OpinionIsraeli startups and the enterprise market: A roadmap for success in uncertain times
Opinion
Israeli startups and the enterprise market: A roadmap for success in uncertain times
What should Israeli early-stage startups do in light of the current market trend? Where should they focus their efforts? And how does the judicial reform and the political situation in Israel actually have a positive effect on the potential growth of Israeli startups?
This is no secret for Israeli founders. Budget cuts are happening across the board at enterprise organizations. Sales processes are longer, and harder, as sales targets continue to get re-evaluated and adjusted, with enterprises and startups alike looking to become increasingly efficient. This trend has a significant impact on the growth of Israeli startups looking to expand and generate more revenue in order to become attractive for potential investors.
With funding drying out, many CEOs are kept awake at night thinking about how to generate the kind of momentum that will enable them to grow their business.
To add to that challenge, most research firms predict that this market trend will continue for the next year or two. Gartner forecasts worldwide IT spending to grow 4.3% in 2023, a decline from previous 2023 predictions. Many CIOs are shifting spending to technologies which enable automation and efficiency to drive growth at scale with fewer employees.
So, what should Israeli early-stage startups do in light of this market trend?
Where should they focus their efforts? And how does the judicial reform and the political situation in Israel actually have a positive effect on the potential growth of Israeli startups?
Understanding enterprise internal dynamics
There are unique challenges faced by Israeli startups looking to sell to U.S.-based enterprises during a downturn. Understanding those challenges, and adjusting sales strategies appropriately can help shorten the sales cycle. First and foremost, startup founders and their sales teams need to understand who has the buying decision-making power within the organization.
Finding that champion who is going to root for you, and convince others in the company that your solution is needed, (and can make the company better) is key. Think of it as finding a lead investor for your funding round. Once this happens, the rest of the round comes together fairly quickly.
For this to work, you need to do your research. Who within the organization is most relevant for integrating your solution? What have they bought lately? Does your technology replace an existing solution or does it work on top of it? What will be considered a success if you were able to generate a sale, and how would it impact your customer’s bottom line?
Lastly, many times these types of processes can take months to build and mature. As Israelis, we typically don’t have time (or sometimes patience), to build that kind of relationship without knowing that there’s a high likelihood it will convert. Some U.S. investors and top executives have mentioned to me many times that Israelis can be very transactional.
Avoiding this stigma and building a relationship over time will go a long way in increasing your chances for a successful sale. Navigating cultural differences and being an effective communicator is vital when sorting out the difficult process of selling and working with enterprise customers.
Oversaturation of similar products and solutions
One of the factors contributing to the current situation is the oversaturation of technology startups in the market. Think cyber, sales enablement, or productivity solutions. How many of these solutions have executives at enterprises seen lately? The answer is, a lot.
With an increasing number of companies vying for their attention, enterprise buyers have been inundated with a flood of pitches and product offerings. This abundance of options can lead to decision fatigue, making it harder for Israeli startups to stand out from the crowd. As a result, buyers may be more skeptical and cautious when considering Israeli tech sales.
There is also a growing sentiment among enterprise buyers that the initial hype surrounding Israeli tech sales may be waning. And yet, companies need to innovate or they will fall behind. Which is why being creative with your approach and introducing something different can help startups rise above the noise.
The opportunity – Generative AI
A recent report by McKinsey Digital confirms what we’ve seen in the market over the past few months - Generative AI is poised to unleash the next wave of productivity. We’ve all seen the hype around ChatGPT… with pretty much anyone able to use it and optimize routine tasks in a way we’ve never seen before.
Large Language Models (LLMs) technology is already powering a bunch of Google products, and other large tech companies are not far behind. This trend is here to stay and presents an incredible opportunity for Israeli startups. In fact, quite a few top executives mentioned to me that Gen AI is a real revolution that they’ll need to adapt to quickly… but carefully.
It’s a good sign for Israeli startups who are developing innovative solutions with this new technology.
The political situation in Israel is an opportunity for growth
The political situation in Israel has been chaotic and disruptive for Israeli startups based in Israel.
Many companies have let their employees skip work and protest against the judicial reform, missing work days and being consumed with other things than just work. But it also created an opportunity.
Most founders register their companies now in Delaware instead of Israel, and many are thinking about expanding to the U.S. market earlier. It forced Israeli founders to get out of their comfort zone, and be even more bold in their mission to build a global company and expand to the US as quickly as possible.
History has shown us that the best companies are created in down markets and during tougher times. If Israeli startups selling to enterprises can figure out the right way to do so during this abnormal time in the market, they’ll have a shot to join that growing list.
Eyal Bino is the Founding Partner of 97212 Ventures, a NY-based seed fund
