Bangalore vs Tel Aviv: An Overview of the Start-up Culture in Both Cities
The next decade is nearly upon us, and Silicon Valley is no longer the undisputed epicenter of hi-tech innovation. Today, credible challenges are emerging from disparate parts of the world, most notably from Bangalore and Tel Aviv, both of which have spent years building the infrastructure for world-class innovation, each in its own way.
Bangalore has long been the choice of insiders as a prime location to start a business, boasting high level tech professionals, a tradition of experimentation and innovation, and competitive prices base that are attracting an increasing number of European companies.
In surveys of business leaders, Indian tech hubs - with Bangalore at the head - are routinely cited as world leaders in categories such as “people skills” and “environment of innovation” – areas of increasing value for investors looking for start-ups with staying power.
Tel Aviv has also emerged as a research and development powerhouse. Tech giants Microsoft, Google, and Facebook all maintain R&D offices in Tel Aviv, and many of their breakthrough products originated there. Apps like Waze, Wix, and Mobileye were born in the innovation capital of the Middle East. In fact, innovation has been the bedrock of Tel Aviv’s tech culture since ICQ, the first text messaging service, was created in Tel Aviv.
As both cities continue to push ahead with their unique approach to technology, it’s worth comparing and contrasting their start-up culture. It may be the incubator for the company that knocks of Facebook or Google from its perch, or at least grows big enough to sit with the big boys around the world.
1. Venture Capital Funding
Venture capital funding is the cornerstone of the tech industry and one of the clearest portents of a region’s importance on the world stage. Funding is the lifeblood that moves a company’s offering from concept to reality.
In past year, Indian tech companies raised an impressive 12.68 billion in equity funding and an additional 1.14 billion in debt funding – with the majority heading straight to Bangalore-based businesses. The figure not only represents an increase over the same period a year earlier, but reflects more funders and an overall sense of investor confidence amongst the top Indian VCs. The growth was most pronounced in the crucial series C funding. As trends show, the Silicon Valley of India is headed in the right direction.
The funding for Tel Aviv is also on the ascent through the peak has not reached as high as Bangalore, with startup funding hovering at $7.5 billion for the past year. That has been spread through all stages, with companies such as Papaya Global aiming to disrupt global payroll doing well in the seed stage and numerous companies progressing at more advanced stages. The real strength of Tel Aviv startups,however, is in the source of the founding. A record 43% of the venture capital arrived via corporate venture capital (CVC) funds, which are often a sign of interest from major companies in a potential acquisition down the road. That could result in a spate of massive acquisitions in Tel Aviv that could push the region into a whole new level of competition.
2. Start-Up Culture
Innovation needs a creative environment to flourish. Ideas grow out of interactions with top thinkers,who build on each other’s ideas. The existence of shared working spaces, accelerators, start-up incubators, and meet-ups promote creative exchanges.
The culture of innovation in India has flourished despite difficult the economic conditions of a developing country. Unlike in the US, where the biggest companies were often founded by college drop-outs from prestigious universities like Harvard, including Bill Gates at Microsoft and Mark Zuckerberg at Facebook, India’s business leaders have had to fight against the odds to bring their culture to today’s high point. The challenges, however, have created strong leaders and a will to succeed that continues to pay dividends.
Bengalese entrepreneurs have built their startup culture from the ground up. It may not be as advanced as its US counterpart but it is considerably more solid. Those who have pulled ahead had to rely on their skills, resilience, and tenacity, without the benefit of accelerators and incubators, which are still a luxury. It would be hard to argue that the path Indian businessmen have trod has made the tech scene weaker, though it would be intriguing to see how they would fare in the US environment, which is more competitive but offers more opportunities.
The Tel Aviv tech scene emerged out of the advanced training many Israelis received during their army service, earning the nickname of StartUp Nation. Army service and the networks of social connections many Israeli enjoy also provided strong links across much of Israeli society – an advantage of a small country like Israel. As the hi-tech sector grew to one of the most lucrative parts of the Israeli economy, the culture flourished. As more companies displayed world-class talent, Tel Aviv quickly emerged as a top destination for investors and companies seeking to take advantage of the seemingly endless innovation.
Today, training programs, summer camps specializing in robotics, after-school activities, and an endless stream of hackathons are part and parcel of Israeli life. Many believe the tech sector is holding up the Israeli economy – one of the few areas where a person with skill and effort can move ahead regardless of background and education.
3. Big Tech
The top companies set the tone for the upstarts in the ecosystem. They serve as models for success as they move from startup to fully established company. They also serve as the standard bearers that keep the culture vital and growing.
As the third-largest startup ecosystem in the world, Bangalore has seen its share of successful companies, including many that moved on to even bigger markets, such as Flipkart, which currently enjoys a market valuation of $11 billion. Another unicorn company is Inmobi, a leader in emerging tech in automation and artificial intelligence that has been named one of the top disrupters of 2019 by CNBC.
Indeed, there is no shortage of high-end tech companies that were born and developed in Bangalore and many that continue to be based in the scene, showing the way to an ever-emerging crop of companies following in their footsteps.
With the highest number of startups per capita in the world, Tel Aviv has seen its share of glory. The challenge for the Israeli government is keeping from taking their talents abroad into bigger markets with more earning potential. The trend, however, is for companies to maintain some links to their roots in Israel, even if they move to Silicon Valley. That idea was reinforced by Waze, which negotiated a billion dollar acquisition while insisting that it’s main operations remain in Tel Aviv. That sort of leadership has a strong effect on other companies. Even those that move their main operations abroad tend to continue to operate their R&D offices in Tel Aviv.
Investors looking for a strong return have good options well outside the confines of Silicon Valley. In fact, with the enormous leaps companies based in Bangalore and Tel Aviv are taking, the gap is closing faster than ever.
As their different paths to success make clear, both Bangalore and Tel Aviv have developed high level expertise in different areas. Perhaps the quickest way to overcome the Silicon Valley advantage would be for both emerging powerhouses to band together, invest in each other, and allow each to benefit from their unique strengths.
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