"Smashing the Glass Ceiling: Tech, Banking, and R&D for the IDF": Yifat Oron (TAU Talks)

You're welcome. Very exciting to be here. Thanks.

You know, it's very hard to think or to know what you thought as a child because many of the things sort of happen retrospectively. But I think that growing up in a house that had business discussions going on, I think deep down inside I found that interesting. And the reason is because I listened. If I didn't find it interesting, you know, those conversations sometimes you don't even notice they happen. And I will say something, it's a little bit funny, but many, many years after I grew up and I became an investment banker on Wall Street, my mother actually reminded me of something that I didn't remember. But apparently she took me to watch, when I was about 11 years old, this shows my age now, when I was 11, I went to watch the movie Wall Street with Michael Douglas. And this movie has come back to my life a bunch of times because I ended up working at JPMorgan more than a decade after. For a person who was running the business there, who I think, and I'm not sure until today, but I think he was sort of the person that the movie was based on, the banker from JPMorgan. He looked like Michael Douglas. So my mother told me when I started working for JPMorgan, she said, 'Well, you always wanted to work at Wall Street, that's what you said after the movie.' So, you know, I guess.

Big move. Yeah, so when I was about 16, a little older than 16, my family moved to the United States. This was for business reasons of my father. And I found myself moving from a small town in Israel to a very nice suburb in New York called Scarsdale, to those of you who know. And let me tell you, that was night and day. I remember calling my friends back home and trying to explain to them, you know, what is this thing. I couldn't really, because you had to be there to understand. I'll tell you, I think this is, if I were to sort of think of what is the biggest, one of the biggest presents I got from my family, my parents, I think this was probably one of the best ones. Because, you know, some people don't appreciate such relocations. I think I did, actually, in real time, that an opportunity like that is something that prepares you for life and opens doors that you may not ever be able to open without that. And I think that if I can just say one more thing that is very important to me, and I don't know how many in the audience, how many are younger than I am who still have options to move around the world, and I want to endorse it as much as possible. Because the ability, and again, most Americans maybe don't appreciate it as much, but I came from a small town. Most of us, although we thought we were very eclectic because some of us were Polish, some of us were Russian, some of us were Yemenite, at the end of the day we were very similar, extremely similar. And when I moved to New York and all of a sudden I had a high school, I attended a high school where, you know, I had Japanese friends and Korean and Indian and Brazilian and, of course, American. Only then did I start to understand that, wow, you know, there are different types of people and they don't think like us. And I was very intrigued to sort of understand the culture. And for many, many years later, I've unconsciously utilized those skills of understanding that the others are not necessarily like me and appreciate the differences in cultures. And I think throughout my career I have ended up working with people from around the world. And I think that knowing that from a young age prepares you, in my case, for business. In other cases, you know, people can be better artists or better whatever. But I think it definitely enriches you as a human being, such exposure.

What happens next was that I didn't want to go back home, not because I don't like Israel, obviously I like Israel, I live here now, but I felt that I had to get a little more of this American dream. Ended up, long story short, ended up finishing high school and going to college. And can I tell another funny story about that? We welcome all. How culture is different. So when I was looking for colleges, my dad and I went to see one of the schools and there was a tour, and it was a bus tour, and a lady was describing a bunch of things about the university. And then she said, 'And Greek life is very, very advanced here.' And both my dad and I thought there were a lot of great immigrants because we have no idea what Greek might be. And ended up going to UPenn and understanding what Greek life means and enrolling in a sorority because, as I told you, I wanted to do every single beat of the American dream that I could. So that was yet again how cultures are different. So I started, you know, at UPenn actually in a very, very lucrative but demanding program. It was an engineering and finance joint degree, dual degree. Funny enough, half my professors were Israeli professors who I met later on in other schools that I went to in Israel. After three semesters, I was asked kindly, politely by the military to come back home. I had to go back to service the army because I left Israel after I was 16. And I was very happy to do so. I got three semesters at Penn, it was more than I can dream of. So I ended up moving back to Israel, but not enrolling directly in the military. I did, I don't know, the parallel is probably ROTC program. So I moved from UPenn to the Technion Institute of Technology in Haifa, finished my undergraduate degree, and then went to work as a Lieutenant for the Ministry of Defense R&D.

