A view into the growth of Israel’s tech start-up industry
As part of a Technology learning tour, myself and 44 other students went to Israel, also known as the "start-up nation", to meet with more than 20 start-ups and worldwide innovation leaders such as Microsoft, WeWork, Intel and Check Point. There we led interesting panel discussions on innovation.
On day one we visited Incubit Technology Ventures in Beer-Sheva cluster, where large companies and start-ups work together in a collaborative innovation centre. We got the opportunity to speak to the employees to get a better understanding of their day to day activities and learnings. The interactions we had that morning, made us raise the following question…why is Israel a strategic place to launch a start-up ?
In 2016, more money was invested in Israeli-based startups ($4.8 billion) vs. those in Silicon Valley. This amount has increased by 120% since 2013. The number of multinational businesses relocating their R&D department to Israel illustrates the focus in Tel Aviv and the Beer-Sheva advanced technological park. As well as the recent acquisition of Mobileeye by Intel for $15.5 billion which is the biggest ever deal of an Israeli technology company.
After a week touring, here are the things you need to know about this tiny country (8,5 millions inhabitants) and its tech industry.
Necessity was the mother of innovation. R&D focus started in Israel in the 1960’s with the military’s technologies. During the cold war, in protection from Russian and American hacking, the intelligence forces allocated many conscripts to develop software and firewalls to ensure cybersecurity. In this country, there is no intellectual property hence once they’ve finished their military service, people launch their businesses in the systems they gained expertise during their time in the military. It is also worth noting that the Israeli cyber security worldwide leader was created in 1993 by 3 men finishing their service. Check point pioneered the IT security industry and secure more than 100,000 businesses and millions of users globally.
From a cultural heritage Israeli’s have specific mind to create innovation. In Israel, people serve together in the military and establish strong networks in which people trust each other. Not only it reinforces their ability to drive small and aggressive organizations but also develops their fast decision-making skill. The nation's diversity and multi-culturalism population composed of individuals with origins in over 100 different countries widespread in five continents makes a competitive advantage. In addition to Hebrew and Arabic, many Israelis are fluent in English, as well as other languages, including French, German, Chinese and Spanish. The richness of the tapestry of Israel's different cultures not only makes Israel a fascinating place to visit and to do business, but also highlights that its workforce is the source of so much innovation.
A unique ecosystem for cutting edge technologies. Tel Aviv University has trained 7 unicorn founders and stands just behind Stanford and Harvard. University students (engineering) are evolving in a fast paced environment and interacting with startups ; helping both sides to think big and out of the box. Due to the disruption of Amazon, the retail is one of the greatest areas of focus in Israel which is recognized as an expert in the top trends investment technologies - AI, VR & AR are all becoming critical business tools. In addition, cyber security, autonomous cars and FinTech are also areas that are covered by the flourishing number of Israeli start-ups. Being part of an incubator or an accelerator organization encourages collaborative innovation. Companies within Incubit such as Wix, WeWork, EMC-Dell and Dalet meet every 6 weeks to brainstorm on mutual areas of research i.e. how to be profitable with a freemium business model and how to protect from hacking.
Support from the government to facilitate business creation. From a regulatory point of view, the government makes it easy to launch a start-up with a low tax system and minimal administrative paperwork. Then, the government allocates a budget to fuel each stages of company’s development. For example, at seed stage, committees could grant up to 85% of funding but will make sure to keep private money invested to secure the financing structure.
Conflict heritage mentality. As a result of being under war and conflict for several decades, the Israeli population has developed a resilient attitude to failure. Here failure is praised for rewards and you'll get better for the next start-up project. In Jerusalem it is said that for every 1,000 start-ups created, 500 don't survive. The military influence has enabled Israelis able to build things and challenge everything. The capacity for optimism is in their DNA, they will break the paradigm again and again.
All of the above are reason why Israel has become an open innovation centre and prove more and more its attractiveness for large company investments. Established worldwide leaders have put their focus on up and coming start-ups that excel in taking risks and have taken a U-turn in their old organisation structures. These allows them to define a strategy based on a forward thinking and an "innovate or die" mentality.
Source : IMD World Competitiveness Yearbook
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