A new report seeking to clarify the scope of operations of Israeli startups in the European market shows that 912 companies are currently operating in 28 countries across Europe.
The largest number are active in the United Kingdom, with 405 companies employing more than 6,000 premises, followed by Germany and France.
Traditionally, expansion and integration into the US market has been seen as the goal of Israeli technology companies, but the report shows the significant number of companies already operating in Europe.
” A vast majority [of companies] look to the US market, ”says Yotam Tzuker, who heads business development for Israeli technology-centric headhunting company CQ Global.
CQ Global participated in the drafting of the report. However, in recent years, the local tech sector has started to turn to the European sector, says Tzuker.
Various factors influence the orientation of companies towards the continent.
“The European market is a huge market,” says Tzuker, and its size allows for significant growth potential that simply cannot be found within Israel’s narrow borders.
Compared to the United States, having Europe close at hand plays a big role, he says.
You can get on a plane and be in London, the furthest European business center from Israel, in five hours.
This proximity facilitates your first steps and your establishment in Europe, it helps when you have to relocate employees and, above all, it means that the difference between time zones is minimal.
Similar time zones mean it’s much easier to offer services and be available to potential and existing customers, even without being physically in Europe.
Besides geographic proximity, Tzuker says there are some cultural similarities “to, say, the Far East. … We know European culture; we have met Europeans and we know how to manage ourselves within a European framework. ”
Optimove, an Israeli company that offers a global customer management solution, innovative due to its use of artificial intelligence, is one such company, with offices in London and around 50% of its turnover. business from its European customers.
“Doing business with Great Britain is easier, in our experience, at least compared to the United States,” says Moshe Demri, Managing Director of Optimove’s London branch.
It’s easier “first and foremost because of the time zone, when it comes to supporting large clients,” he says.
“The ability to spend a few days a week at the client office was much easier at first.
Demri also points out the great potential for expansion in the UK market and says that administratively it was easier to get established in the UK.
Opening a business and arranging work permits for their Israeli staff moving to their new offices was relatively straightforward.
Compared to the United States, he says, the relocation process “is much shorter and easier,” and it’s cheaper.
“It allowed us to transfer a small team quite quickly and start recruiting locals, and it really paved the way for us to Europe,” he says.
Tzuker says: “You can set up an entity or operation in one place and basically have access” to over 20 other EU markets.
Technology companies operating in Europe belong to a diverse set of sub-sectors. The largest segments are computer and software companies, internet companies making up a fifth, while cleantech and communications each account for about 10% of the pie.
Other contributors to the report are Adi Barel and Yoni Levenfeld of the EIT Hub Israel, part of the large European Institute of Innovation and Technology (EIT), an EU institution that seeks to foster innovation on the mainland, and by residents of the mainland.
Its Israeli hub, founded in 2019, was created to be a bridge between the local startup scene and interested parties in the EU.
Levenfeld says that an additional reason for the interest of Israeli companies in Europe is the subsidies given by the EU.
Sixteen percent of the companies surveyed by the researchers said they had received EU grants.
Levenfeld points to the large European fund Horizon 2020, which had more than 80 billion euros to invest in innovative projects, from technology companies to research projects, and which was open to applications from Israeli companies.
As a result of this program, which ended in 2020, Horizon Europe, with a budget of 95.5 billion euros, is now active and “intended to encourage innovation in specific areas that the European Union strategically defines [important] to humanity, ”says Levenfeld.
Another advantage of the EU is its advanced regulation of environmentally beneficial technologies.
“More specifically with regard to the climate[-related technologies], you can see that Europe is much more advanced than Israel, ”he says, giving an example that a solar company wishing to connect to the city grid would have a much easier time doing so in Europe. than in his country of origin.
Demri highlights a perhaps surprising plus for Europe, which the authors of the report did not mention: the costs of employment.
“England is attractive because of the costs,” he says, because compared to New York, hiring someone, whether engineers or salespeople, is considerably cheaper.
Levenfeld, who works for an EU body, summed up the European interest in local industry in three words: technology, talent, know-how.
The EU and the European clientele of Israeli companies are first and foremost in search of innovative technology from Israel.
The know-how they seek to absorb is linked to the integration of new technologies.
“There are methods and practices of innovation here” in Israel, says Levenfeld.
For example, he says, a large Spanish company is working with them to learn how to engage in the startup ecosystem because they want to develop a department focused on innovation.
Some European companies also come to Israel to learn how to operate globally, he explained. Due to Israel’s small size, the businesses that thrive here are all outward-looking, and that’s something EU businesses want to learn from.
Despite the long list of benefits and opportunities found in the flourishing relationship between Israel’s tech sector and Europe, the primacy of the US market seems to be going nowhere.
Optimove, despite the importance of the European market, also has an office in New York.
“It’s a market you need to be in,” says Demri. “You want to play with the big boys, and it’s apparently the United States”
However, a majority of the companies surveyed expect to grow and recruit more employees in their European offices.
The report itself is designed not only as a benchmark of activities, but also as a tool for interested Europeans and Israelis who seek to contribute to the flourishing cooperation.
“There is no reason why the European market should not be much bigger,” says Tzuker.