So it's funny because when I look back, this was the first time that I started, but it consistently stayed that way, of doing work that integrates finance and technology. So what the Directorate of R&D does is to fund, manage and fund R&D projects for the military and other areas in the defense business. And you know, I'm not going to talk specifically about what I did, but one of the things that came out, and it's a public thing, it's not a secret, that came out from when I was there, I didn't invent it, but I was there, was Iron Dome as an example. So these are strategic projects that we've managed and funded. A great experience. It's not a typical military service because it engages people that are both servicing but also regular employees. But yeah, three years of great pleasure with a lot of smart people around me.

Then, like every, you know, people in Israel, compared to the US, decision-making starts post-military sometimes and not post-school. So that was my sort of, okay, what do I want to do? And I ended up not knowing what I want to do. And because of that, and I wanted to do consulting work because I've had a bunch of people surrounding me telling me, you know, if you don't know, go to some kind of a role where you're exposed to as many industries as one can be exposed to in a very short time. And in hindsight, that was great advice, which for the younger crowd on the call, I highly recommend. So if you know what you want to do, that's wonderful. If you don't, try to get to a position that opens a very wide sort of roadmap for you for later on. You don't have to retire doing consulting, but I think it's a great start for somebody who's still debating. I did that, but I did, and now I'm going to tell a little bit about my Tel Aviv University experience. Because while I was in the military, and thanks to the flexibility of the university at the time, and obviously also now, they allow students to do their MBAs at crazy hours for those who work or in the military. So I actually did my MBA mostly at nights at Tel Aviv University. Yeah. And I continued doing it after I graduated from the military, did that when I was a consultant. And then the miracle happens. Can I tell you what the miracle was?

So I was literally post, whatever, I don't remember, finance class, it was probably 10 p.m. Really tired because I had worked all day also. And then I saw on the corridors of the faculty, I saw a small note, it was a pink note, saying that there's an opening, they're starting to open up a possibility for students to do an exchange program around the world, anywhere they want around the world. I saw that note and I went right into the student, I don't remember what it was called, but the student secretariat or something. I said, 'Okay, where do I find?' And this pretty much was the beginning of my change of career. Because thanks to Tel Aviv University, it allowed me to do an exchange program at NYU. So I returned back to New York for a semester. And that's when I started my sort of Wall Street experience because through NYU I got to the recruiting process and long story short, I got a job at JPMorgan. So for those of you who are Tel Aviv University people, thank you. Major, major, major force in my life, this move.

I think that leaving home at 18 is hard for everybody. It's a shock for everybody. So the whole thing of becoming independent, you know, takes different forms, but it happens around the world. The main difference, if I were to compare sort of undergraduate students in America to undergraduate students in Israel, it's very, very different. First of all, the age difference, it's at least three years difference. And also Israelis, the three-year army thing makes the difference even more because you're really mature in most of the services that are there. So I think that, and by the way, it has a positive thing and a negative thing. Because I think that because Israelis get to university at a stage where they're much older and they're more stressed, some of the times, to work during school, I think that as Israelis we're missing a lot of what our counterparties in America are benefiting from. The ability, and again, not everybody is enjoying the same style of school in America, but if you go to a private school or a school with, you know, the dorms and this whole atmosphere, this is something that is very tough. It's very tough. And Israeli universities try to do things that are similar, but it's very tough to replicate that when people are much older. Sometimes they're already married, sometimes they have kids, they have to work. So they're running around, whereas in America, you know, it's a wonderful incubator, right? You're fully immersed. So yeah, so it's really, really not that comparable. But look, I'm talking quite a while back. It may have changed since. But it's a little different, you know, now when you walk on the campus of Tel Aviv University on Thursday, you see everyone out there, the student fair, having beers, and it starts to look a little bit more like a university. We're starting to see a little bit of a coming together. But I'll tell you also why. First of all, I think universities are doing, with Tel Aviv University obviously, are changing also. But I also think that we are more international. So now we know what we're missing and we're trying to get all the benefits of also being a student. I'm joking. I think universities are investing more today in making the experience maybe more 360 and a lot more social as well as academic. I wouldn't know because I finished my last time in school many, many years ago, but I think that's where it's going.

