AgTech in Israel: The Land of Technology, Data & Seed Money
A look at the reasons for the success of AgTech in Israel
Arid. Sandy. Infertile. Hardly words that describe the sort of environment that can support a thriving agricultural ecosystem, much less be a world leader in AgTech. Yet with more than 60% of its landmass consisting of desert, Israel has not only surmounted this challenge, it has gone from revolutionized irrigation and water treatment systems to computer vision and image processing systems, to emerge as the standard against which other countries are judged.
While countries such as New Zealand, the Netherlands, Ireland and U.S. cities such as St. Louis have put serious efforts into developing innovation in their Agri-FoodTech ecosystem, Israel has become the “Start-Up Nation” by fostering technological entrepreneurs and developing new companies.
Israel’s thriving agricultural startup industry is a product of its environment: adapt to your environment, developing new technology to meet your needs, or else starve. Just as farmers note that drought can be followed by a bountiful harvest for fruit, so business adversity can be the basis for innovation and growth.
The 2011 book Start-up Nation, explores how Israel (a young country with no natural resources, surrounded by enemies, and a population of just 7 million) produces more startup companies than large, peaceful, and stable nations like Japan, China, India, Korea, Canada, and the UK. The authors particularly note the influence of an adversity-driven culture, which is linked to a flatter, more informal hierarchy.
Perhaps the combination of environmental challenges, geopolitics, and historical challenges forced innovation as a mode of survival. That could explain why the US, with access to capital, arable land, scalability, and R&D, has been slower to develop and adopt AgTech: without an existential threat, there is more complacency. On the other hand, there are many countries with comparably difficult environments that have not developed an innovative agtech sector.
So how exactly did Israel become a world leader in AgTech, and what can other countries learn from it? Here is how Israel spells success:
Investors
Israeli companies raise more investment for upstream technologies than China or India, despite both of those countries having dramatically bigger populations. The money is sourced from both Israeli and international venture capital funds, as well as government sources. In addition, targeted relationships with university campuses and food retailers draw investment and attention from VCs.
Not resting on their laurels, however, Israeli companies are constantly looking for more investment. At AgriFood Tech week, business leaders expressed unhappiness that so many Israeli startups fail to ‘scale; on their own, selling out long before ‘unicorn’ status had been reached. It seems that, so far, the rock-star entrepreneurs and startup founders have not been the right people to run larger billion-dollar bureaucracies.
Startup Culture
An exceptionally high percentage of young Israelis report ambitions of starting their own businesses. On a per-capita basis, this equates to one startup per every 1,400 inhabitants. Secondary school students asked ‘‘what do you want to be when you grow up?’ included ‘Startup founder’ as frequently as the more familiar responses of ‘Doctor’, ‘Lawyer’ or ‘Business Executive’. The numbers of startups in agri- and food are astonishing: Israeli has now generated More than 500 of Agri-FoodTech startups. Even during the global pandemic, $290 million was invested in Israeli Agri-FoodTech companies in 2020, down just $50 million from 2019’s $320 million. The lion’s share of that investment went into technologies such as Artificial Intelligence, Internet of Things and Sensors, Data Storage, Robotics, Biological solutions, and Water-Tech.
Research & Development
In addition to private investors, The Binational Industrial R&D Foundation (BIRD) encourages cooperation between Israeli and American companies in a wide range of technology sectors. The Foundation works by providing funding and assistance in facilitating strategic partnerships for developing joint products or technologies. BIRD does not receive any equity or IP rights in the participating companies, instead of providing non-dilutive funding, and support of up to 50% of a project’s budget up to $1 million. Support begins with R&D and ends with the initial stages of sales and marketing. Since 1977, Bird has granted more than $340 million to nearly 1000 projects, investing up to $1 million in each. In a new initiative, the Israeli government is preparing to sponsor pilot projects to bring together startups and farms, facilitate technology testing in real-world environments, and allowing technology to be tested domestically before being implemented into the international marketplace. Since the government sponsors R&D for Israeli startups, VC investment partners are more freely able to work towards funding marketing and sales
Army
While many countries are abandoning compulsory military service (or making it easier for wealthy and/or connected children to escape the requirement), Israel continues to insist on all its citizens serving: 2 years for girls, and 2.5 years for boys is mandatory. Israel’s military has been a leader in robotics, sensors, machine learning, artificial intelligence, and augmented reality, creating opportunities for young people to explore these areas, gain experience, find other like-minded peers. The Israeli army has a reputation for encouraging junior ranks to challenge norms, with the aim of creating better outcomes. This shared experience contributes to similar business culture, normalizing ‘pivoting’, ‘resets’, and resilience in the face of failure. A high percentage of startup founders report that they met in the army and the tech they use to establish their startup came from their experience in the military.
Education
IDF training provides the necessary training in computer science and engineering, something missing from many western education systems. The IDF also takes a more holistic business approach, helping recruits develop their leadership and operational skills. Israeli schoolchildren are taught the core of Zionism (connection to the land) through farming education programs like “Leaders of the Land”, and draw lessons from the early agricultural culture of Israel kibbutzim. Entrepreneurship is taught at school, and startup boot camps are run for teenagers.
