Throughout the years, the success story of Israel’s startup ecosystem has been driven by acquisitions made by tech giants like Google, Microsoft and Intel. However, alongside these “regular” buyers, a new set of non-traditional players looking to benefit from the Israeli ecosystem has entered the game lately.

With growing capital committed to innovative tech in the retail industry, brands like Nike and Alibaba have been eyeing Israeli companies in an attempt to sharpen their competitive edge.

One of the first non-traditional players to start this trend is no other than American retail giant Walmart. In February 2019, the company acquired AI startup Aspectiva, whose vast customer experience intel matched Walmart’s seek of innovative AI solutions.

To learn more about the story behind Walmart’s first-ever acquisition in Israel, we sat with Ezra Daya, CEO of Apectiva, for an open talk about tech, innovation, and the secrets every entrepreneur should know in order to reach a successful exit.

The power of a shared vision 

Aspectiva was founded by CEO Ezra Daya and CTO Eyal Hurwitz in 2013, with Yoad Arad joining later on as VP of business development. From the very beginning stages of the startup until this year’s acquisition, the company raised $4.2 million from main investor VC fund Jerusalem Venture Partners as well as Global Brain, Union Five, LivePerson and Re-Invent.

As a tech guy himself, Ezra is constantly striving to connect the dots between technology and business, with a special focus on AI application for eCommerce. This is what originally led Daya to think of the idea for Aspectiva. “I was extremely frustrated when searching online for products and services, discontent with the consumer reviews that were simply irrelevant to my personal needs”, he told us.

By presenting relevant knowledge based on individualized components, Aspectiva provides a disruptive solution to this challenge. Its mission, according to Daya, “is to uncover what people think about any product or service and turn it into clear and effective knowledge for everyone’s benefit”.

Image Source: Ezra Daya

Walmart’s hook 

As a founding principle of one of the largest retail stores in the world, Walmart prides itself in offering customers amazing shopping experience at a low cost. With that, comes the need for Walmart to thoroughly monitor customer wants and needs in order to stay relevant.

This requires an immense amount of research and data, gathered from the most important source of all: the consumer.

Aspectiva’s solution offers a critical solution for this challenging retail environment. With its natural language processing technology, it has the ability to analyze enormous amounts of product reviews and customer insights to create a more refined and informed shopping platform for all users.

Aspectiva’s initial contact with Walmart happened thanks to the Bridge, a commercialization program for startups, acting as a bridge between the entrepreneurial community and major global markets. Following the introduction, and thanks to Walmart’s prominent amount of focus on eCommerce and AI technology, the two companies relationship formed rather fast. Although Daya and his team at Aspectiva were not planning for an acquisition, their “great synergy and shared vision generated a unique opportunity that allowed for executing their vision at scale”.

The acquisition was officially announced in late February 2019.  In accordance to the agreement formed by the two companies, Aspectiva joined Walmart’s incubation hub, Store N°8, to assist in developing new capabilities that will bring forth the future of retail. However, aspectiva still operates from their home base in Tel Aviv.

Image Source: Yahoo finance

The secret to a successful exit 

While getting acquired as a startup can be a major success, it can also be an extremely complex process to navigate.

Daya believes that a “successful exit is not something you can plan for, as being on a shelf with a “for sale” tag is not an attractive position to be in”. Instead, he suggests startups to “focus on the core elements of their business: team, technology and customers. If their business model supports a long term plan, concrete value for customers or partners that might end up being potential buyers, it can possibly result in an acquisition offer”.

Once a startup has been given the opportunity to be acquired, it is not necessarily a seamless process. Both parties involved have a lot to negotiate and therefore it can be a very complicated and lengthy process.

From Daya’s experience, it is imperative to be “fully transparent with all parties involved: the potential buyers and your partners”. In addition, he highly recommends creating a business alternative in case the acquisition does not work out while working with esteemed lawyers who have worked similar deals beforehand. By doing this, the acquisition process will be more straightforward and coherent for all involved.

Although building up a startup from the bottom is not an easy undertaking for anyone, Daya made the sacrifices needed to get him to where he is today. “Without my wife’s and kids’ support, it would have been impossible to even think about running a startup” he told us. Although it is hard to have a ‘normal’ family life, “you definitely learn to appreciate the time you have with your family and make the most out of the quality time together”.

walmart

Image Source: Walmart

More acquisitions on the way

Although this may be Walmart’s first acquisition in Israel, it is definitely not the first time the megastore has shown interest in Israeli technology, with investments in Team8, a tech incubator, and interactive multimedia platform Eko.

Overall, Walmart has a tactical acquisition strategy, focused on acquiring tech companies that will strengthen its e-commerce platform, that as their CEO Marc Lore expressed, “will resonate with millennials”.

Aspectiva being acquired by a brand of Walmart’s status is truly an exciting milestone for the Israeli retail tech ecosystem. With amazing innovations currently in the works, Daya sees Israeli startups continuously providing global retailers with innovating technology that will propel retail to the next evolutionary phase.

His best advice for new entrepreneurs building ventures in this retail tech space is to fail fast. The key, according to Daya, is to find “innovation-driven customers who are willing to test your solution in a live environment as well as serve as a design partner”.

Walmart, on its end, continues to look into more companies that they can acquire and invest in, trying to elevate their current AI technology and eCommerce platform.

With that, a path to success is likely to follow.

Alla Foht

Alla is a Partner & CSO at Re:Tech, a one-stop shop for retailers looking to discover and implement next-gen tech solutions. Re:Tech works with clients such as ASOS, eBay and Farfetch to introduce and lead open innovation programs, aiming to create results that affect the bottom line.
Alla Foht