Israel: More European Corporates Open Innovation Centers in the Startup Nation

Automotive, Engineering and Biotech the main industries
Germany, France and UK the most present countries

Tel Aviv, June 3rd – Israel is not yet at the level of Silicon Valley, but with no doubts, Corporate Open Innovation is definitively taking off in the Startup Nation.

According to the latest “European Corporate Innovation Outposts in Israel – The Who’s Who” Report, presented today in Tel Aviv Stock Exchange at the SEP Scaleup Summit, part of “SEC2IL – Startup Europe Comes to Israel” mission organized by Mind the Bridge and co-organized with EIT, 41 European large corporates, representing 9 European countries, have been tracked with at least an Innovation Outpost in Israel.

EU Ambassador to Israel, Emanuele Giaufret commented at the opening of the SEP Scaleup Summit: “This is the second SEC2IL – Startup Europe Comes to Israel, funded by European Union, and this year it brings an even larger group of European corporates, municipalities and investors to Israel. European economic presence in Israel is rapidly growing, a trend that has markedly accelerated in the past three years. This is in addition to already very close economic ties and the impressive trade flows between our countries whereby the EU is by far Israel’s largest trading partner covering around 34% of its export and 40% of its import.”

The Report represents an effort to map the activities of European corporations in Israel by tracking their presence and observing how they increase, modify and diversify their activity over the time.

“European companies from across industries have been operating in Israel for decades, mostly through an R&D approach. During the last 3 years we have seen a strong shift towards a leaner approach and the use of open innovation mechanisms – commented Alberto Onetti, Chairman of Mind the Bridge – More companies are increasingly experimenting with different partnership models, making innovation costs variable and on-demand. This trend is similar to what we have been observing since 2010 in Silicon Valley. European presence in Israel is still not at the same level as that of Silicon Valley. However, it’s definitively on the rise.”

And these are the main findings, according to the Report, that includes also a Who’s Who directory with the list of all the companies having an outpost in Israel plus details regarding Sector of Reference, Outpost Type, Address and Local Point of Contact:

• When it comes to country of origin the European innovation outposts are concentrated in some of the powerhouses of the European Scaleup economy: Germany leads with 13 corporates, followed by France with 10, the UK with 7, and Switzerland with 4. Sweden, Netherlands host 2 corporates, Italy, Finland and Czech Republic only 1. Many countries, with a high concentration of large corporates, are still not present in Israel. This is expected to change as physical proximity to the key hubs of innovation is becoming an increased necessity to remain competitive.

• In terms of variety of the outposts, 6 out of 41 companies are present with multiple facilities and modes (often including a lab or a CVC outpost in addition to their R&D Center). R&D Centers are the majority (28/41), followed by Corporate Innovation Labs (11), CVC offices (7) and Corporate Innovation Antennas (3). Favorable government-led incentives play a key role in the establishment of R&D centers here.
  
  “The concentration of R&D centers in Israel is a testament to the strength of the Israeli workforce and skills which make the country so attractive for corporates looking for a non-European R&D Center. It is equally a measure of the success of the policies put in place by the Israeli policy-makers to further exploit the potential of new Intellectual Property generation” commented Marco Marinucci, CEO of Mind the Bridge.

• About half (51%) of the outposts were founded in the last 5 years (since 2014): an increasingly larger amount of outposts have been surfacing in the last three years (about 8 per year). The highest concentration has been tracked in Tel Aviv (21 outposts).

• With regards to the verticals, Automotive and Engineering & Electronics lead with 6 corporates each having at least 1 outpost, Life Science & Biotech and IT Software follow with 5. Finance, Banking, as well as Insurance are becoming increasingly represented in the corporate outposts that we have tracked, along with Media and Business Services & Consulting.

Israel vs Silicon Valley

Silicon Valley still remains the most frequent destination for the scaleups. More European companies (over 60, 1.5 times more) have an innovation outpost in Silicon Valley compared to Israel (41), despite the relative geographical proximity. Anyway, Israeli outposts show to be larger, while SV’s ones are leaner. Israel is more focused on R&D, while antennas, labs and investor posts dominate in Silicon Valley. Silicon Valley outposts consisted of only 19% R&D centers, while in Israel they have been recorded at a 60% mark. This seems to suggest that the raison d’etre in Silicon Valley is more transactional (investments and M&As), versus a more research/co-development approach in Israel.

“Innovation strategies are continuously evolving; our customers and data show it. The ultimate goal of this Report is to provide benchmarks to corporate players that are considering scouting innovation and technology in the Startup Nation in a more structured way – added Alberto Onetti – Future reports will continue to track the differences, specifically among corporates that are present in one but not the other ecosystem.”

*see the description of each form in the Report