Okay, so Lumitech, which I'm very, very proud of, is the business that we founded within the Bank Leumi group. Bank Leumi is one of the largest two banks in Israel. And back, this is back in end of 2013, we already have a wonderful startup nation, probably two decades of startups growing up and funds funding them and exits are happening. And we have a very, very sophisticated ecosystem for technology innovation. However, we were completely lacking as a nation, the banking system is part of this ecosystem. So the banks, for whatever reason, were not really part of this thing called startup nation. And what our goal was to be able to have the banking system, well, we started with Lumitech, but you can imagine all the other banks followed suit, that the banks would actually understand the tech business and provide the right services and provide lending, many things that, as funny as it may sound, did not exist amongst the Israeli banking system. And I joined Bank Leumi to start this and lead Lumitech in beginning of 2014. And there was such a great need for those services that luckily for us, you know, the business grew extremely fast because there was dire straits because nobody had given the startups what they needed. I don't know if you want to dive into, you know, what does it mean to be a banker for tech, but it's not trivial at all.

Yeah, so maybe before I talk about that, I just want to explain to people how tech and banking is so different. Because banks like proof. They want to see businesses that make money. They want to be able to predict how much money they're going to make. And they really want to work with companies and clients that their probability of going under is very, very, very low. All of what I just said doesn't resonate within technology. So when I, and actually when I said you have to know technology, I don't mean that you need to know how to code or how to develop drugs or, you know, this is not what I mean. I think that being a banker for tech means that you have to understand what is it about a tech startup, what do I need to see to be able to provide services while not losing a lot of money. It doesn't mean that we only worked with those who had a 100% success rate, but you had to understand where they are at the growth cycle and the maturity cycle. And things like, I'll give you an example. So obviously all the companies, not all, but a lot of the startups we worked with were losing money and therefore they had investors, they had funds. When you look at the company, you don't need to know how to write code, but you do need to understand how a software company differs from a cleantech company at a certain whatever, because it really is a very different story there. It's not, you know, one fits all. Some of them can be very, very quick to market with, you know, their first sales. So software companies sometimes less than a year from being founded they already have revenues. And if we're talking cleantech, and you're in cleantech, some of the projects in cleantech are not that easy to, the actual physics is not easy. Not necessarily the market, but to get to a product and a technology that's proven and it's cost-effective, it sometimes takes years. So when you're a banker and you're judging a company, you have to understand those differences. You have to understand what type of investors are around the table. Are they going to be able to be walking hand in hand with you as a bank for the long run or are they too small and don't have what it takes and then you may want to suggest the further round, et cetera, et cetera. So what I mean is not really knowing how to diligence the code or whatever the physics, it's more about the dynamics of technology. How do rounds happen? You know, what are things that a company does that are going to hinge on its ability to fundraise, which for us as a bank was very important. So I think that that's more of what I meant. And we didn't mention it, but I had moved to, launched and founded Lumitech after 10 years of venture capital investing. And venture capital investing, not in this decade but the decade before, when I was in investing, wasn't that trivial. And money was not as abundant as it is now. And so I was very, very aware, very much aware of the dynamics of what type of businesses require what types of money. Because usually they had to manage with much less than what companies manage with right now. So the dynamics of how it works and what it takes was something that I think helped me to become, you know, the right person and they were all to be leading this effort. And now everybody Lumitech knows.

Seven years.

