By Amir Mizroch and Einat Paz-Frankel
It was a 45-minute meeting that led to a US $109 million investment. Executives at Koch Disruptive Technologies (KDT), a subsidiary of Koch Industries, one of the largest privately held companies in the world ($110 billion revenue, operating in 60 countries) listened intently as the founder of a buzzy Israeli sensor startup explained how its portable radar imaging sensors can see through walls and objects.
The startup’s technology can track and map everything happening in an environment in real-time (its chip can detect breast cancer and notify if an intruder is in your home, among other “superpowers”), Vayyar Imaging’s co-founder and CEO Raviv Melamed said. At a meeting at Start-Up Nation Central (SNC) in August 2018, Melamed told KDT investors and Adam and Ellen Beren – who were instrumental in connecting KDT to SNC – that his company’s products are used in self-driving cars, smart farming, smart manufacturing, cancer detection, retail, construction, and more.
KDT, led by President Chase Koch, had already met a raft of innovative companies on their trip to Israel, a four-day immersion into Israeli innovation organized by Start-Up Nation Central. But it was SNC’s introduction to Vayyar – chosen specifically for them out of Start-Up Nation Finder’s 6,400 currently active innovation companies– that really sparked their imagination and resulted in KDT’s investment.
The deal was KDT’s second investment in Israeli tech, after its December 2017 investment into Haifa’s INSIGHTEC, a commercial-stage medical device company revolutionizing surgery with MRI-guided focused ultrasound. This time, KDT chose Vayyar, one of the stars of a cadre of growth-stage Israeli deep technology companies poised to make a big impact on key industries like mobility, manufacturing, agri-food production, and digital health.
Harnessing the power of machine learning and AI
The deal positions both KDT and Vayyar at the center of a global race to harness the power and opportunity of machine learning and artificial intelligence (AI). At the heart of that technology are cloud computing and artificial intelligence infrastructure and applications, powered by semiconductors and sensors. Israel is a focal point for the design and production of the chips and sensors that make these technologies function.
Intel makes the chips it needs to power its global data center business in Kiryat Gat on the edge of the Negev desert. After buying Mobileye (which makes sensors for driving automation) for $16 billion, Intel recently bought Habana Labs, which makes specialized chips for AI computing. Nvidia, Intel’s closest rival in that growing market, in 2018 spent $6.9 billion for chipmaker Mellanox. Amazon’s highly profitable and near ubiquitous AWS cloud computing business is highly dependent on its 2015 acquisition of Annapurna Labs for new innovations. Many of Apple’s phone camera capabilities are based on 3D sensor company PrimeSense, whose founders went on to start Habana Labs. Both Annapurna and Habana were founded by Avigdor Willenz.
According to SNC’s research featured in this article, Israel’s semiconductor industry is enjoying a new lease on life. As of January 2020, there are some 528 semiconductor and sensor companies currently active in Israel, up from 380 in 2014. Fundraising has jumped from $197 million in 2014, to $754 million at the end of 2019. The sectors –which largely fall under the catch-all term Internet of Things—amounted to $2.4 billion worth of exits (M&A and IPO) in 2019, a record.
“The right match”
Vayyar is one of those chip companies with real buzz around it, and a lot of investors and connectors circling it. KDT, which had only begun learning about the Israeli innovation ecosystem, was not one of the usual crowd of VCs and corporate venture arms making the rounds in Israel’s tech industry. It was the company’s desire to partner with entrepreneurs who would benefit not only from capital investment, but from access to Koch’s global capabilities that formed the brief for SNC to go looking for Vayyar. “Advancements in imaging sensors are vital as technology continues to disrupt all aspects of society,” Chase Koch said. “Our goal with this partnership, is to utilize Koch’s knowledge and capabilities within multiple industries to help Vayyar create more value for its customers.”
KDT’s investment in Vayyar is further evidence in the now unmistakable trend showing a significant increase in later-stage funding for Israeli growth stage tech companies. Startup Nation is maturing, and so is its impact on the world. Israel will be Koch Disruptive Technologies’ first satellite office, led by Managing Director Eli Groner.
“SNC’s ability to source the right partner for KDT amongst the thousands of possibilities in Israel is totally unique in the ecosystem. They have no other agenda but to make the right match for both sides, and they do this on a regular basis, and at the very highest level of accuracy and discretion. With SNC’s help we connected with Vayyar, a company that will undoubtedly have a transformative effect on global industries. We are very grateful to the SNC team,” Mr. Groner said.