We recently published our AI study — an in-depth study which examines the German AI startup scene via analysis of data and insider interviews and compares this to the AI ecosystem in Israel. You can access the study here.
While our study is peppered with revelations — the need for more collaboration with the science community; the German industry’s “blind spots” when it comes to AI — one of the most striking aspects of the study was the comparison it draws between Germany and Israel’s approaches to artificial intelligence.
According to information from the Start-Up Nation Central platform, there are currently around 1,300 AI start-ups in Israel, over four times as many as in Germany. Given the fact that Israel has a population of just nine million people in comparison to Germany’s 83 million, this difference is conspicuous and illustrates Israel’s enormous strength when it comes to AI.
So why is Israel’s AI scene so strong and what can we learn from it?
The total amount of venture capital invested means Israel’s ecosystem stands head and shoulders above other countries in this respect. In 2018, per capita investments in Israel were almost 30 times higher than in Germany, and twice as high as in the USA. This shows Israel’s lead isn’t simply about the country’s sheer number of AI startups, but is also about a high-quality AI ecosystem.
Unlike Germany, Israel only has a small domestic market and few local industries, which is why the majority of start-ups target international markets right from the beginning. The ecosystem’s focus on the global market allows Israel to establish a foothold even in industries which are barely represented there. Think, for example, of the many Israeli start-ups focused on autonomous driving despite the fact that not a single automotive manufacturer exists in Israel.
The founder and CEO of ciValue, Beni Basel, told us: “For German start-ups, their domestic market with a strong industry and many well-established companies is definitely a real advantage. At the same time, founders in Israel must get their products ready for international competition at an early stage and they also benefit from the large number of international investors in the country. As a result, Israeli start-ups do not develop products for individual customers, but aim to conquer larger markets. Being a global player also makes you a more interesting partner for big companies.”
In Israel, close ties are nourished between universities, research centers, and businesses and the academic field is strongly focused on the economy and on practical methods. The company Mobileye is a good example of this connection between universities and the AI scene: founded way back in 1999 by a Hebrew University scientist, this start-up has been a pioneer in the field of image recognition and was acquired by Intel for $15 billion in 2017.
A comparison of Israel and Germany reveals a number of blind spots: Israel already has a long line-up of use cases and industries that are not yet covered in Germany. This includes the education sector with 11 Israeli AI start-ups (5.1 percent), which is expected to experience significant growth amidst the coronavirus pandemic.
When we examine the German AI start-ups working within the field of enterprise function, another deficit becomes clear. By focusing on “Sales & Marketing” and “Customer Services” (53.7 percent), the German community is focused on markets that are not very innovative and which are already saturated. Germany’s presence in the disruptive and rapidly growing field of “IT & Security” is still fairly weak at this point in time. In addition to the need to close the gap across all fields, the AI ecosystem in Germany is also facing challenges in its attempts to gain a foothold in innovative and future-proof business areas.
Hungry for more? Check out our AI study in full by clicking here.