As the global trade and shipping industry is battling centuries-old inefficiencies, the startup nation Israel is hoping to provide the answers, reports Sanne Wass.
It’s a country well known for its technology and entrepreneurial culture, but less so for its role in global shipping. More recently, however, Israel has become the breeding ground for a wave of startups looking to innovate the age-old maritime industry.
Since 2017, theDock, an Israeli investment fund and accelerator programme focused on ports, shipping and maritime logistics innovation, has screened more than 150 startups working on everything from automatic customs clearance processes to smart containers and electronic bills of lading. 70% of them are Israeli companies.It’s a country well known for its technology and entrepreneurial culture, but less so for its role in global shipping. More recently, however, Israel has become the breeding ground for a wave of startups looking to innovate the age-old maritime industry.
“Israel is very strong in technology, and when it comes to trade, we found that there was quite a lot of knowledge here,” explains Hannan Carmeli, founder and CEO of theDock. “Israel is practically an island, because our land borders are not open. Most goods are being transported by sea, so there is a lot of seaborne trade going in both directions and there is a lot of knowledge within the maritime, trade and trade finance sectors. So we found that there was a lot of creativity here. Joined with the technology side, the promise is very significant.”
It is this promise that drove the foundation of theDock two years ago by Carmeli and co-founder Nir Gartzman, who are both veterans of the Israeli navy. The mission of theDock is to promote Israel as a hub for shipping and maritime logistics innovation by investing in startups and helping them bring their products to market. It does so by pairing the startups with large business partners, such as corporates, terminal operators, port authorities, freight forwarders and insurance companies. So far, 10 tech firms have received investment through the programme.
It’s perhaps not a coincidence that such innovation is emerging in Israel. The country has acquired the label as a startup nation, with more than 6,000 active startups and an economy dominated by industrial high-tech development and entrepreneurship. According to OECD figures, Israel spends 4.5% of its GDP on research and development, a larger proportion than any other country (the average among the OECD is 2%). The country also enjoys the highest percentage of engineers and scientists in the world, and one of the highest ratios of university degrees and academic publications.
Furthermore, Israel’s thriving startup scene is complimented by a flourishing venture capital market, with approximately 70 active venture capital funds located there, according to Deloitte, which notes that Israel is “by far outperforming any other country in VC volume per capita”.
The country is also known for having one of the most advanced military technology in the world, particularly when it comes to cybersecurity capabilities, an expertise that Israelis take with them to other sectors.
“Israel is a very tech-savvy country, and because of all the security threats we have here, we have a lot of security experience, which helps when you are working in regulated markets,” says Gadi Ruschin, CEO of Wave, an Israeli firm that digitises trade documents using blockchain technology. “Israel is already one of the leading hubs when it comes to development and high-tech. Now shipping is on the map, and you will start seeing more and more startups evolve and the ecosystem grow.”
Carmeli at theDock highlights the automotive industry as an example where Israel has proven successful in positioning itself as a technology hub, despite having no native car manufacturers. Yet, the country has managed to build an automotive tech scene that rivals Silicon Valley’s and it is the birthplace of some of the biggest success stories in contemporary automotive technology.
“Israel was never known as a car manufacturing country,” Carmeli says. “Nevertheless, today, Israel is considered to be a superpower when it comes to technology for the automotive market. At theDock we are looking to follow the same idea: Israel never had the fleets and the port infrastructure like Asian, European and North American countries, but the country does stand a chance of becoming a real power when it comes to developing innovative technology for the maritime market.”
GTR spoke with three Israeli tech companies that each in their own way are putting Israel on the map for maritime technology.
Loginno: Making containers smart using IoT sensors
Short for ‘logistics innovation’, Loggino is a tech startup that uses internet of things (IoT) technology to make containers ‘smart’. Founded in 2014, the company has developed a hardware solution which, when installed on containers, can monitor everything from location of the goods to shocks and conditions such as temperature and humidity, in real time.
“Similar to a smartwatch that knows how many steps you’ve taken or how well you’ve slept, we do the same thing for shipping containers. So we can detect lifts, vessel engines, things like that, and that gives us a lot of insight regarding what exact situation the container is in,” explains Shachar Tal, founder of Loginno. Short for ‘logistics innovation’, Loggino is a tech startup that uses internet of things (IoT) technology to make containers ‘smart’. Founded in 2014, the company has developed a hardware solution which, when installed on containers, can monitor everything from location of the goods to shocks and conditions such as temperature and humidity, in real time.
The tech company is now working with its first client, Log-In Logistica, a Brazilian-based coastal shipping group, to fit its containers with Loginno’s IoT devices. According to Tal, the two are working to roll out the solution into production by early next year. This will make Log-In the first shipping line in the world to have an entirely smart fleet.
Currently, Loginna’s solution uses the data collected from the smart containers mainly for two purposes: first, it helps shipping companies optimise internal operations by giving them real-time visibility of their assets. Second, it allows shipping firms to offer tracking as a value-added service to their clients.
But there are many more use cases that can come out of the wide range of data gathered from the supply chain, and Tal believes making shipping smart will impact business processes and prompt the development of new products across other trade-related sectors.