Wonderful question. So Blackstone, well I hope that most of the audience here know about Blackstone, but Blackstone is currently a big asset manager and investment house. We're managing as of now 880 billion dollars in several investment strategies. A lot of it is around private equity. We have a very big practice in real estate, we have a practice in energy and new energy, we have a practice in lending, etc. And I will say about the relationship between Blackstone and Israel is that Blackstone traditionally, and continues to be so, is investing relatively large checks. And if I pause for a second about Blackstone and I go back to sort of the Israeli ecosystem, I think that something that has dramatically changed here is around the fact that we used to be, we were always entrepreneurial, but in the first two decades of our startup nation story, we have mainly worked around or innovated around technologies that make things move better or enable other industries to work better. And such solutions sort of had a glass ceiling to them. And a lot of what we've seen in Israel in the first 20 years of startup nation is we've seen companies growing their products to a certain maturity and then ending up being sold. Just as a matter of perspective, if we looked between 1995 and probably 2010, even later, 85 or so percent of exits were M&A exits, all of which, maybe I think 100%, were to other tech giants. And what has changed dramatically, by the way, because of a bunch of factors, it's not just one factor, is that the Israeli tech ecosystem has significantly matured. Like I said, we used to sell early. Companies' average M&A was about 110 million dollars, which was great numbers, but a lot of the companies did not materialize all their potential while they were private, and then a lot of the potential ended up being exploited by whoever acquired them. And what happened was that we matured, and our companies moved from being an enabler to being the actual business, many of them. And we have grown enough to get attention from the investment community around the world to attract late-stage financing, which we completely lacked on the ground. And so all of a sudden we have companies that want to grow and can become much larger. We have the funds that know how to follow the VCs or potentially buy some of their positions to allow for the company to maintain, not necessarily private, but independent. And we're seeing a lot more companies, or actually I don't even know if there's any entrepreneur today that will actually say that he's planning on selling himself in an M&A situation. Everyone is aiming at an IPO. Everyone. Some end up getting some nice offers and they sell the company, but nobody's planning on that, where we used to be completely planning for it. So that fact has made Israel, and thank God we also have great entrepreneurs and engineers, so that has put us in a place where the breadth and depth of what we have here on the ground has become very, very large and interesting. And all of a sudden firms like Blackstone understand that there is enough velocity of deals that could be relevant for the funds that we manage, specifically or more so with our Blackstone Growth fund, it's called BXG, but it could also be from our other funds, our private equity or whatnot. So I'm going back to Blackstone. I think Blackstone has always recognized Israel and has known Israel and spoke to interesting companies in Israel, but I think that this move of actually having people on the ground is because one cannot ignore Israel anymore, even when you're managing such large amounts of money. Now again, Blackstone is not the first to recognize, we have great colleagues here, but I think that what the really big difference that Blackstone brings to the table is that what we're trying to do is we're trying to be a partner of choice along with a lot of our friends here, and sort of enable the platform of Blackstone, the great Blackstone, to the Israeli companies and entrepreneurs. And we really invest a lot of efforts into helping out, all the funds help out, but we also like to provide value and we think we have quite a lot of value just because we are all over the world with great companies that are portfolio companies of ours, great talent, and you know, the sky's the limit when it comes to value creation.

