December 2015. Dozens of groups of founders and corporations began working around the clock in a race that would culminate in dropping an envelope into a box of proposals to establish a technology incubator backed by the Chief Scientist, now the Israel Innovation Authority. The process would end with two new franchise holders, one in Tel Aviv and one in Jerusalem. Would our initiative to establish an incubator for physical products succeed?
I was working around the clock too. A year earlier, I had submitted a bid for another group seeking to run a Chief Scientist incubator in Petah Tikva, focused on medical devices and health information technology, as part of my work at PwC.
I was trying to achieve a goal I had set in 2014: enter a group in the next rounds of tenders too. In the intervening period, I had studied the Chief Scientist’s incubators extensively. I wanted to write a business plan and become much more involved in establishing and operating an incubator in the next round.
But reality showed me that goals intended to produce a particular result sometimes change. You have to stay flexible. And no community is more dynamic than the Tel Aviv bubble.
Our attempt to build a technology design incubator from Tel Aviv’s coffee shops
After researching the market, we sharpened our direction. The incubator would help Israeli founders working in the technology design ecosystem.
We learned that design has considerable economic potential, and that companies that make it a priority achieve much better results. One illustration was the following article about research by the Design Management Institute and Motiv Strategies, which tracked 16 design-oriented companies between 2004 and 2014 —including Apple, Coca-Cola, Herman Miller, Nike, Walt Disney, and Whirlpool—and found that their design index outperformed the S&P 500 by 219% over that period.
Companies such as Apple, GoPro, Instagram, Houzz, Fitbit, and Oculus were on our minds as we examined returns from design-focused startups. We were also thinking about Israel’s design ecosystem, rich in many of the resources needed for leading design, yet somehow still lagging behind.
If you are one of the people typing on a laptop in Tel Aviv’s coffee shops, you probably know that sitting long enough in certain locations—do not miss Arcaffe at Habima—lets you hear almost every idea, good or otherwise, on the startup scene.
The Israeli combination of loud conversation and a neighborhood mentality that encourages sharing your idea over coffee has produced good results.
At one of those coffee meetings, a new group took shape: two enthusiastic founders, a well-known technology PhD, and me. We decided to bid for the incubator tenders and quickly developed our concept.
We all felt that Israel’s technology design market was not sufficiently mature and did not fit comfortably into the existing government or private incubators. We wanted to refresh the ecosystem, so we named the incubator Artic.
*Image: the founder in the center struggles to navigate an ecosystem lacking communication and maturity (from a slide in our accelerator presentation, showing the potential resources available to a design entrepreneur in Israel that still did not bring the field into line with the wider Israeli startup ecosystem)*
Racing against the Israeli clock: we always need it yesterday
The extensive requirements for an incubator operating franchise left us little choice. We had entered the race too late, with too few tools. But it was worth trying.
My heart and enthusiasm were drawn to hardware ventures. I had to try combining my love of supporting startups with my interest in physical products. Establishing a technology incubator for physical products was exactly what I decided to attempt.
We approached countless international corporations that could not commit to the challenge because they could not make that kind of decision within 14 days. We also lacked the money and time to raise our first fund. The lawyers alone requested about 20 days to develop its terms and structure.
The response from academic design institutions deserves particular credit, especially Shenkar and HIT, which found the idea of a design incubator highly attractive.
We also needed an experienced, knowledgeable team to complete the picture. We were close to assembling one. But our respected prospective CEO, a former head of a Chief Scientist incubator, argued that the Chief Scientist’s operating approach would leave a technology design incubator completely starved of resources.
Without saying much more, the wind went out of our sails. We recalculated our route and looked for a new direction.
Editor’s note: three groups won the 2015 tenders, and their success had seemed fairly predictable. My goal of submitting an independent bid therefore had slim odds from the outset. Even so, I think the Chief Scientist’s incubator program is excellent, and I greatly appreciate the Chief Scientist’s broader work in Israel.
Why were there no physical product incubators in Israel?
As of this writing in 2016, there was no dedicated solution of sufficient quality for founders developing a physical product. A technology incubator specifically for physical products had not yet been established.
There were more than 70 incubators and other programs—some are listed here—that founders could approach, such as Intel or Tyco, Vertical Engine, which mainly targeted innovative technology products in the Internet of Things.
Hamidgara , for example, might accept unconventional ventures. Other programs existed too, but there was no true dedicated accelerator specializing in physical products.ACT Shenkar was a dedicated program, but it was intended for Shenkar students. Physical product founders faced particular difficulties in these areas:
- Strategy
- Fundraising
- Product design and prototyping
- Validation
In Israel, there was a gap between founders building physical products and those developing software or cloud ventures. Artic wanted to bridge that gap as effectively as possible, alongside other organizations trying to do the same.
Physical products and hardware are treated differently elsewhere
Italy, Sweden, the United States, and Japan are just some of the countries where design receives the attention it deserves. In many countries, founders have a much easier time bringing their ventures to life.
Funding programs such as NSF , or the various grants offered by the European Union—for example, these programs for agricultural technology and sustainability ventures—design firms such as DesignIt, IDEO, FrogDesign , accelerators including the American programs Bolt and Seamless , or Italy’s Industrio , and many other frameworks give founders the support they need. I will devote a later chapter to these resources in more detail.
That situation led me to conclude that Israeli founders in this field should consider strategies that bring them closer to overseas markets: roadshows, manufacturing, relocating to access grants, and so on.
*Image: an illustration of an Israeli mind leaving the country because of a real shortage of resources to advance a venture*
The next chapter explores the gaps in Israel’s physical product design landscape. Some of the figures may be discouraging and others encouraging. What should really excite you is design’s potential as an engine of growth and prosperity in Israel, something Shenkar has written about well. (Link to Chapter 4).
The next chapter will offer data, innovation, tools, and resources. I hope they can help people like me enjoy a better and easier entrepreneurial adventure.