Israel, a Female Startup Nation?

February 10, 2021 1:03 pm

Israel has one of the strongest entrepreneurial ecosystems worldwide. However, it is not so advanced yet in narrowing its gender gap amongst founders. This article will provide you with a snapshot of the good and the bad of female entrepreneurship in Israel, and the perspectives of women that achieved to disrupt industries.

19 November is a special date, not only a celebrative one. Although it can be argued that every day is women entrepreneurial day, it was specifically assigned as a primer for discussion for initiatives and opportunities aimed at empowering women to leverage on their entrepreneurial drive.

During my time at Flashpoint VC, I decided to look closely at the situation of female entrepreneurship, a topic that is gaining momentum and I am very passionate about.

Israel, Best Country for Women Entrepreneurs

Mastercard Index 2020 (MIWE) has ranked Israel as the best nation to be a women entrepreneur in — in 2019 it was still in 4th place. Key drivers of this score include amongst others the knowledge & financial assets and support of entrepreneurial behaviors provided by the country. Although Israeli women are 2.3% more driven than men for pursuing business opportunities, they only represent 10% of total founders. A similar situation occurs on the other side of the table, as female investment partners represent only 8% of the total. Even the most advanced nation for entrepreneurial activity is not so advanced in terms of diversity in decision-making. My objective here is to provide a snapshot of the female presence across stages and sectors in Israel while gaining insights into the perspective of three great Israeli entrepreneurs that are pioneering the industry: the very successful founders Danit Peleg, and Adi Shemesh; and investment partner at Viola Growth, Natalie Refuah.

Situational Snapshot — The Good and the Bad

Gender Inequalities vary across industries

There is a highly visible disparity between industries preferred by women versus men in Israel. If we look at the number of organizations, female founders are more concentrated in HR, Software Development and Marketplace. On the other hand, men-led start-ups are more focused on Analytics & Marketing, and Software Development. Concentration for Healthcare & Beauty-tech and Edtech for women-led start-ups are respectively 15% and 4% higher than men-led counterparts. On the contrary, female founders are less focused on Cybersecurity, Entertainment and Marketing & Analytics by 2.5%, 6%, and 10% respectively. The disparity seem to root itself from the natural propensity of women to start a venture in fields they are more familiar with because of their educational background (e.g. there are fewer inequalities in Healthcare and HR faculties than for engineering). However, with all the initiatives in place in Israel, the situation is predicted to radically change in the next 5–10 years.

Startups with at least one female founder — Industry Split. Own Elaboration (Crunchbase)
Startups with no female founders — Industry Split. Own Elaboration (Crunchbase)

The gender gap is still predominant even across the most represented sectors being HR, Healthcare, Beauty-tech, and Edtech. Moreover, industries such as Social Media & Entertainment, Cyber Security and Apps are largely underrepresented. Accelerators, schools and overall initiatives should focus on solving these disparities from the root: starting from education. From an early age, schools should raise awareness on the issue and eliminate the myth of deep tech sectors “for men only”.

Even in industries featuring fewer disparities, large gender gaps are still predominant. Own Elaboration (Crunchbase)

Depending on the Industry and funding stage, women-led start-ups are succeeding in raising tickets

Comparing funding amounts of female-led startups vs men-led can give an idea of how each of the two categories is attracting investor interest by sector. I have prepared some tables divided by funding stage and including the most represented sectors (% of female start- ups by industry: for each stage is the percentage of female startups in that specific industry out of all female-led start-ups at that stage) and average ticket sizes compared to men-led start-ups. The companies analyzed include those that have HQ in Israel and were founded after 2010.

Women-led start-ups are overperforming in Healthcare & Beautytech, Agtech and Cyber (Crunchbase)
Women-led start-ups are over performing in Healthcare & Beautytech, Marketplace, Edtech (Crunchbase)
Women-led start-ups are overperforming in Software Development (Crunchbase)

The preferred exit strategy for Israeli women-led start-ups is acquisitions. Overall female-led number of exits still represent 10% of the total number of exits, this makes sense as the representation of women in entrepreneurship in Israel has the same proportion.

23% of total IPOs and 17% of total acquisitions are women-led start-ups (Crunchbasehttps://dealroom.co/)

Initiatives that Support Women Entrepreneurship

One of the reasons why Israel is more advanced in closing the gender gap is the promotion of great programs that support women. Below is a list I created of the main initiatives in place and their missions.

List of initiatives & missions

Source: Own Elaboration

Map of initiatives

Source: Own Elaboration

Over the past five years, Israel featured an increasing number of initiatives that had the objective to inspire women and foster their entrepreneurial drive across all stages of education and career. They are focusing on reshaping students’ misconception of computer science-related subjects as being for men only, with the goal of increasing student rates in those majors (Queen B). They are also providing inspiration and network support for graduates (Yazamiyot, WMN, Woman2Woman); Coding classes (She Codes); Accelerator Programs (Women of Startup Nation); Coworking spaces for entrepreneurial mums (Mommy work). Since most of the initiatives are relatively young, and behavioural change is a slow process, we cannot have an accurate success rate yet. However, we know that more and more women are attracted to those events, which is a good sign.

