Dafna Schwartz* and Eden Nissan
Interdisciplinary Center Herzliya, Israel
*Corresponding author: Dafna Schwartz, Interdisciplinary Center Herzliya, Israel
Submission:August 02, 2021Published: August 12, 2021
ISSN:2770-6648Volume2 Issue5
What is the contribution made by angels to the Israeli innovation ecosystem? A study
conducted recently addressed this question. The State of Israel is considered to be a Startup
Nation. Out of 131 countries, Israel ranks 13th in the 2020 Global Innovation Index (GII) [1].
One of the factors that contributes to Israel’s innovation ecosystem is its developed venture
capital industry [2]. The venture capital industry is relatively young in Israel. It was established
in the early 1990s with government support for a program of private-public participation
through the YOZMA (Initiative) enterprise. The program was highly successful, and from a
situation where there were almost no venture capital funds in Israel, Israel was ranked in
2020 according to the GII index [1] in 5th place in the world in venture capital per capita out of
131 countries. The presence of venture capital funds, in turn, attracted additional risk capital
entities to Israel, including strategic investors, CVC (corporate venture capital funds) of global
companies, private equity funds, as well as private individuals called angels. Angels are private
investors who usually invest in the early stages. In Israel, as elsewhere in the world, there
are relatively few studies that focus on angels, despite their important role in creating new
ventures-they are a link that bridges the Death Valley when entrepreneurs have an idea and
face difficulties in raising money from venture capital funds and from other financial entities.
At first, angels were mainly financial investors who invested in startups even though it
was not their expertise, and their contribution to the new companies was mainly limited to the
financial aspect. As the Israeli high-tech arena developed, Israel became a hub for innovation,
characterized by the large number of startups that are created each year, high rates of startups
that succeed and are acquired by multinational companies for astronomic prices, and high
rates of successful IPOs (Initial Public Offering). For instance, in 2018 Israel had the third most
companies listed on the Nasdaq, after the US and China [3]. In addition, Israel has become an
attractive location for multinational companies to establish their R&D centers and employ
talented Israelis. Many of these individuals, whether they were senior employees in startups
or multinational companies, or the entrepreneurs themselves who established the startups,
themselves accumulated wealth-and a new type of angel was created in the country. The
new type of Israeli angels are individuals who have acquired knowledge and experience in
the high-tech industry in addition to attaining financial wealth. They are professionals who
make a valuable contribution to the ventures in which they invest as well as to the ecosystem
of innovation in general. In a research study that we conducted, we found that these new
angels, although they have become rich and seemingly no longer need to work, continue to
want to take an active part in the Israeli innovation ecosystem. They are not people who got
rich and retired-on the contrary, they are looking for channels to continue to be involved in
entrepreneurial and innovative activities by providing not only financial resources but also
their expertise, knowledge, and networking.
In some cases, The new generation of angels establish startups
of their own. In other cases, they invest in other startups.
In both cases they provide smart money-in addition to financial
resources,
They provide knowledge, information, access to additional
resources, expertise and networking. Some angels establish venture
capital funds or join an existing venture capital fund as partner
and contribute to the innovation arena through their fund. Some
of the angels invested individually and independently. However,
it appears that in many cases the angels invested along with
colleagues they know (one or more). Angels find investment deals
through personal connections, friends and business associates, and
some have become a crossroads for investments-likely giving the
venture the credit in the community.
In many cases the new generation of angels is making more than
one investment in startups. According to the IVC database [4], half of
the angels between the years 1997-2020 made up to 5 investments,
and half more than that. It was found that some of them are serial
angels (based on Start-Up Nation Central database) [5], making
more than 15 investments. Among the serial angels-46% of them
made an exit with the companies they founded before they became
angels. Another contribution of the angels is through monitoring
and consultancy services. A significant proportion of angels are also
voluntarily assisting entrepreneurs as mentors through different
frameworks, such as accelerators and university programs. It can
be concluded that angel investors in Israel are making an ongoing
and significant contribution to the innovation ecosystem. This
phenomenon can be described as a circle that feeds itself [selfperpetuating
circle]-an entrepreneur and veteran in the high-tech
industry can make an important contribution to the development
of the innovation ecosystem in Israel.
© 2021 Dafna Schwartz. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and build upon your work non-commercially.