The start-up dilemma: sell up and move on or concentrate on building a giant?

It's a question that has been raised repeatedly over the years in the Israeli tech sector: should the country's entrepreneurs concentrate on creating one start-up after another or build up the companies rather than going for exits.

Serial Israeli start-up entrepreneurs have typically sold the technology and moved on to a new company. In recent years, the best-known example was the sale of Mobileye, a leading developer of advanced driver assistance systems using computer vision, which was gobbled up by Intel in 2017 for $15.3 billion, thus creating the largest exit in Israeli history.

Should Israeli high-tech shift to being a scale-up nation rather than a startup nation? The answer is not so clear-cut because the idea of large firms acquiring small start-ups with incredible technologies is perfectly normal.

Huge technology firms will always need innovative new solutions that small and nimble Israeli startups create. In addition, although startups are perfect at innovating, they may not have the time, skills or resources to scale up.

Meanwhile, technology giants have already scaled up, but may not want to devote funds and manpower to creating or expanding their research and development departments. Buying new technologies off the shelf may appear more expensive, but is actually a perfect solution since it can be integrated into existing solutions, it allows them to charge clients more, and provides an enormous boost, taking them beyond the technologies offered by competitors.

In other words, both sides need each other. And clearly for Israeli firms, initially operating on a shoestring, their competitive advantage would be lost by pumping ever greater resources into a product instead of selling it and moving on to the next idea.

Ironically, while Israelis – who found the largest number of start-ups per capita in the world – are asking themselves whether they should create large companies, other countries are asking why they can’t build startups.

In fact, the whole question may be irrelevant because many Israeli entrepreneurs don't ask themselves these questions because they are too busy moving on to another idea – whether they succeed or fail.

Interestingly, following the initial start-up, some entrepreneurs move on to an area where they believe they can aid mankind more broadly. This often means in the spheres of healthcare, education, water resources, agri-tech and the environment more generally.

This is both interesting and critical because these are challenges that are being dealt with at a very slow pace. The problems of water resources and agri-tech largely affect many millions of people in poorer countries which don't have the resources to take them on. This is where a lean and forward-thinking start-up can make a huge difference, punching far above its weight.

Israel is also seeing the ongoing development of its technology sector. As we enter 2020, the number of startups is far higher than a decade earlier with approximately 6,500 such businesses, according to www.startupnationcentral.org. In addition, many large corporations have opened development centers in Israel, huge sums are being invested by venture capitalists, and awareness of Israel's growing role as an important center of innovation is continuously expanding, leading to partnerships in innovation both with companies and governmental bodies.

Israeli tech firms have understood the immense importance of artificial intelligence and big data and how they can be used in a multitude of solutions. The need to collect unfathomable amounts of data and provide digital solutions by building algorithms to extract critical insights from the data, as well as using it to forecast future trends are at heart of the operations of many Israeli start-ups.

Welcome to 2020 – and buckle up for another great journey!