billion valuation. “Over the years, we accumulated business experience, life experience and experience with people. For example, we learned how to do partnerships right. I see companies that are developing interesting software and then they close a partnership for peanuts, in a way that doesn’t allow them to build a significant company.”

It’s not surprising that among the top entrepreneurs, many (47 out of 121) are veterans of top technology units in the IDF, but there are also many who served as combat soldiers, such as Lemonade CEO Daniel Schreiber, who was in Golani’s 51st Battalion; Outbrain founders Yaron Galai and Ori Lahav, who were officers in the navy; Payoneer founder Yuval Tal, who served in the 669 Rescue Unit; and Gong.io founder and CEO Amit Bendov, who was in the armored corps. It appears there is no single formula as far as military background is concerned, as is also evident if you consider Oren Kaniel, founder and CEO of AppsFlyer, who served as a cook in the army. However, Kaniel and 60 percent of these entrepreneurs all have degrees in computer science, engineering or the sciences.

Meeting a certain checklist doesn’t make a person successful or mean their next company will be worth a billion dollars. The importance of examining the entrepreneurs’ biography is based on the theory that their background provides some of the necessary tools for success, or opens alternative paths to success, such as for those who didn’t gain technology knowhow during their military service. It certainly doesn’t mean that there are objective reasons for the small number of women on the list (only three) and that there is not a single Arab or ultra-Orthodox entrepreneur on the list. This is not a reflection of the abilities and skills of these groups, but rather their under-representation in the relevant frameworks at earlier stages – in certain high schools, in the army, in academia – and finally at tech companies.

“It’s hard, and even a little dangerous, to make generalizations, since then people get this typecast in their heads about the model of the entrepreneur – that they must be a certain age, a veteran of Unit 8200, and that other people aren’t suited to this or that it’s harder for them,” says investor Oren Ze’ev, who invests in early-stage companies and has invested in several unicorns, including Houzz, Tipalti and Next Insurance.

Oren Ze'evCredit: Ofer Vaknin

“They used to say, ‘How can you spot a good salesperson?’ And the answer was: ‘They’re the one who sells more than others.’ Likewise you can say that you can tell a successful entrepreneur by the fact that they’re successful. There are some entrepreneurs who are good managers and others who are terrible managers; there are some who want to keep power concentrated in their hands and others who empower their employees,” Ze’ev says. “The variance among entrepreneurs is no greater than among people in general. Many venture capitalists draw sweeping conclusions from a couple of successes or a couple of failures. I think that’s a mistake.”

Zeev Farbman, one of five founders of Lightricks, a company that developed a picture processing app, says something similar. “Not long ago I had a discussion with some people about whether a CEO has to be a difficult person. People said, ‘Look at Bill Gates and Steve Jobs – they were like that.’ But it’s hard to say whether success is due to a certain characteristic, or despite that characteristic. These elements are extraneous to success, they’re not at the heart of the matter. For instance, often success is a result of a big new market that the entrepreneurs know how to take advantage of. That’s what Gates and Jobs did, when they got involved at a very early stage of the computerization revolution. There are cases where the timing is so good that even if the execution is not first-rate, you’ll still get far. That was the case with Twitter, whose founders were mainly caught up in bickering with one another in the early years. And there are cases where the opposite occurs. There are groups of people who get involved in something that’s ahead of its time. This ties in to the fact that one of the most important things is competitive advantage – it could be the right timing, an ability to get to the market first and quickly get ahead, or as happened in our case – having focused technological knowledge that enabled us to put a software processing algorithm on the relatively weak hardware of the iPhone at the time. We subsequently were able to leverage it into other things.”

Still, what works in the beginning might not turn out to be what takes the company to the next stages. “Until a company reaches $100 million in revenue, the most important thing is product/market fit,” says Ze’ev. “Good people can miss this, and people who are less good can hit it. In the next stage, what enables a company to go from $100 million to $1 billion or more in revenue is the organizational culture, and that’s something the entrepreneurs are responsible for. The question is whether the company continues to operate with a mentality where each person considers themselves a partner in the company and cares about the company, or if it devolves into internal politics and subjective considerations. Management abilities are tested more at this stage.”

