Israeli kibbutz tries a new crop: high-tech startups
Once a bold experiment in communal living, Israel's kibbutzim have been in decline. Now some hope the farming collectives can provide fertile ground for the startup culture.
Lion David co-founded a technology accelerator dubbed the "Hatchery" on Kibbutz Revivim in Israel. The offices await a new class of entrepreneurs who will eventually move into a former chicken hatchery that's been renovated and outfitted as work space.
Joshua Mitnick
Kibbutz Revivim, Israel
When this desert farming commune cleared out its old chicken hatchery two years ago, Lion David had a vision about what else could be spawned there. Over lunch in the Revivim dining hall, he pitched the kibbutz business director on the idea.
鈥淚 said, 鈥榃ouldn鈥檛 it be cool if it were a startup hub,鈥� 鈥� says Mr. David, who last year inaugurated a technology accelerator at Revivim dubbed, appropriately, the 鈥溾�� 鈥� Hebrew for 鈥渉atchery.鈥�
The 73-year-old kibbutz in the northern Negev Desert has since given birth to four fledgling Internet ventures that it owns a stake in, and is sizing up applicants for a new class of entrepreneur teams that will eventually move into the old chicken hatchery.
鈥淲e want to be a factory for startups. The Hatchery is going to be a very big business,鈥� says David. 鈥淲e are going to make hundreds of millions for the kibbutz.鈥�
The four ventures that have now flown the coop, so to speak, include a wedding planning phone app and a website that's an online platform for sharing indie music.
Revivim鈥檚 foray into technology businesses and venture capital is part of a growing embrace of startup culture within Israel鈥檚 kibbutz movement that might have caused its founding fathers profound consternation. But now the movement 鈥� the political umbrella organization that guides member communities鈥� policies and promotes their economic well-being 鈥� has come to see startups as a way to bolster their finances and attract new members.
More than just a stretch from agriculture to high tech 鈥� for decades kibbutzim already had embraced non-agricultural enterprises 鈥� it is an attempt by a collectivist community to participate in a branch of the economy associated with individual inventors and risk-takers.
Israel鈥檚 egalitarian kibbutz was one of the novel social and economic creations of the 20th century. The socialist communes were instrumental in helping build the nascent and impoverished Jewish state, cultivate its land, and define its borders. Kibbutzniks were celebrated as part of the country鈥檚 vanguard of pioneers and dominated Israel鈥檚 politics, culture and military. Thousands of volunteers were drawn from the United States and Europe to experience the life of the commune and work shifts in the kibbutz cow sheds.
Reinvention to reverse long decline
But for decades, now, the collective community model has been in steep decline: socialist idealism has long since cooled; kibbutzim suffered from a long-term debt crisis; and the communities have struggled to retain their youth, who sought independence and opportunity in Israel鈥檚 rapidly modernizing and growing economy. Now, it鈥檚 local technology startups that have replaced the kibbutz as a brand for the Israeli economy and drawn interns and entrepreneurs from abroad.
Kibbutzim have experimented with modified collective models: some 75 percent of the 270 communities allow individuals to keep the income from their labor rather than give them set living allowances. Some have built neighborhoods of villas on kibbutz grounds and sold the homes to non-members. But even those dramatic changes aren鈥檛 enough to ensure financial stability, says one senior kibbutz official, and the embrace of startups marks the most recent effort at reinvention.
鈥淭here is definitely a change in the kibbutz attitude toward startups,鈥� says Udi Orenstein, the chief executive of the Kibbutz Industries Association, an umbrella group for kibbutz-based businesses.
Kibbutzim account for just 1.6 percent of Israel鈥檚 population but nine percent of its total exports, according to a 2012 . But nearly all those exports come from heavy industry rather than the technology businesses for which Israel has become renown.
Last year, the kibbutz association announced a plan to invest kibbutz movement capital in new startups, and took several promising companies on a tour of individual kibbutzim to generate interest in the investments.
