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Investors and start-ups highlight what's holding Israel's smart cities back

A recent event highlighted the difficulty smart city technology companies have breaking into the urban space and getting the ear of municipalities.

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Tel Aviv is actively building an ecosystem of start-ups and entrepreneurs
Tel Aviv is actively building an ecosystem of start-ups and entrepreneurs

A contradiction between the words “smart” and “city” is impeding the progress of smart cities in Israel – this was the verdict of one investor participating in a recent smart city technology event hosted by accountancy and consulting firm, BDO Israel.


The panel event also highlighted the difficulty that start-ups and technology companies have raising money for proof-of-concept or pilot projects because investors do not perceive there is sufficient “buzz” around the smart cities market at the moment.

 

Smart city barriers


The event was opened by an investor panel led by Yigal Toledano, managing partner at BDO, who discussed the influence that municipal bodies and municipalities have on the introduction of start-ups into the urban space.


Noga Kap, one of the founders of venture capital fund i3, who participated in the panel, said it can be difficult to do business with local authorities since many of them belong to the “old generation” of businesses which are not as up-to-date with new technology as they could be.


"Beyond that, there are barriers connected to bureaucracy, tenders and procedures that make it difficult for start-ups to enter urban spaces," he said.


Avi Eyal, founder and managing partner of the Entrée Capital Foundation, noted that most of the technology companies in the smart cities space operate mainly abroad, and described the combination of the words “smart city” as not accurate.


"There is a contrast between the ’city’ and ’wisdom’ of the people working in municipal authority,” he said. “Today, there are not many young people who work in municipalities, especially in key positions. Thus, in practice, many young technological companies break into municipalities through tenders for the provision of external services or through suppliers of local authorities. If that does not change, it will take a long time for cities to really be considered smart."

"There are barriers connected to bureaucracy, tenders and procedures that make it difficult for start-ups to enter urban spaces"

When the panelists were asked about the development of the smart city area, they all agreed that, despite the acceleration of the field in recent years, it had not yet reached its peak. Investor Yonatan Machado of Samsung Next asserted that smart cities have not yet been perceived as "something big" for investors. "There is still no big buzz around the field, so technology companies that brand themselves as ones who develop solutions to smart cities are finding it difficult to raise money.

 

"Companies that do raise money are usually those that already have a product, not just an idea, which is an advantage for the investor."

 

Embracing entrepreneurs


Daniel Romi, director of infrastructure architecture in the Tel Aviv municipality, exlained that the city is developing an ecosystem of significant start-ups active in the field to advance the introduction of technology. "The municipality’s success is dependent on the success of the start-up,” he said.

 

“Many delegations arrive in the city and we make sure we give them a tour of the city. We expose our problems and invite entrepreneurs to come and solve them. There are no such industries that call on entrepreneurs to solve their problems. This is an important signal to the investor. Where the problem is and where the market is willing to invest and pay."


"We use the term ’urbatech’, not smart cities, added Gaby Kaminsky, CEO of CityZone, the smart city project of Tel Aviv.

 

“The IOT is growing at a tremendous rate, and big companies have realised that most of the technology, including that related to the home market, will be spread through cities, and those who pay the bill will be the cities."


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