The lean Israeli startup is a thing of the past

• Author: Assaf Gilead
• Published date: 24 April 2022
• Publication title: Globes (Rishon LeZion, Israel)

The Lean Start-up theory fit Israeli high-tech like a glove. A decade ago, it was still considered a small industry in which everyone knew everyone, and in which colleagues, customers and competitors were not afraid to give direct and honest criticism to one another

According to the Lean Start-up concept, early encounters with customer needs reduce the risk of blind, wasteful development of a product that might not interest the market, and thereby reduce the need for massive capital raising. The term was very appropriate for the period during which the theory was developed: just two years after the great banking crisis of 2008-2009, which also led to a wave of high-tech companies closing, and a lengthy freeze on high-tech investment, which began thawing out only years later.

More than a decade later, even companies that adhere to the Lean Start-up theory are having a hard time meeting its definition. Last year was a year of plenty, with early-stage companies raising millions, and sometimes tens of millions, of dollars. One example is fintech company Sorbet, which raised $21 million in its first round of funding for its platform that helps employees turn unused paid time off (PTO) into cash. Other companies are Talon Cyber Security, which developed a browser-based cybersecurity platform for the enterprise, and raised $26 million in first round, and cloud data security company Cyera, whose entrepreneurs were demobilized from Unit 8200 just two years ago and has since raised $60 million in two rounds alone.

These companies are, admittedly, extreme examples, but the trend is clear: establishing a start-up has become a more costly task than ever. According to data released by Bank Leumi and research firm IVC earlier this week, the median seed round for young companies rose from $1.8 million in 2015 to $4.25 million in the first quarter of the year.

So, for example, Tamar Bar-Ilan and Yotam Segev of Cyera raised $4.5 million from venture capital fund CyberStarts, founded by Gili Raanan and Lior Simon, at the pitch and presentation stage just a scant few months after they were released from the army. "Start-ups need to run faster today than in the past," Bar-Ilan explained, talking to "Globes" about the need to raise large sums from the outset.

"The technology environment is dynamic and changing faster and faster, and as a start-up, you have to grow faster to help organizations implement your technology safely and quickly. Today, you can't afford to take your...