Soft Ties with Great Potential

Connections Between the German and Israeli Ecosystems

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The relationship between young Israeli technology companies and investors from the German-speaking region has been gaining momentum for some years. One side is looking for a market, the other for innovation. Mid-sized businesses are increasingly getting involved.

The Israeli start-up Inspekto has developed a fully automated system to visually assess the quality of products. It’s a small, robust device that can be quickly mounted anywhere in a production facility and doesn’t need to be integrated into a system process. Thanks to machine vision processing and artificial intelligence, it can reliably check the quality of virtually any object. “The capabilities of the system are so varied that it offers an enormous number of application possibilities,” says Alec Rauschenbusch, Managing Director of venture capital investor Grazia Equity in Stuttgart. Grazia took part in the seed funding of Inspekto and was also represented in the recently completed A funding round. Even though the commercial launch of the Inspekto system is currently in the initial stages, it already counts the two large automotive suppliers Bosch and Mahle as well as the beverage company PepsiCo as its customers. Mahle is also an investor in Inspekto. From the very beginning, Inspekto had its eyes set on Europe, and Germany in particular. The young company finds a strong industrial structure there, and a large market which it doesn’t have at home. “We were able to establish excellent contacts to German industry and help Inspekto acquire customers,” explains Rauschenbusch. By now, the start-up is a GmbH and thus a German company.

Intensive Search for Opportunities

Inspekto is not an isolated case, but rather a good example of a trend that has been gaining momentum for several years. An increasing number of companies from the German-speaking region is looking to Israel for innovation. Many large groups now have their own offices there whose sole mission is to find start-ups with outstanding ideas and to do business with them. Many larger mid-sized businesses are also attracted by the lively start-up scene around Tel Aviv. They usually rely on the support of local scouts. According to a study by the Israeli IVC Research Center, 31 German investors were active in Israel last year. In 2013, there were only eight. This year for example, Allianz took part in the fourth funding round of the Israeli insurer Lemonade, which focuses on artificial intelligence and behavioral economics. The German market leader expects to receive an innovation push from this as it moves toward digitalization of the insurance business. In 2018, Commerzbank took part in the fifth funding round of the trade platform eToro through its subsidiary CommerzVentures. A number of larger takeovers were also recorded recently: In 2017, Continental acquired Argus Cyber Security, a young company specializing in cybersecurity for cars. That same year, SAP acquired Gigya, a start-up that helps companies develop digital relationships with their customers. According to IVC figures, both takeovers cost the German buyers more than EUR 100 million each.

You can find the complete article in our Special “Technology Hotspot Israel”.