Zeev Farbman, one of five founders of Lightricks

Focus and patience

Studies point to adaptability, self-discipline, coolness under pressure and ability to deal with uncertainty, a need for achievement or recognition, a desire for independence, passion for work and a proactive personality as the most important traits for entrepreneurs. These must be supplemented by education, work experience and mental readiness. But what do these things actually look like? Are they really that crucial? What traits do the Israeli founders of big companies have?

“In soccer there are players who dribble in the middle of the field, defensive midfielders, and offensive midfielders who are constantly thinking ahead and seeking the net. Entrepreneurs who build unicorns are offensive midfielders in their DNA,” says Aaron Mankovski, a partner in Pitango Venture Capital, which has invested in DriveNets, Riskified and Taboola, among other companies. “As soon as they see that the field is theirs, the only thing they’re focused on is the net. These are people who take no prisoners.”

Entrepreneurship requires a certain type of personality that can cope with the ups and downs that come with the territory. Abrahami once compared the feeling to jumping out of a plane at a low altitude, and the parachute fails to open. The entrepreneur has to experiment quickly and with self-confidence in order to land on their feet. Robert Antokol of Playtika, which recently went public and has a valuation of $14 billion, once said: “Being a CEO of a company that grows very quickly is like getting a ticket for a train going 1,000 kilometers per hour, without knowing where it’s going. You’re sitting in the front seat, you think you’re controlling which way the train is going, but that’s not necessarily the case.” Successful entrepreneurs have to be able to handle such experiences.

Aaron Mankovski, a partner in Pitango Venture CapitalCredit: Yoram Reshef

“Someone who grew up in a challenging environment – not sleeping on the streets per se, but having experienced tough things in life – it’s easier for that person to become an entrepreneur,” says Eynat Guez, a founder and CEO of Papaya Global. “That kind of background gives you a better sense of proportion when it comes to crises in a company. People like that have a lot of emotional strength and if they encounter challenges early on, they really develop this strength.

“CEOs have no fear. It has something to do with the psychological profile. Most CEOs have something eating at them. They came from a place of lacking, and they have a need to prove something, to rise up from a minus to become a plus. I’m that way too. Somehow it causes those entrepreneurs to have more drive than other people,” she says. Gigi Levy-Weiss, who has invested in numerous unicorns, says, “A desire to prove oneself can also motivate someone who comes from a successful family and has to compete for their place, or it could derive from a sense of shame over earlier failures.”

No ‘me me me’

When Wix went public in 2013, the board had to decide which directors to insure, in case something should happen to them. Abrahami told the rest of the board members: “We have to insure Omer Shai (the VP of marketing). He’s the most important person in the company.” Shai is not one of the founders, nor is Nir Zohar, the company president, but they are two of the dominant people in the company.

The way in which a team is built at the start is very important, and personality matters here too. If someone surrounds himself with yes-people, there’s probably a reason. “Good entrepreneurs surround themselves with people who are stronger than them, not with sycophants,” says Michael Eisenberg of Aleph venture capital, citing the recruitment strategies of Lemonade’s founders as a positive example. Another example is Taboola founder Adam Singolda, one of the few people on the list who founded a company on their own. In the early stages, Singolda brought on board Eldad Maniv as president and COO. Maniv is known for his superb executive skills. In general, the ability to recruit the right people is important, because it shows an ability to read people, which is also relevant when it comes to relations with investors and clients.

The Taboola teamCredit: Noam Galai

Then there are companies where the initial team doesn’t last long together. For example, at the cybersecurity company SentinelOne, one of the founders no longer has an active position at the company, and almost all of the company’s first 10 employees have since left. While this may appear to indicate a lack of faith in the company, SentinelOne’s market value tripled within a year, hitting $3 billion last November. CEO and cofounder Tomer Weingarten isn’t fazed by the staff departures. He has said in the past that the team that’s right for the first stages of product development isn’t necessarily right for the stage where it has to become a mature product, and that the nature of the company changes and people then decide to leave.

