German and Israeli Innovation: The Best of Two Worlds

This study reviews – through desk research and expert interviews with Mittelstand companies, startups and ecosystem experts – the current status of the Israeli startup ecosystem and the Mittelstand region of North Rhine- Westphalia (NRW), Germany. As a case study, it highlights potential opportunities for collaboration and analyzes different engagement modes that might serve to connect the two regions. The potential synergies between the two economies are based on a high degree of complementarity. A comparison of NRW’s key verticals and Israel’s primary areas of innovation indicates that there is significant overlap in verticals, such as artificial intelligence (AI), the internet of things (IoT), sensors and cybersecurity. Israeli startups can offer speed, agility and new ideas, while German Mittelstand companies can contribute expertise in production and scaling, access to markets, capital and support. The differences between Mittelstand companies and startups are less pronounced than those between startups and big corporations. However, three current barriers to fruitful collaboration have been identified: 1) a lack of access, 2) a lack of transparency regarding relevant players in the market, and 3) a lack of the internal resources needed to select the right partners, often due to time constraints or a lack of internal expertise on this issue. To ensure that positive business opportunities ensue, Mittelstand companies and startups alike have to be proactive in their search for cooperation partners and draw on a range of existing engagement modes (e.g., events, communities, accelerators). The interviews and the research conducted for this study made clear that no single mode of engagement can address all the needs and challenges associated with German-Israeli collaboration