Importance of Diversity in VC

Until now we have identified that the disparity gap is still very large even though funding performance in some individual sectors is not. You might be asking, so what? Well, I’d like to mention shortly some benefits that can be provided by diversity, not only gender wise but overall. Venture Capital firms that increased female partners’ hires by 10% saw a rise of 1.5% per year returns and 10% more profitable exits. I am not presenting this data, one of much research, to show that women are better than men — it’s not a gender war. I rather want to show that having more diverse teams can enrich leadership discussions and make problems visible from different perspectives while having a positive impact on decision-making. There is a hope for a “domino effect” to occur, empowering more women to co-create startups and enter the investment space. This will hopefully prompt more women to break into VC, creating more funding opportunities for female founders, and furthering the cycle.

The perspective of Natalie Refuah, Partner at Viola Growth

Natalie Refuah with her team

Natalie has collaborated with Flashpoint VC for the Summer SaaS 2020. She is a partner at Viola Growth and is representing one of the 8% Female Israeli Investment Partners. She agreed to participate in an interview with me and provided great insights.

Have you noticed any trends in VCs?

Yes, I am seeing more female partners joining the VC space. LPs are willing to invest in organizations with top-level diversity, not entry-level. The mentality is changing, there is more awareness about this issue. Schools, parents and friends are now more mindful and motivate girls to pursue technical careers. Israel has great supportive programs, proved very useful since females tend not to show the same “aggressivity” and network of men. This is changing and will continue to do so with new generations joining the workforce.

What tip would you give to a young female willing to join the VC world?

There are still fewer women applying for entry-level positions than men. So the first tip would be:

“Don’t be shy! There are plenty of opportunities out there, it is important to be fast and to act a bit more aggressively while being on top of things. Secondly, I would strongly recommend pursuing a degree which involves also an understanding of technology, no sector in particular”

The perspective of Danit Peleg, Founder of Danit Peleg 3D

Danit Peleg 3D collection

Europe top 50 Women in Tech (Forbes); 100 most Inspiring Women (BBC); 40 under 40 (Globes)

After gaining the perspective of a successful investor, what couldn’t be better than combining it with the opinion of someone sitting on the other side of the table, a founder. I had the great opportunity to speak with Danit Peleg, one of the most innovative entrepreneurs out there, which managed to disrupt the fashion industry with 3D printing technology. While completing her final project for Shenkar University, she noticed how no one had ever developed an easy process to implement 3D printing for garments to use at home: large manufacturers were using very expensive machines that could cost $20k/piece. Her projects had been featured by magazines like The New York Times and Elle Magazine. She is has founded her fashion 3D academy and is also a Ted Talk speaker.

What do you think were the key success factors for you and what tips would you give to female founders?

“Use of an open-source mentality: don’t be afraid to share your knowledge and initiatives”

This mentality led me to be inspired and collaborate with a home designer that was using 3D printing materials for walls. I have started using his materials for a bouncing skirt, one of my most successful pieces.

“It is great to bring something that already exists into your own environment”

I didn’t invent the 3D machine myself, I just had the idea of combining three existing elements into one: 3D printing, filaments and home-made fashion.

“Take risks: rather than focusing only on what can pass a “checklist”, it is great to think of it as: what can disrupt this list?”

I could have created a beautiful collection for my final project and still get a top grade, however, this wouldn’t have given me the satisfaction of creating something that was totally mine, with all the risks involved in it.

“Think of challenges as triangles of opportunities: Once one corner of the triangle is solved, then the next challenges can be easily solved next”

For example, I had troubles with the software for 3D design and collaborated with the software company to improve their 3D visualization. After this problem was solved, came the problem of materials: people don’t want to wear 3D plastic: I am now collaborating with a Japanese company to develop more wearable 3D printed materials.

Have you noticed any trends of women in entrepreneurship?

“In my personal case I didn’t find that being a woman was a barrier, actually the opposite”

I felt that because I am a woman talking about 3D printing, there are more writers that find it interesting and receive more curious attention during conferences. I do not think this is the way it should be in the future, there should be more equality for both sides. I think that in Israel we are slightly more advanced in entrepreneurial drive because of military service, which is obligatory both for men and women.

What’s in for the future?

Well, I guess my mission is to work towards the democratization of 3D printed items, make them more wearable on a day-to-day basis. I also believe that the fashion industry still needs to make huge steps to become greener, not only with the materials of garments but in the production processes.

