Israel defines itself as the Start-Up Nation. With one start-up for every 2,000 people, clearly it has an ecosystem conducive to business development, based on innovation, an entrepreneurial culture and the strong presence of incubators.
Entrepreneurship in technology is on an upswing, as Compass points out in “The 2015 Global Startup Ecosystem” overview. According to the study, the global context has never been so entrepreneur friendly, on account of the wide range of tools, resources and information about target markets available to entrepreneurs.
The same report had some good news: Montréal made it into the top 20 ecosystems for start-ups in the world… 15 spots behind Tel Aviv, which was ranked fifth. The leading city outside the U.S. – it ranked just after Silicon Valley, New York, Boston and Los Angeles – Tel Aviv, and particularly Israel, are sources of inspiration for our city and its entrepreneurs.
What are the characteristics of the entrepreneurial ecosystem in Israel, a country proud to be known as a Start-Up Nation?
Innovation: driven by public policy
As the Organisation for Economic Co-operation and Development (OECD) notes, “Innovation is a major driver of productivity, economic growth and development.”1 This observation applies particularly well to our case study.
Innovation has been in Israel’s DNA since the country was founded. Needed to address the country’s geographical and geopolitical constraints, in the 1990s it became the driver of economic recovery following the Lost Decade.2 At the time, the Israeli government positioned itself strategically in high tech.
The result? The country currently invests 4.3% of its GDP in research and development, the highest rate among OECD nations. Leading-edge technologies account for three quarters of its production. Innovations – which are stimulated by government programs, but which do not rely solely on them – include the prototype of the USB key, the patent for which was submitted in 1999, and instant messaging, a concept created by a student start-up, Mirabilis, which was later bought by AOL. It is not surprising then that major international corporations have set up their R&D centres in Israel, drawing on this technological expertise. These include Apple, Microsoft, Motorola and Google. Google’s former CEO, Eric Schmidt, considers the Israeli high-tech sector the second leading innovation hub after Silicon Valley.3. Will Silicon Wadi4 (Hebrew valley) be the next Silicon Valley?
An entrepreneurial culture
This thirst for innovation has created an entrepreneurial boom. In this small country, with a land area of 22,000 km² and a population of over 8 million, there is one start-up for every 2,000 citizens – a ratio seen nowhere else in the world. In Israel, entrepreneurship is more than a statistic: it’s a state of mind, born of the difficulty of building a country from nothing.
According to Saul Singer, co-author of Start-Up Nation, The Story of Israel's Economic Miracle (2009), military service is a breeding ground for entrepreneurship and a key factor in the country’s economic success. Mandatory military service – three years for men and two for women – gives young people a chance to learn “in terms of leadership and improvisation” Saul Singer says,5, pointing out that “they know how to get things done, by any means.”6 Mandatory army service and being exposed to leading-edge technology gives young Israelis maturity and an initial experience in the working world when quite often they have not even started their post-secondary studies.
Finally, technology transfer companies are part of Israeli universities, and their goal is to help students and researchers monetize their research and products. It is the first contact these budding entrepreneurs have with the world of incubators.
Incubators: the cornerstone of start-ups
Having support while developing an innovative project offers much greater chances of success than being left to one’s own devices. Israel is particularly aware of this: there are more than 250 incubators in the country.
The government created the impetus for this with its Technological Incubators Program, which has existed since the 1990s. The program’s mission is to transform innovative technology ideas that are considered too risky or advanced to be financed into viable start-ups that will interest investors who could exploit their ideas.
One example of a Tel Aviv incubator is The Hive by Gvahim, one of the top 20 incubators in the Middle East. This five-month program gives entrepreneurs and immigrants an office in a shared workspace, mentoring and tools to create and develop their start-up in Israel. In 2014, the Chambre de commerce France-Israël noted that “most [start-ups in this program] launched their product, recruited a team, formed partnerships and developed new markets.” It is unfortunate that the term “most” is not more specific, but the importance of these business accelerators is nonetheless clear.
Global giants with a presence in Israel are also developing their own incubators, like Samsung in the field of telecommunications and IT security, and Intel, in the wireless technology sector.
Start-ups enjoy an ecosystem that fosters their growth. Red tape is minimal (it takes less than a month to register with authorities), and innovation and entrepreneurship are at the heart of Israeli culture… What is stopping this young country from becoming the next Silicon Valley? Perhaps it’s the country’s specialization in high tech. To develop innovative products, you need engineers. And Israel is running low on them…
Are you interested in the Start-Up Nation?
Business opportunities in Israel
“Start-Up Nation: quand Israël mise sur l’innovation,” France 24, September 2015, http://www.france24.com/fr/20150911-telaviv-startup-nation-naztech-israel-macron-frenchtech-apple-keynote-qrokee
“Campus Israël: voyage au pays des start-ups,” Revue Gestion HEC Montréal, July 21, 2016, http://www.revuegestion.ca/entreprendre/campus-israel-voyage-au-pays-des-start-ups/
2 The Lost Decade followed the Yom Kippur War in 1973. Hyperinflation. Rise in the public debt…
4 Term from a quote by Daniel Senor and Saul Singer, authors of Start-Up Nation, The Story of Israel's Economic Miracle (2009).
5 Excerpt from the article http://www.lapresse.ca/international/moyen-orient/201106/26/01-4412645-israel-le-service-militaire-prepare-les-futurs-ingenieurs.php