Mankovski agrees with Eisenberg, noting, “Successful entrepreneurs need to be able to leave their ego at home. Ido Susan of DriveNets is a fantastic example. No one on the company’s board is younger than him. All the VPs are at least a decade older than him. He says, ‘I know what I know at my age (34), but I need the experience of the HR people, the operations people, the sales people and so on, because that will take me years to learn.’ Successful entrepreneurs are the ones who understand where they’ve made mistakes and where they need help and what kind of help they need. And once they know that, they’ll go for the best they can find. It’s not that these CEOs have no ego; they know that the credit and success will accrue to them. They’re the ones who are interviewed in the papers and who speak at conferences. You won’t hear our CEOs saying, ‘It’s all me me me.’ A CEO needs to make their employees feel that they’ve built the company, that they’re responsible for the idea, for the direction that was chosen, and for the company’s success.”

A successful entrepreneur, Mankovski says, also has to be a leader and be capable of making decisions, including painful ones, but they also have to be very modest. “Where are you best measured? When you have to fire someone or transfer them to another position. It’s important for the person to have a high degree of emotional intelligence. Things need to be done with determination and sensitivity. Let’s say you need to communicate with a client after the product didn’t work properly. You can’t say to the client – ‘You’re an idiot.’ You have to tell him, ‘We messed up’ and fix the problem.”

However, studies show that modesty alone is not enough, and that the optimum combination for a CEO is humble narcissism, with positive characteristics that balance out the negative and make them effective in motivating workers.

A little insanity doesn’t hurt

A start-up event in Tel Aviv, 2018Credit: Tomer Appelbaum

Many of the companies on the list have received buyout offers that they turned down. “All these entrepreneurs are a little irrational, because by any logical way you look at it, they should have taken the offers,” says Levy-Weiss. “Let’s say you hold 15 percent of the company and you’re not a rich person, and someone offers to buy it for $200 million. Turning down this offer almost makes no sense. But they’re sure they’re going to win, to build the next huge thing and they can’t stop.” Says Bloch: “In 1976 I watched the Montreal Olympics and Esther Roth-Shahamorov finished sixth. Everyone was hoping she’d win a medal. And I thought, ‘You went all the way to Canada – come in first, or maybe second, but why compromise on sixth place? Who’s better than you?’ I don’t tell myself that I’m building a company in order to sell it or for it not to succeed, but I bring in the people, and if we don’t make too many mistakes we can win. At some stage you lose the thought that they are better than you.”

All these entrepreneurs have a lot of passion for their field and feel a boundless devotion to their companies. “There are a lot of CEOs who are just as obsessive about results when the company is worth $1 billion as when it was worth $10 million. Success is what they care about most,” Levy-Weiss says. “It’s practically impossible to get to companies that sell in the hundreds of millions without it being that way all the time. The DNA and the spirit that the entrepreneur-CEO brings to the company are what makes it successful. Take Robert Antokol from Playtika. He has a mentality of bringing in the highest-level talents and not leaving a cent on the floor, to constantly be striving for optimization. Even now, he’s the kind of person who wakes up in the middle of the night to check on everything to make sure it’s okay. This kind of DNA seeps into the company.”

“The culture is what amplifies the company’s strength. And it’s always a reflection of the CEO. We don’t have a single company in our portfolio that isn’t run by its developers,” says Erez Shachar, a partner in Qumra Capital, whose investments include Taboola, Fiverr and AppsFlyer. “It’s hard to build leading companies on a global level without having the entrepreneurs leading them and spreading the organization’s culture.”

Organizational culture not only has to do with a company’s operations DNA, but perhaps even more so with the company’s goal, its role and the story it tells.

“In all these companies, there’s a larger-than-life vision, a need to define a mission that goes way beyond the business aspect, such as fighting for publishers’ independence with a network like Taboola, or changing the way the world works together, like at Fiverr. I know this sounds like the clichéd slogans of an American copywriter, but it’s really not. This has become an organization’s North Star. It’s what makes it possible to create a highly impactful organizational culture. It’s not enough in itself, but it’s essential,” Shachar says.

“These entrepreneurs aren’t out to make money; they’re out to bring change. Which is also why very good people want to work with them,” Eisenberg says. “They have a different view of reality. They see it an unconventional way and are looking for ways to change it.”

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