Licensing Patents
Israeli firms are prolific at patenting. For example, with a much larger research budget, the Massachusetts Institute of Technology files less than half as many patents as the Israel Institute of Technology.
Success
Two examples of Israeli agtech startups revolutionizing the industry are YieldX Solutions and MiRobot. YieldX is the first Bio-AIoT precision livestock farming platform. It aims to provide farmers with the right data at the right time without requiring any farmer input. MiRobot is fully automating the dairy milking process. The robotic solution helps decrease milking time to service more cows and increase dairy farm profitability.
Even more so, among the 50 top Agtech companies in the world, 10 of them are Israeli. These companies include DouxMatok, a sugar-based sugar reduction solution, InnovoPro, a chickpea-based dairy and meat alternatives creator, Hinoman, a startup that develops and cultivates Mankai and Future Meat Technologies, developer of lab-grown meat currently building the first cultured meat production plant. Additionally, startups like Tastewise, use AI to predict food trends, and TIPA Corp develops biodegradable packages. Infarm creates modular smart farms and CropX developed an adaptive irrigation system. Startup Taranis focuses on precision agriculture and Prospera develops computer vision technologies. The Israeli entrepreneurs have looked at the food and agriculture sector through different lenses, optimizing all parts of the food chain None of these companies are accomplishing the same task, yet they are working together towards revolutionizing the oldest industry in the world.
The Global Road Ahead
Balanced against the positive elements of Investors, Startups, R&D, the Army, Education, and Licensing (noted above), are the realities of the continuing challenges Israel Agri-Food Tech startups face, including:
Small market with limited distribution channels for the technologies and services.
Limited agricultural resources, so Israeli startups must look for partners abroad early on.
Climate challenges, which creates pressure to understand distant export markets with a different climate (i.e., Brazil or the American Midwest)
Many startup founders find it easier to sell up at an early stage, rather than building their ventures into big global companies, and then use the proceeds to fund a new startup. While this approach takes advantage of the R&D resources within Israel and is in line with Israel’s hard-won reputation as the ‘Startup Nation’, there are some downsides as well. In particular, large domestic firms could provide employment for both skilled and less-skilled Israelis—including kibbutzniks—who would otherwise be cut off from the booming tech industry. However, Israel is well on its way to move from “Start-up Nation” into “Scale-up Nation”
Small companies with advanced technologies and innovative ideas but no large market are actually in fact positioned well to become global problem solvers. They are geared well to adapt to new geographies and different demands. In light of the COVID-19 economic crisis, population growth, and ecological challenges, food security is becoming a more pressing issue around the world. Israel can harness its technological capability to permeate the global food supply chain.
While this seems more idealistic than practical, one example of this global adoption was through the revolutionary drip irrigation system. Israel pioneered drip irrigation, a process by which water is slowly distributed directly to a plant’s root system through a network of underground pipes. This form of irrigation minimizes evaporation, thus conserving water and increasing yield. Now, more than 50% of Israel’s usable water is man-made from desalinated water, and 86% of wastewater is treated and reused. Drip irrigation has become essential to ensure food supply especially in developed countries where there are challenges with clean water and arable land.
Israel has made it a priority to share its agriculture advances with developing countries in Africa, Asia, the Middle East, and Latin America through the Foreign Ministry’s MASHAV – Israel’s agency for international development cooperation. MASHAV’s projects include training in low-cost family-farm food security, pilots’ programs of better environmental practices, technology-based agribusiness enterprise development, and agribusiness consultancy services.
Public-Private Partnerships
While there is no recipe for Israel’s agtech global expansion, Israel’s agricultural success has proven the benefits of a symbiotic relationship between science, business, and the government—something that both developed and developing countries can learn from. The role of the government is key to not only research and development but also in allowing the private sector to experiment, test out new solutions and allow people to mobilize challenges towards solutions.
Israeli startups have gotten help along the way from accelerators and incubators like government-created The Startup Nation Central and The Kitchen Hub. For example, Aleph Farms is the world’s first lab-grown meat cultivator that harnesses the power of 3D printing of cow bovine cells to create beef. Aleph farms converged funds from private food manufacturer the Strauss Group, and top scientists from the Israel Institute of Technology inside the tech incubator, The Kitchen Hub.
Now, a new innovation center is also joining the scene continuing the convergence of academia, private food industries, and public initiatives. With the Ramat Negev Regional Council and Ramat Negev Industries, Arieli Capital is establishing an agritech innovation center within the jurisdiction of the regional council in southern Israel. Ramat Negev municipality accounts for 22% of Israel’s land and outputs about $177 million in vegetable crops a year. the center’s focus will be on general agriculture, desert agriculture, marine agriculture, cannabis, and more. Arieli Capital says that this innovation center will provide financial support, mentorship from technology and business gurus in the agriculture and food industries while also providing access to labs and R&D facilities
From fostering education, developing curriculums for science and technology, and utilizing military involvement, businesses and governments together have created synergies in industries to advances innovations that optimize a country’s best resource—its people.
Researched and Written by Aidan J. Connolly, Patrick Lee & Anisha Quadir. Edited by Kate Phillips Connolly