That's a bunch of stuff here. So before the talent, I'll just say on the large companies, I think honestly, if you ask any investment professional, would they think that we would have decacorns traded in NASDAQ and TASE? We do. Nobody would admit, maybe people will say they would, but don't believe them. So I think this is a major issue. And I think if I try to look back to what was that thing in history, according to my theory, that changed people's minds, I think these were two, essentially two stories. The first one was Waze. I was in a fund that was invested in Waze, and I remember the feedbacks, people didn't understand the story, but it was really one of the first brands that Israel had produced. Because we used to have technologies and solutions, but we were not branded. And all of a sudden you have a company that I remember because they broke out big time around the LA traffic problems, and somebody in some morning show mentioned their name, which created a huge buzz. And I think this was the first Israeli company to be actually recognized by people who have no idea what the word startup nation means, they don't know where Israel is on the map, but they know Waze. And then when it was sold, according to foreign press, above a billion dollars, people started thinking, wow, we thought we don't know how to do consumer, but maybe we know a thing or two about consumer. So first of all, we moved away from like deep tech enabling stuff to consumer internet and things that we weren't that big on, other than, by the way, the sector of gaming, which we're very big on. And then I think the other very important milestone was the acquisition of Intel, when they bought Mobileye. And the reason I think that was a huge story is because Waze resonated around what we could do with consumer and grabbing market share around the world and people knowing it's Israeli. But then Mobileye has made a lot of investors wake up and say, whoa, where did this come from? What is this Mobileye? And I think you can literally see in the growth of the investment of the monies that came into Israel for growth, grew a lot after that event, because people always knew Israel is a manufacturer of technology, but people necessarily thought that there could be huge companies. So we had our eclectic types of VCs, whatever, but Mobileye had actually brought in the big, big boys. So I think if we think about the changes, so we have big companies. Another important thing, and this relates to your talent question, we used to think that you have to be moving from whatever Ra'anana or Tel Aviv or whatever, when the company starts having customers, you have to move to Silicon Valley or Boston, back then it was Boston for cyber. Cyber before it was called cyber, it was called security. And the big change that happened is that Israeli entrepreneurs started saying, well, I don't want to move. I'm an internet, I'm a global company, I'm selling not only to America, I'm selling to Europe, I'm selling to Japan. I don't need to live in California, I can live in Tel Aviv or whatever. And that was a huge change, huge change. Because when the CEO of the company is located in Israel, most of the HQ stays in Israel. So then you have the C-levels, some of them, not all of them, and a lot of the peripheral, not peripheral, but a lot of the talent that's not necessarily only R&D. And that has made a big change in the Israeli community because the tech ecosystem employs many more people and need a lot more people. And now we're hitting what I call our biggest challenge around the continuing success of Israeli tech, and this is around talent. From everything I hear, we're lacking thousands of thousands of people that companies would have wanted to hire and cannot find them here. Luckily for us, most of the entrepreneurs and CEOs are insisting on finding them here, and we can talk about what is being done. Some of them just don't have any other choice and they go abroad, but most of them are insisting and are trying to nurture the ecosystem. But this is a major issue, because when Israel wants to compete and have the best companies in the world, and then you have Silicon Valley with some kind of talent issue, and then you have India who's also in the race, and Germany who's also in the race, and the UK in London, the numbers there are a little different than ours, unfortunately. So there is some, people are worried here on the ability to produce enough talent. But people are doing things to try to solve it. So I'll just name a few. So first of all, we're trying, all of us in some fashion, are trying to bring across underrepresented groups from within Israel. So it's Haredi, women who are not as much, the Arab ecosystem who's starting to take more of a role, which is amazing. And then companies are also assuming on themselves to do all kinds of academies, if you wish, or boot camps, to bring people that have some academic background but to sort of bring them up to speed to become something in their company. And it's starting to be taking a higher priority by everybody because everybody wants to make sure that we stay strong as a nation.

