Israel can “own anything it wants” in AI, says Pitango First’s Eyal Niv

Israel has emerged as a formidable player in the global artificial intelligence (AI) landscape, according to Eyal Niv, Managing Partner at Pitango First. His assertion that “Israel can own anything it wants” in AI stems from the country’s robust engagement across the entire AI stack, spanning from foundational infrastructure to application layers. This comprehensive involvement positions Israel as a unique hub of AI innovation, with promising potential in various sectors.

### The State of AI in Israel

Israel’s AI ecosystem is characterized by its agility and adaptability. Niv highlighted a pivotal transformation in investment strategies driven by the advent of AI technologies. The focus has shifted towards identifying AI-native companies—those fundamentally built around AI—and those that exhibit resilience through defensible moats created by unique datasets. This represents a fundamental shift from traditional metrics of innovation, as what was once deemed core may now appear trivial in the comparison.

### AI’s Impact on Investment Strategies

Pitango First has recognized that AI’s infusion into operational methodologies has significantly shifted how investment teams analyze potential startups. The firm utilizes AI for vital processes like market research and competitive analysis, while also integrating AI into their own operational systems to enhance efficiency. This incorporation underscores AI’s role as a tool for transformation rather than merely a subject of investment.

The firm has seen considerable success in its investments, particularly in AI infrastructure companies, several of which have achieved unicorn status. Examples include DriveNets and AI21 Labs, which showcase the trend of building advanced capabilities in AI infrastructure rather than just applying AI in standard product offerings.

### Challenges of Evaluating AI Startups

Evaluating AI companies presents a different set of challenges compared to more traditional sectors. Niv notes the importance of defensibility in AI startups, where traditional technologies and software increasingly become commoditized. The true competitive edge lies in access to unique datasets—data generated through customer interactions, which contribute to the effectiveness of AI models. A key example cited was Waze, which built user-generated data into a competitive advantage in navigation.

When assessing AI startups, Pitango prioritizes understanding customer needs and the ways products are built around real-world usage. Investors must differentiate between meaningful applications of AI and what Niv refers to as “AI wrappers,” which are superficial enhancements that do not add substantial value.

### Financial Metrics in AI Evaluation

In evaluating potential AI companies, Pitango First endeavors to go beyond conventional indicators. Traditional metrics often fall short in assessing the financial viability of AI solutions. For instance, companies that merely implement attractive user interfaces around third-party means of AI, like large language models, may struggle to establish long-term financial sustainability. The focus is thus on whether an AI startup genuinely adds value, rather than simply dressing up existing technologies.

Similar attention is paid to financial risks, given the rapid change within AI technologies and the accompanying volatility. Regulatory issues, including data privacy and governance, further compound this complexity. As organizations adopt AI, trust becomes a crucial factor in overcoming barriers to implementation, particularly in enterprise environments.

### Transformative Potential Across Industries

AI’s influence is poised to reshape traditional industries, with certain domains such as marketing, customer service, and healthcare emerging as particularly ripe for transformation. In industries relying heavily on language processing, the changes may be swift, while more specialized sectors, like healthcare, present additional hurdles that must be navigated.

The interconnectedness of various AI technologies also offers significant opportunities, as advancements in one domain can have ripple effects across many sectors. As industries adapt, the ripple effect of AI’s pattern recognition capabilities is anticipated to usher in a new wave of efficiency and innovation.

### Future Trends in AI

Looking ahead, Niv is optimistic about Israel’s potential to excel across a spectrum of AI initiatives. The country’s capacity for developing both business-to-business (B2B) and business-to-consumer (B2C) solutions serves as a testament to the dynamic nature of its startups. He posits that a strong understanding of customer needs remains paramount, and that founders who embody commitment and clarity are likely to succeed in the evolving landscape.

In terms of gaps within Israel’s AI landscape, Niv believes that the factors driving successful ventures are consistent across global markets. There is an ongoing appetite for founders who are customer-focused and willing to commit wholeheartedly to solving real-world problems.

### Conclusion

Israel’s position in the AI industry reflects a unique intersection of innovation, user-oriented design, and a commitment to understanding market opportunities. The evolving investment strategies at firms like Pitango First exemplify a broader shift in how technology is evaluated and adopted in the entrepreneurial ecosystem. As AI continues to advance, both globally and within Israel, the data-driven approaches will likely become even more crucial for identifying sustainable, defensible startups. In this environment, the question is not just about what startups can do with AI, but how they leverage unique datasets and customer engagement to create lasting value. The potential for Israel to “own anything it wants” in AI remains tantalizingly within reach.

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