New ideas for conservative farm
The shift is still in its initial stages. Mr. Orenstein, who is a member of Revivim, says kibbutzim invested some $20 million over the last year in technology startups 鈥� a pittance among tech venture capitalists, but a significant sum for the kibbutzim.
鈥淗igh tech currently has a minor share in our portfolio, not like the rest of Israel,鈥� says Orenstein. 鈥淲e think it doesn鈥檛 make sense that the kibbutzim won鈥檛 be part of the high-tech locomotive of the economy.鈥�
In the last few years, a handful of kibbutzim like , in Israel鈥檚 remote southern desert, have raised eyebrows by selling ownership stakes in successful home-grown technology businesses to foreign investors for tens of millions of dollars.
Revivim, where residents still walk around in ill-fitted, drab work clothes, has a successful automobile valve export business聽that has generated enough money聽to continue operating as a collective. Still, it is the first kibbutz to dabble in business accelerators, which host and support small teams of entrepreneurs trying to get startups off the ground in return for an equity stake. Other kibbutzim are taking note and mulling setting up their own startup incubators.
鈥淭he kibbutz is something that is very conservative,鈥� says Revivim鈥檚 secretary general, Tzachi Lavim. 鈥淚t鈥檚 hard to accept new ideas. They鈥檙e used to being involved in agriculture, industry, and services. But just as the world has become a global village, the kibbutz is opening up to the outside world.鈥�
Competing for young Israelis
Sitting behind a desk with a stack of business cards and a business plan for a mobile phone app, accelerator co-founder David says kibbutzim were left out of the startup wave in part because of their distance from Israel鈥檚 urban center. However, he says, the appeal of the Revivim startup hub for entrepreneurs is its isolation from the distractions, pace, and high costs of city living.
For a community where 70-somethings gathered in the dining hall lament the departure of kibbutz children to live in Israel鈥檚 big cities or abroad, the accelerator is an opportunity to compete for the hearts and minds of young Israelis and attract them to relatively underdeveloped areas in southern Israel.
鈥淭he kibbutz has to create some kind of value,鈥� says David, who moved to Revivim several years ago from cosmopolitan Tel Aviv, an hour-and-a-half north. 鈥淭here鈥檚 a need to have something that is challenging, a path to a career and personal growth.鈥�
Even though kibbutzim helped set up the factories that industrialized Israel in the 鈥�60s and 鈥�70s, the scars from a nationwide financial crisis dampened the appetite for new risky ventures in technology businesses that few understood.
鈥淭oday the expected risk of startups is that 90 percent of them fail. Kibbutzim are not used to statistics like that,鈥欌�� says Jacob Ner David, a technology entrepreneur who moved from Jerusalem to Kibbutz Hanaton in northern Israel鈥檚 Galilee mountains. 聽There is risk when you plant a field or build a factory, he says, 鈥渂ut it won鈥檛 be a complete failure.鈥�
Collectivism versus individualism
Kibbutzim have lagged the rest of the country in embracing startups because the old collectivist ways of the kibbutz don鈥檛 support the culture of the modern day startup entrepreneur, say kibbutz residents involved in technology businesses.
鈥淚t鈥檚 a sharing culture which worked well in the '70s and '80s.鈥� 聽If you look at kibbutzim, the spirit is 鈥楬ey, we are all equal,鈥� 鈥� says Eden Shochat, a partner at the Tel Aviv-based Aleph venture capital fund who grew up on a kibbutz near Revivim. 鈥淎 startup is anything but equal鈥�. Entrepreneurial spirit isn鈥檛 something that kibbutz produces.鈥�
Despite Revivim鈥檚 new focus on venture capital and individual enterprise, David says the spirit of shared community and even shared profits still endures on the kibbutz, whose members stand to benefit if the startups become so profitable they go public or get snapped up by a multi-national.
鈥淚鈥檇 rather be rich with a lot of people, than a lonely rich man,鈥� he says. 鈥淏etter to be with a good community. We want people to come and say, 鈥楲et鈥檚 make millions of dollars together.鈥� And we don鈥檛 have to sell our soul for it in the city by ourselves.鈥