“Banks can no longer ignore the high-tech industry's tremendous impact”
Discount Bank CEO Uri Levin wants the banking and high-tech industries to better cooperate. "It was difficult for these worlds to connect - but this situation cannot continue”
"Israeli high-tech has always been a source of pride, so why did it take Israeli banking so long to go for it?” That is what Discount Bank CEO Uri Levin wondered at the opening of the Calcalist and Discount Tech Unicorn Forum. "Banking, in recent years, has more or less ignored the high-tech sector, so much so, that today only 25% of tech companies’ credit was taken from banks, the other 75% came from international banks," he said.
Discount Bank CEO Uri Levin. Photo: Orel Cohen
Levin explained that the banking industry and the high-tech industry, in their essence, are from, opposing realms. "Two polar sides of a magnet, if you will. Banking is a world that manages risks, we manage the downside of every transaction that reaches the table. The proportion of what the bank can lose in a transaction to what the bank can gain is bigger." Meaning that while the high-tech entrepreneur focuses on what he may gain, the Israeli banker focuses on what he may lose. "The upside from a high-tech venture is disproportionate in terms of investment for the bank, certainly in the numbers we see today in the industry," Levin admitted.
Levin believes that this deep gap between the two industries has led to a disconnect or a mere loose connection between the realms. "It was difficult for these worlds to connect - but this situation can not continue. The high-tech community must also get along with the banking world. Because of the funding that flowed into the high-tech, the industry mistakenly thought it could do without the bank. But it should understand that dividing shares is a high price for growth, using a bank will reduce growth costs.”
In any case, banks can no longer ignore the tremendous impact the high-tech industry has on the Israeli economy, and it will have to change. 10% of those employed in Israel are high-tech workers, 43% of Israel's exports are attributed to high-tech companies; 25% of the income tax paid in Israel comes from tech workers. Also, in the capital market, the industry is deepening its hold, with 40% of the value of the companies in the Tel Aviv-35 index currently associated with high-tech companies. The value of Israeli high-tech companies, which is close to half a trillion dollars, is higher than the GDP of the entire country, which stands at about $400 billion.
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"The unicorn phenomenon in Israel exemplifies the fundamental change that has taken place in the local high-tech industry. The industry is moving from start-ups to giant companies. A dramatic part of our ability to deal with the corona crisis came from high-tech,” Levin said. “Tech export during the crisis injected capital that compensated for the general business weakness at the time. But - there is also a but. This goodness is not evenly distributed throughout the country. In fact, in Israel as in the rest of the world, high-tech success deepens the social gap. It is the responsibility of all of us, economic leaders, and those in key positions in growing industries, to share the success with the rest of the people of Israel. Today there is a resource problem that mainly includes the difficulty of companies in finding good employees. This is an opportunity for high-tech to find quality manpower in the periphery."
In conclusion, Levin explained that with the maturation and change of the high-tech industry, more and more companies are finding the balance between taking debt in exchange for shares in the company. "The equilibrium indicates that there is room for both VCs and banks in responding to corporate finance. The high-tech industry is a tremendous opportunity for us. We understand that in order to play on this pitch we must continue to adapt - and we are all-in," Levin stated.