The perspective of Adi Shemesh, Founder of Trench

Israel 30 under 30 (Forbes); Israel’s 70th young and brilliant Women (Globes)

Similarly to Danit, Adi is an entrepreneur committed to the re-shaping of the fashion industry into a more sustainable one. She had been recognized and awarded for her innovative company Trench. Over the past few years, her mission had been to reduce the inefficiencies of outdated business models of the fashion industry. The key distinctive point of Trench.app, in comparison to other e-marketplaces, is that items are traded in an exclusive digital currency, being diamonds: users can shop without spending money and see the value of their items left unchanged. Another key feature is that users can be socially engaged with people using the platform. Trench is not only a marketplace but also a community.

When did you realize you wanted to be an entrepreneur?

“In my early career, I didn’t consider entrepreneurship as an option. When you are little you don’t really know what it means to become an entrepreneur”

Once I became one, I realized that it was combining every element of who I was while growing up, there are a lot of social skills involved in this job. There wasn’t a particular moment when I woke up and thought “I am now an entrepreneur”. I had been walking in this direction for a while. I probably started to consider myself as one after having various funding offers I could choose from.

How did you come up with this great idea?

When I was younger, a constant in my life was the participation in projects focused on sustainability (e.g. international beach clean-ups). As I grew older, I nurtured a passion for fashion.

“I found myself in the contradictory position of owning a lot of clothes but still caring about the environment. How was it possible to have so contradictory hobbies at the same time?”

The identification of this problem I was facing myself, triggered me to develop Trench.app, which is designed to make those two elements be present at the same time. The idea is to provide not only a marketplace but enabling people with the same interests for fashion and sustainability to get together and meet people with similar styles. Fashion communities are the future of shopping.

What were the main challenges faced during your entrepreneurial journey?

“ Main challenge is probably the fact itself that every challenge you will face is a new one”

Other challenges were around people: it is hard to be the one making decisions about their work, which constitutes most of their life. Finally, I think most entrepreneurs have a hard time acknowledging that the chicken-egg vicious cycle is a natural challenge for anyone (e.g., finding investment, develop a product, invest in a team: what goes first?)

You have participated in the WMN initiative. What was the support received and how was it useful?

I think the WMN initiative was incredibly supportive during my early days as an entrepreneur. I had the opportunity to get exposed to a community of women entrepreneurs and have space where I could sit down and be supported, it means a lot at the beginning. What is key here is that we are not supposed to be equal on outcomes, but yes on opportunities and this is why programs like these works. On the other hand, content-focused programs that teach you, as an example of how to raise money, shouldn’t be only for women communities, you can study this with men too.

“This is why I think it is very unfair when people go out disappointed with women-focused programs for not providing the right content: they are providing the most important thing, which is a community, network and support”

What would be a tip you would give to women entrepreneurs and entrepreneurs in general?

For women entrepreneurs:

“Don’t think about yourself as a women entrepreneur, rather as an entrepreneur”

Don’t necessarily abolish your feminine traits, rather avoid being scared off on a professional level by the fact that you are a woman in a male-dominated sector. Take advantage of the opportunities out there for you.

For entrepreneurs (I didn’t get this tip at the beginning, but I think is an extremely useful concept to internalize):

“Be focused, patient, and mindful that processes take time”

Final Remarks

Israel is in the midst of a revolution. Even though the gender gap is still large as of today, the great initiatives and support for women will be essential to re-shape girls’ positive mentality towards entrepreneurship and technology. Current initiatives are focusing on removing the issues from the root: change the societal mindset through educative programs at an early age, since cultural shifts take long. The future looks promising, there will be a circular effect foreseeing more women being entrepreneurs, leading to more investor partners needed, leading to and more young students inspired to grow in technological sectors. We have to acknowledge that because of the driven mentality of Israeli women in tech and the network and mentorship potential that this nation can offer, Israel will lead the way and is a great example for other nations aiming to raise the game and finally close the gender gap.

Personal Takeaways from interviews, and “checklist” to remember when seeking to embark on an entrepreneurial journey (useful for young entrepreneurs):

1. Use an open-source mentality: talk with people about your mission, and create a collaborative and supportive network around you. Best ideas are not anymore the ones you invent alone in a garage, but those capable of combining existing elements of the current reality into something new. Take what is already out there and combine it in a way that re-shapes your own world.

2. Don’t try to be an entrepreneur, just to obtain the “cool” label for being one. Do it if you feel like seeking a mission at your heart, something that you feel is a problem for you, you have insights in, and which can benefit other people like you which will turn into your community. Don’t necessarily try to invent what is not existing yet, watch out for incongruences between existing industries/services/products/matters and try to solve them.

3. Don’t be scared off by new challenges which are faced by every entrepreneur, try to have the mentality of constantly seeing problems in a positive way: as opportunities for change.

4. Don’t be good at being adequate to the checklists of an industry, break it and create your own.

5. Take advantage of this spotlight momentum (for women): don’t let the gender gap scare you off, rather use the networking opportunities offered and be positive that the situation will change in future years, you can drive this change too. Finally, don’t be mad if initiatives are not providing the right content, focus on opportunities to be connected and be supported.