Kibbutzim in the New Millennium: Cultivating High-tech

In the heart of the desert, Kibbutz Revivim created a tech incubator: Pick entrepreneurs, lock 'em in a barn for three months, add food, water and mentors, and wait.

Revivim is the first kibbutz to launch an incubator for high-tech rather than chicks, or strawberries. (Illustration shows young chicks in an incubator, one with glasses drawn onto his face).
Dreamstime, elaboration by Haaretz

Even weird fruit like black tomatoes or tiger-striped eggplants seem tame compared with the latest crop from Israel's kibbutzim: technology startups.

The kibbutzim could create their own companies to invent a better tractor wheel. Or they could pick promising entrepreneurs, lock them in a barn, feed and water them, and wait.

Some think this leap from a better grape to doohickeys for outer space will be the movement's salvation.

"The kibbutz movement is moving from survival to growth," Ofir Libstein, vice-president of the Kibbutz Industry Association told Haaretz. "We want to contribute to the State of Israel again, we want to lead again. The Kibbutz Movement is reawakening and regaining the pride of the leadership position."

Revivim, a kibbutz in the Negev, is the first to go the whole hog and form an incubator for startups, complete with mentors. With its first cycle of startups having graduated, the kibbutz is now opening registration for the second round.

Other kibbutzim, such as Shamir, Ketura (also a desert kibbutz, located north of Eilat) and Degania, have invested in individual startups, though not incubators. These kibbutzim are picking companies that have actual products actually being sold to actual consumers, not the ideas-in-a-briefcase typical of incubators.

Lycophene-rich dark tomatoes, that can even reach black, developed in Israel.
Haaretz

This foray into high-tech isn't some sudden stab in the dark. It is a calculated attempt by leaders to reinvigorate the kibbutz movement after 20 horrible years, involving towering debt (the result of amateurish financial management coupled with a period of hyperinflation) and desperate restructuring for survival.

"The statement we're making isn't that high-tech is better than low-tech industry which is better than farming," says Udi Orenstein, director-general of the Kibbutz Industries Association and a member of Revivim.  "It's that Israel is a technology nation and it isn’t reasonable for kibbutzim not to have high-tech."

From chicks to chips

Kibbutzim have changed from their socialist, citrus-centric early days, when all members were equal, at least in theory, and assets were shared for the greater good of the collective. Today's kibbutzim are privatized, the greater good the members are looking out for is their own, and incubators for chicks are being augmented by accelerators for chips.

Augmented, not supplanted. Israel's collective agriculture ventures still farm, Orenstein begs to stress. A great many of the kibbutzim also expanded into industry, almost from the get-go well over half a century ago, to shore up their income.

Agriculture at Revivim continues apace: it isn't being supplanted by industry or technology. "The statement we're making isn't that high-tech is better than low-tech industry which is better than farming," elaborates Udi Orenstein.
Stéphanie Gromann

Today industry provides about 75% of the kibbutzes' income, and some kibbutz-grown companies have become world-class, such as Netafim, maker of drip irrigation systems. . The famous meat-substitute company Tivall had been a kibbutz company until the members sold it for hundreds of millions of dollars, which they shared. 

It's high time for the next phase: venture capital, says Orenstein (who moved to Kibbutz Revivim in 1991 "as the husband of," he tells Haaretz – i.e., following his wife).

Speaking of sharing, what does it mean for a privatized kibbutz to invest in startups, if like everywhere else, it's every man for himself? Libstein explains: like in days of yore, the kibbutz members meet, vote and decide to invest jointly (or not).

So far, various kibbutzim have invested about ILS 20 million or $5 million in startups, which is peanuts. But according to kibbutz industry observers, there's around 2 billion shekels, or half a billion dollars, looking for happy homes in technology ventures. Some of that may find targets on March 8, when dozens of kibbutz representatives will meet with representatives of six startups, at a gathering set up by a Hamashtela, a joint body of the Kibbutz Industry Association and the Kibbutz Movement, chaired by none other than Libstein.

CROSS Scorpions and startups

"I established the accelerator at Revivim.  It's a boot camp for startup entrepreneurs," says Elad Yeori, affirming that it's the first and so far the only kibbutz incubator for technology startups. "They come to Madgera ('hatchery') for three or six months, get room and board on the kibbutz and offices too, if needed."

And laundry service. In contrast to most incubator programs where the entrepreneurs go home at the end of each day to fight over the housework like normal people, Revivim is providing a sort of incubator-hotel. And just like every other technology incubator, accelerator, hatchery or wet-nursing program for startups – there are mentors to help them collect their thoughts and achieve feasibility.

Kibbutz Revivim
Wikimedia Commons

If the startup people haven't achieved that grail of feasibility by the end of that 3-month window (or six months, when apt), they get kicked out.

Kibbutz cuisine aside, one big difference between Revivim's Madgera and any other incubator you ever heard of is that it's in the middle of nowhere.

Yeori sees that as good thing. There's nothing to do in the middle of the Negev Desert unless your hobby is counting sand-lice and scorpions ("there are no distractions," he puts it), and with the dishes and laundry done uncomplainingly by others, one is free to concentrate on one's invention. And is spared commuting, to boot.

"We just finished the first cycle," he told Haaretz. "We had nine startups in this round, of which four graduated the incubator. We're now helping them raise investments and find collaborations." (Yes, he confirmed, five startups didn't make the grade.) 

One of the four is still in stealth mode but Yeori is prepared to reveal MyIndieLand, a marketing startup for indie musicians; Upscale, which is all about sharing the VIP experience in clubs; and a startup working on a price-comparison tool for people who shop online internationally. "When you buy from abroad, there are extra costs of shipment and tax and so on, which can make price comparisons difficult," Yeori explains. "This startup gives the final price of the product including everything. It even elaborates on the warranty."

Udi Orenstein, kibbutzim leader: "Israel is a technology nation and it isn’t reasonable for kibbutzim not to have high-tech."
Meir Partush

Now other kibbutzim are looking at the incubator model, rather than isolated investments.  Meanwhile, their investment in technology startups that actually have products is warmly encouraged and supported by Hamashtela, which is also prepared to lend kibbutzim money (if they commit money of their own too) for these investments.

"It's still early days to talk about exits, but [Hamashtela] has extended five loans to kibbutzim for investment in startups," Libstein tells Haaretz.

Typically, equity positions the kibbutzim demand for investment in startups is from a few percent to 15%.

Surely there are safer ways for the kibbutzim to invest their money? Yes, but the model of coaxing over youngling entrepreneurs and keeping them for 3-6 months has a potential upside. They may realize they like it and stay on, bringing fresh life to the kibbutzim, which may be facing a new stage in their evolution – but desperately need fresh blood.

That's one reason why Revivim for one isn't looking for agricultural technology, or even industrial technology, but cutting-edge, millennial things.

"We choose companies mainly in the fields of web and mobile, chiefly b2c," says Yeori, meaning "business to consumer," and that is absolutely because agricultural and industrial inventions tend to be made by older people, established in life, who wouldn't move kit and kaboodle and kat to a kibbutz  for three to six months. A 22-year old kid wouldn't think twice about it. And then he might invent something amazing and stay forever. What's to lose?