The early stages – Skip the local Israeli market

In the past few months I have been seeing a lot more Israeli startups that are focusing their initial business steps in the local market. And when I say Local, I mean the Israeli market. There is a good reason for this growing trend. With the abundance of accelerators and early stage seed funds, many company don't have the resources to launch in the US (or Europe) and prefer to spend the little money they have with closer customers.

In every meeting I have with early-stage companies I keep pushing them to stay away from the local market, especially as their primary initial target. Israel is a great place (Sometimes…), but it is completely non representative of the bigger markets out there. Here are a few examples of these differences:

1. Business Netowrk: In Israel, there is a 1-2 degrees of separation. So easy to get to the right person in ANY organization. Totally not the same when you think about the large US companies.
2. Infrastructure: Unfortunately, Israel is truly behind as it relates to infrastructure. Michael Eisenberg, in his 4-part Hummus Manifesto has been recommending for a long time the need to build local cloud computing and real broadband. Until that happens, we will stay behind and will not be able to experience the real Internet as seen in Asia. In other words, focusing local means focusing on Internet 2001 style.
3. Applications: In Israel, the current state of online services is different on all levels. No real online music (iTunes, Pandora, Spotify). No Netflix. No ad exchanges. Can you really learn something about the US when focusing locally?
4. Finally, and based on the above (and more), having a local beta/customer does create enough value with investors. What does that mean? One US-based beta is worth more than 10 paying Israeli customers.

Still, there are a couple of situations that are relevant for selling locally. First and foremost, for cash. All of the above is irrelevant if the local customer help you survive and push forward to the next milestone. Skip it if you can, don't skip it if you must. In addition, once the company is advanced and selling in foreign markets, generating some local sales can be a great financial benefit and help the R&D team interact with real customers.

In summary: Israel is great for B-round and above. Till then, skip it if you can.