Israeli Robot Startups Prepare for Post-War Valuation Bump

One could hear in the hallways of RoboBusiness murmurings of shock and disgust with the Hamas terrorist attacks still smoldering. Just eleven days prior, a sunny morning in Israel was marred by bloodshed and the death of thousands of innocents. Consequently, the startup nation’s economy quickly spiraled. Almost overnight some of the world’s most promising venture-backed companies lost on average 15% of their workforce to military reserve duty. At the same time, these founders displayed a resilience that illustrates the promise of a post-war valuation bump, doubling down efforts to increase sales and overseas staffing.

To understand the full impact on the mechatronic industry, I spoke with Amit Moran, co-founder of Indoor Robotics and the Israeli Robotics Meetup community (with 2500+ subscribers). Amit recently moved to Sunnyvale, California, far from the action but his partner, Doron Ben-David, is on the ground in Ramat Gan. Since the beginning of the war, Ben-David has experienced daily rocket attacks along with a scaled-down engineering crew. As Moran shares what it is like for him and his founder, “A robotics startup is never an easy startup. The possibilities are endless, but the technology is complex and many times the solutions are so disruptive that it takes time to implement and change the perception of customers, investors, and the market. [The] Oct. 7th event was horrifying and it caused several issues from a business perspective: 1) many people got drafted (for us, a third of our workforce); 2) logistics became more difficult as many flights were canceled; and 3) productivity was reduced for the Israeli members (which are the big majority in our case). People have small kids at home and it is hard to concentrate. It was a shock for most people.”

Oliver Mitchell (author) with Amit Morat at the Israel Robotics Meetup in Ramat Gan, Israel in June

Moran is pragmatically optimistic, “For a startup, one of the things you are looking at as a founder, is how to get to those KPIs to be able to raise the next round. At this time, it makes it harder since the money is still going out on salaries, operational costs, etc. But productivity is lower. On the other hand, the groups of founders, alumni accelerators, startups, etc. are really trying to help each other. From webinars on how to deal with employees who got drafted and their families, how to communicate with investors and customers, to tips from fellow colleagues. We felt a big hug from everyone.”

This embrace has been very real, beyond people outside of Israel sending supplies and money to the embattled State. Zoe and Michael Burian of New York launched a volunteer network for Israeli startups called “Startup Reserves,” to fill the open spots left by drafted employees. According to a conversation I had with Ms. Burian last week, the response has been so overwhelming that she is revamping the website from an Airtable form to a robust software-matching platform. According to Forbes as of October 13th, Startup Reserves had over a thousand volunteers committed to the cause. This grassroots effort is on top of a new emergency fund initiated by Hilla Haddad Chmelnik, former Director General of Israel’s Ministry of Innovation, Ehud Schneorson, former commander of the famed intelligence unit 8200, and Itzik Parnafes, advisor at Battery Ventures. According to Calcalist, the fund, called Safe Dome, “plans to invest amounts of up to half a million dollars in about 100 startups by the end of 2023 through a short application process. The conditions for receiving the support include raising at least a quarter of a million dollars in the last two years and experiencing significant damage to the activity due to the war.” In addition, more than 800 VCs have signed a letter of support for the Israeli entrepreneurial ecosystem stating: “Israel has been an enduring partner to the global innovation ecosystem, fostering groundbreaking technological advancements and startup innovation…it is now our time to step up to the plate and to support Israel and the Jewish people.”

While these external resources are very helpful, internally Moran has been busy restructuring his team to meet the new reality. “We had to reprioritize. As a business, our #1 priority is our customers. We had to restaff the team. Luckily, the team manager is still here. We identified several key employees who had previous experience in the needed tasks, created a training plan, and started to work with them on this. I am also joining the effort and performing maintenance tasks and deployments. Whatever it takes to reach those KPIs, and keep our customers happy.” He sums it up, “I think the key is perseverance and persistence. Reassemble, think fast, and act.”

CivRobotics San Francisco office with Tom Yeshurun (CEO), Oliver Mitchell (investor/author) and Liav Muler (COO)

Indoor Robotics is not alone, in speaking with ff Venture Capital portfolio company, CivRobotics, its CEO Tom Yeshurun outlined his new game plan for his Tel Aviv office, “Working from the office is crucial for the success of robotics companies as the system is complex and involves engineers with different expertise. Today, we are able to work on tasks that require 1-2 developers to work on and are limited to hardware changes as all of our mechanical engineers have been drafted.” He continued to illustrate how his team is adapting, “Our VP of R&D took to his house 2 robots and every other day a team member comes to his house to test out their software. We [also] sent each of our developers an NVIDIA board and the sensors they are working on.” We are now “prioritizing tasks that developers can work on and complete on their own.” Yeshurun recognizes that if the war continues, he will look to outsource the work to their US partners.

Both innovators are optimistic about the post-war future. As Yeshurun explains, “As an Israeli founder, we aren’t afraid of failure nor walk away from a challenge. I’m positive that the Israeli tech community will bounce back stronger and more united.” Moran elaborated, “Luckily (or not) we, Israelis, had to deal with many crises all the time. Just for us as an example, already in the last 5.5 years, the company has existed – wars, the pandemic, political protests, multiple elections, etc. We know how to deal with the unknown probably better than anyone.” Moran’s sentiment is echoed in Israel’s history in bouncing back from each previous Palestinian flareup, as CNN reports. “Each time, the [tech] industry has bounced back, demonstrating why the country of just 9 million people is known as the world’s “startup nation.” Yaron Samid of TechAviv commented, “Seasoned investors with experience backing Israeli startups are not backing away due to the war. On the contrary, they are being very supportive at this time, as they have in the past.” In Moran’s view, the Israeli tenacity and spirit is “one of the best reasons to invest in Israeli tech – we will do whatever it takes to succeed.”

Hearing Moran and Yeshuran’s determination, I am reminded of the tragedy of Yaron Shay, Izhar Shay’s son who was killed while preventing terrorists from entering Kibbutz Kerem Shalom (one of the only commuties neighboring Gaza that was not conquered by Hamas on Oct. 7th). Yaron’s father was the former Minister of Science and noted entrepreneur/venture investor. His response to his grief, “Israeli high-tech should take on a mission that for every innocent life lost, for every fallen soldier, for every missing citizen, and for every abducted person; we should establish a startup company.” He continued to tell Calcalist: “All the investors I’m in touch with believe in the fundamental values of human dignity and freedom, the right to live, work, and enjoy life. This is an attack that began in Israel but will reverberate worldwide. On the military front, the IDF wil destroy them, but investors seeking to create a better world need to invest now. We will develop solutions for agriculture, diseases, life-saving devices for children, technological solutions for the elderly, and more. This is the best way to counteract extremists…Over the next 12 months, for every fallen soldier, for every murdered civilian, let’s put together a new innovative startup which will build a product or service that will serve thousands of companies and/or millions of people around the world.”

Meet other Israeli robot startups and the entire uncrewed ecosystem in the United States by joining ffVC and Genius New York at our Annual Drones & Robotics AI NYC Summit on 11/8. SIGN UP TODAY!

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