For example, financiers could gain real-time visibility of the goods that they are financing – which they don’t have today. This will enable them to act faster when things go wrong, while also giving them confidence to finance more transactions.
In insurance, meanwhile, the IoT device could be crucial evidence in a claim situation, working as the container’s ‘black box’ that can expose exactly what happened, including pinpointing the liable party.
With these new forms of innovations in mind, Loginno has set up an academically endorsed research entity called Contopia Labs, which will operate a sandbox for the testing of new use cases for smart containers, be it within insurance, customs, homeland security or financing. Among its first partners is Navis, a global technology provider for port operators, with Loggino also looking for partners within finance and insurance.
Wave: Leveraging blockchain to exchange trade documents
Wave offers a blockchain-based solution to digitise the bill of lading and other trade documents. Founded in 2014, the company first became known in the global trade finance industry in 2016, when it completed a transaction with Barclays in what was claimed to be the first-ever live trade transaction using blockchain technology.
Wave’s service allows for the digital exchange and management of all shipping and trade-related documents through a decentralised network. While its first focus has been on the bill of lading, the company has since expanded to facilitate other trade documents digitally, including certificates of origin, certificates of inspection and bills of exchange.
The application targets all types of organisations involved in international trade, including banks, carriers, importers, exporters, customs and chambers of commerce.
In June last year, Wave released the commercial version of the solution, which the startup has since been piloting with a range of clients, including Israeli shipping company ZIM. According to Gadi Ruschin, CEO of Wave, the application today facilitates hundreds of transactions a month.
Wave is now working to go into production with ZIM and one of the world’s largest shipping companies (currently not publicly named). This will see the integration of Wave with the core systems of these shipping companies, enabling the automatic creation of bills of lading – as opposed to the current version of the solution, where digital documents are created manually.
The blockchain company has also been piloting with banks, including Barclays on the 2016 transaction and BBVA in a pilot in late 2017 (although none of these banks appear to have gone any further than pilot stage, at least publicly). Wave is also piloting with First International Bank of Israel, which will be the first financial institution to fully implement the solution.
In a bid to target banks more broadly, earlier this year Wave became one of the first applications to become available on SureStore, an online app store for trade finance-focused fintech solutions. The digital marketplace, provided by Surecomp, offers a route for banks to easily connect to new technology solutions, while giving a startup like Wave the chance to market its product to Surecomp’s customer network of banks across 80 countries.
“There are 16,000 banks in the world, so we can’t go one by one,” explains Ruschin. “So while we are working with some of the banks directly, together with Surecomp we are trying to integrate at the source, and then every bank which is using Surecomp will be able to upgrade its own systemsand get Wave.”
Tiidan: Using AI to assess risk on Chinese suppliers
Founded in 2017, Tiidan provides an artificial intelligence-powered solution to help importers, banks and insurance companies better assess risk on trading partners in China, and soon also other countries in the Far East.
According to Yaron Shapira, CEO and co-founder of Tiidan, the startup is seeking to provide a technology-driven alternative to traditional business intelligence companies.Founded in 2017, Tiidan provides an artificial intelligence-powered solution to help importers, banks and insurance companies better assess risk on trading partners in China, and soon also other countries in the Far East.
“The biggest problem for importers is not with the operations or procurement phases,” he explains. “We understood that a huge gap in the market today is in the data itself – the inability of customers to get information about their business partners. One of the options would be to go to business intelligence companies, but in the Far East, especially China, their ability to deliver is limited: it will be an expensive process, it will take about two weeks and the data received would be limited and not up-to-date in many countries.”
Instead, Tiidan’s AI tool automatically collects, scans and structures data from a large number of web-based sources, and in any language: anything from information on shareholders and capital to legal cases, media coverage and certificates. To start the process, a user will only have to put in the name of a potential Chinese trading partner. In return, the solution will provide a report with information on potential risks associated with the supplier and set up automatic alerts for any future changes to this risk profile. Tiidan’s AI algorithm has also been trained to predict the probability of a supplier to fail or succeed. All of this in less than an hour.
Having spent the last year building and piloting the solution, Tiidan has now started deploying it to clients. The company is targeting importers who wish to use the platform to assess the risk of new trading partners, as well as financial institutions and insurers supporting cross-border trade with the Far East. Among its clients is Bunzl, a UK-based multinational distribution and outsourcing company, and Pernambucanas, one of the largest retailers in Brazil.
One of the startup’s first bank clients is Standard Bank in South Africa, which is currently offering Tiidan’s solution as a value-added service to its clients. However, the idea is that financial institutions can use the solution in their own risk assessment and onboarding processes, which should ultimately give them confidence to support more cross-border business than they do today.
“When a bank needs to transfer money to or receive from China, for example, compliance requires the bank to do KYC and to prove where they get this data,” Shapira says. “Getting this information today is a very long and painful process for the bank and its clients. The bank asks for documents, the clients need to provide the documents, sometimes they need to ask their business partner in China to provide documents. It is not just a pain, but also very slow and expensive.”