Shady Side of Hi-Tech Startups

Wok Republic on Dizengof Street reflects the fast pace entrepreneurial lifestyle in the sometime shady side of Israel’s hi-tech startup world

Israeli entrepreneurs will gladly tell you great stories about fabulous hi-tech exits in mobile, cloud and enterprise computing. Government (i.e. foreign investment seekers) will wax shamefully about the “Startup Nation” effect and Israel’s global image as an innovation power house. But not much is said about the hundreds of companies in gaming (i.e. gambling), personal finance (i.e. binary options, Forex) and affiliate marketing (i.e. retail, pharma). While the more traditional (i.e. mainstream venture capital backed) technology companies focus on traditional business products, there is plenty in the less visible spectrum. Israel’s entrepreneurs long ago realized the need to develop early in a technology cycle. This means not going to the traditional investors or markets. At least in the early stage of the cycle. In Israel we see this in programming and system integration companies. But to enter early into markets and make money also means taking care of regulatory (i.e. legal) requirements. Gaming (i.e. paid cards & casino games) and financial¬† speculator sites (i.e. binary options, Forex) are regulated in each country separately. One can’t play casino games in the USA with a company regulated by a European gaming commission.¬† In Europe regulation approval from Cypress and the British Channel Islands are popular methods Israeli companies use to gain approval. In Asian countries small Pacific Island regulators (i.e. Vanuatu, New Zealand – see legal explanation and here) for Forex and financial trading are useful in gaining market acceptance. From personal experience, nobody here likes the regulation work. Besides the cost of lawyers and regulation fees, technologists are not really sure how regulation can truly police (or even prevent) fraud. Technologists are willing to work hard and create new products to move markets forward. Yet they are worried about public image or regulation action stopping a product from getting to end customers. The life of innovation still needs to overcome fears from historical speculation and downright fraud. Israeli hi-tech startup companies try to build new businesses legitimately, this may mean seeking regulation and approval in ways not always traditional or respected by all.

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