So thank you for the question. I'll say one thing about Israel and a little bit about also about Blackstone. Israel, if you think about it, has invested in clean energy and alternative energy forever. I don't know how many of you know, but Israel has been using solar to heat our water since I remember, and it was before I was born. So we didn't have a choice not to do that. Now the world doesn't have a choice, but we as a nation didn't have a choice, which, you know, it's always things like this happen because of necessity. So we had a lot of investment into, now it's called food tech, but we've been investing in food technology forever. If you all remember the special tomato, and you know, milk-wise, we are the most producing milk per cow in the world. I mean, we've been doing this forever, we just didn't use the branding. It doesn't sound as sexy as it does now, but we've been doing it forever. There is a movement, well obviously, you know, solar and water-related technology and irrigation, you look at the map of irrigation, most of it is Israeli companies leading the world. So we're there. A bunch of specific stuff that was highlighted in the last few years is around energy, energy storage, and two specific things that I touch upon is food technology and ag tech, so FoodTech and AgTech. And I remember, just I'm relatively close to it, and I remember when the FoodTech stuff started about six years ago, maybe seven, it was like, you know, what is this thing? Now we have about 500 food tech companies, some of whom recently raised hundreds of millions of dollars with names that people know around the world. And by the way, I'm not surprised because one thing about food technology, which Israel is, I think, relevant around, is that food, similarly to some other industries, is a lot about the convergence, and I'll mention in a second another thing, but the convergence of disciplines. So it's not necessarily only about biology or physics or mechanics. The real interesting food tech companies encompass all those disciplines that need to talk to each other, and this is something that Israeli tech has always been good at. This is why we were very, very good at medical devices, because we've managed to put the doctors with the engineers. And so I think that if you look at Israel, even without knowing all of what I said, is this the right place to nurture food and ag tech? Of course. AI is now a big issue across many industries, but for example, in agritech, we have a bunch of companies that are utilizing AI for various things. How do you make bees more productive? How do you water? How do you interpret weather? I mean, so I don't know, I'm obviously not objective, but it almost seems obvious for Israel to have all these things coming out of them. And you know, we also have very, very large companies that are already well proven, and I'm happy to have taken part of them in their existence, is SolarEdge as an example. I looked around and I sat on the board for many years, it's an amazing company. So yeah, so I think it's very, very interesting, huge potential, and Israel is probably one of the best hubs, one of the best, not the only, to nurture those. And in terms of Blackstone, I'll just say that we put a lot of emphasis on ESG, and starting from simple things like cutting carbon from the employees, you know, we travel less, we use heating less, we just save carbon. And also we have specific dedicated funds that were raised to be able to invest in clean energy and all ESG-related. By the way, ESG is way beyond clean energy, this is around governance and diversity and a lot of other things.

Wow. Thank you again for the question, because this helps me explain our strategy. So Blackstone is not trying to sort of take away business from all our friends, all the VCs, the local VCs. Blackstone has been mentioning all the time, we're supposed to come in after the Israeli VCs have grew the companies to a certain level where it needs the really big checks and help around the world. This is only when this is the point we get in. We do not intend to go downstream and sort of start to race on the early stage investments. You know, we're in a different lifetime or life stage of those companies.

I would love that. First of all, on a personal note, I was in the UAE literally the day of the signing in Washington. There's a bunch of us there and we all had goosebumps because it was very, very emotional. We were so happy to be there. Who would have thought, right? This was beyond anybody's dreams. So one, this is amazing. Just peace is a good thing. But when you have peace that comes with potential mutual business, it's even better. And I think that what this combination brings is something that really couldn't have been achieved otherwise. Israeli companies are selling until today to the US, Europe, lesser extent to South America, but we don't sell anything to that region of the world. And if I'm not mistaken, there is about 1.3 billion people that are not a market that with our relationship with the UAE now, who are going to be our colleagues and our partners, who can sell into those regions. This is a huge opportunity, huge. And I cannot express enough the belief that I have that I think this is huge, a huge step to Israel, because of, again, because we have new friends and new friends who want to work with us and they want to visit us and they want us to visit them. And I've been there a bunch of times and I get excited every time again and again. And I think this is going to also, it's not the main thing I don't think, but it's also going to bring a lot of economic value to both sides because it's a win-win. It's not a one-directional thing.

Good question. Big question. I will say from my old age that a happy person is a person that found a career, whatever it is, that enjoys two things. One is that the person is good at what they do, and two, that they enjoy what they do. And many of us don't understand it, usually we understand it at a later stage in life. And so don't try to do what people told you you need to do if you don't feel comfortable. Find a place you feel comfortable, because if you are not comfortable, you're not gonna do well. It's just something that feeds itself. So that's probably the main old woman suggestion that I have. Another thing is just get used to the fact that, and if you're specifically, if you're in school and you think that you're in school and then you finish school and you're done learning, well, that's not the case. Be prepared to be learning and studying all the time. By the way, especially when you're investing, because the investment world is just changing, you have to be on top of everything all the time. But it's actually relevant to any other things. So if you're a doctor, if you're whatever. So that's something, it's not a recommendation, it's a wake-up call for those who think they will actually finish school one day. It never ends.

Thank you. Thank you, bye Aaron.