Why don't more Indians invest in Israeli startups?
Israel is a hotbed for startups, which have proved to deliver good returns too—but despite good relations between the countries, Indian investors seem to be missing the bus
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Israel is continuously strengthening its fame as the 'Startup Nation'. The number and size of investments in Israeli startups are on the rise, and according to a report by IVC, in the first half of 2019, Israeli tech companies raised $3.87 billion across 254 deals.
That is a substantial sum, especially when taking into account that the population of all of Israel put together is no more than half the size of the population of Mumbai. Most of this money is invested by non-Israeli investors, with the majority coming from the US, but also from Europe, China and Japan.
You might have noticed that one name is missing on the list above. Yes, India.
However, the main reason Indian investors still miss out is that they expect to make their investments in Israeli startups by investing only in their activity in India, and not in the parent company in Israel. This might sound safer and easier to manage, but in fact, fosters fewer results. Firstly, creating a partnership in a foreign market is often a difficult and risky endeavor for a startup with limited resources and understanding of the Indian market, and requires a lot of trust. This leads to complications and misunderstandings. Secondly, international investors from the other countries mentioned are happy; in fact, they are rushing and pushing to find the opportunity to invest directly in Israeli startups. By doing so they also get to attract the startups to partner with them in their home markets, and divert manufacturing and other activities to their home court.
Making an investment in the parent company creates an alliance of interests, and gives the startup capital that will allow it to properly engage with their Indian partners. Without investing directly in the parent entity of the Israeli startup, negotiations on investing only in the India-related activities of the startup too often fall apart, at times after long and painstaking discussions. Often, the reason is that by the time such deals are negotiated, other international investors are creating stronger and more attractive alliances with the startup by investing in the parent entity directly as a first step towards a broader collaboration.
To what extent did Indian investors enjoy these exits? This year the answer is unfortunately very little. It is high time Indian investors start enjoying the fruits of their friendship with Israel.
The writer is founder of Lucid IL, a business-development firm promoting Israeli technology in India.