How the military redefined Israel as the ‘startup nation’
Wed 29 Jun 2016
With a population of eight million people, Israel is a home for more than 7,000 startups, attracting more venture capital per person than any other country in the world.
The Israeli startup scene extends from the tech hubs and co-working spaces of Tel Aviv to the multi-office buildings of the Bursa area; From new rising talents in Jerusalem all the way to the southern desert city of Beersheba. It’s a tech seed-bed often compared to the dynamism of Silicon Valley – but Israel’s tech environment has unique qualities which are rooted in unusual geographical, political and cultural circumstances.
Microsoft, Google, Apple, and dozens of other large multinational companies are funding a growing number of R&D centers in Israel, with two-thirds of all R&D employees in the country employed by such high-rated foreign tech companies, according to Israel’s Central Bureau of Statistics. The IVC Research Center’s own statistics also highlight the fact that Israel is now home for approximately 270 research and development centers to the aforementioned companies and others, including eBay, AOL, Philips, Huawei, Samsung and Siemens.
Yotpo, based in Tel-Aviv
But since Dan Senor and Saul Singer defined the crown of ‘Startup Nation’ for Israel in 2009, many competing nations have sought to catch up. At an event held in TLV to mark 10 years since the foundation of Google’s development branch in Israel, Alphabet chairman Eric Schmidt observed “I am worried the Startup Nation has competitors…The most obvious one is Beijing, and in Northern Europe, such as Finland.”
And so the challenge is for Israel to maintain its vanguard position, having set the pace.
The military origins of the Israeli startup scene
Israel’s tech scene is distinguished from competitors by its active military culture, and the political background that has necessitated it. Israel’s critical need for security has led to the formation of special tech units within the Israeli army, inducting men and women aged 18-21, and training them to think outside the box with the biggest incentive ever – personal and national security.
Israel Electric Corporation Vice President, Yasha Hain, and Ofir Hason watch a cyber team at work at the CyberGym school in Hadera in 2013 (Times Of Israel)
The rising need for technology in Israel’s defense made it easier for citizens to acquire unusual skills during their mandatory service. An increasing number of young adults have chosen to study Computer Science, with their previous military experience capable of jump-starting their careers at much higher levels than their counterparts in rival tech nations.
Though the military retains a great deal of this talent, it still represents a technical hot-house culture that feeds the private sector a stream of (sometimes literally) battle-hardened candidates accustomed to working for higher stakes than are normally found in the tech sector.
Military experience also prefigures startup culture: running a successful startup and reaching your development and marketing goals takes more than just a few years of studies and field experience- it also requires the ability to operate a small team, where every single person does the job of three. The special structure of these computer units and teams not only creates formidable development skills, but also teaches young people how to operate in a team, how to work together, cover for each other, and make the best out of the time they have together.
Cybereason CEO Lior Div
Their experience also leads to better management and structural understanding of companies – a factor which large foreign investors find fascinating.
But a military background inevitably gives way to personal diversity: technology development in Israel attracts people from all ages and origins, with the younger sector generally more concerned with the internet and cyber studies, and the older often focusing on bio and hardware.
The end of ‘quick sale’ startup culture
Seeking work beyond the age of forty in the youth-oriented tech scene can be disheartening; but the converse side to the trend, at least in Israel, is how much it has contributed to the accelerator scene. Israel operates around 100 different programs of this type in diverse fields, offering funding and mentoring to those with a vision of cutting-edge products that could storm the industry. Israeli startups have a 4% success rate – one of the highest numbers in the world.
Seven or eight years ago the startup culture in Israel was orientated towards purchase and rapid, profitable sale. Today things are different, with a whole generation seeking to establish consolidated, long-term companies which can endure and compete against the multi-million dollar brands that are currently so fascinated with the country’s technical acumen.
Waze founder Uri Levine
Not that anyone blames startups for selling. When Waze decided to exit-out with about a billion in its pockets, it was an understandable choice, despite popular second-guessing which opined that the company sold too early to Google. But it is hard to blame them in light of all the risks and efforts that a young company needs to endure just to be able to bring a product to the table.
In fact, the Waze sale had the opposite effect, as Israel started to realize the value of its own work – and this was the primary reason that the rapid-sale startup culture began to shift towards endurance and long-term strategies.
Early indications of the shift included the retention of Outbrain and Taboola after their huge initial success, defying the public perception that these innovative companies would cash in early. It didn’t happen, and both have gone on to challenge even Google in terms of annual impressions – a first since the rise of Google as a popular search engine.
Together in the real world
Paid conferences, free meet-ups, evening get-togethers, co-working spaces…networking is essential ground for the Israeli tech eco-system. More and more companies are inviting people for evening educational events, free of charge and intended to promote growth in Israel. This belief in the value of sharing knowledge and insight is a key attractor to the country’s startup scene, and to the vigor that defines it.
They say that Generation Y is doomed to switch jobs every year or so, but in Israel this actually works to everyone’s advantage; this extraordinary level of networking and exchange of insights – often between people who are former or future colleagues -drives the entire startup movement forward in terms of aggregate knowledge.
Another important factor in this regard is the preference towards real-world meetings over online networking via LinkedIn or other social networks. When you actually do ‘know’ people beyond their avatar state, things can get done much faster.
The power of mistakes
The phenomenon of ‘Fuck Up Nights’ is relatively new, but growing. In these confessional events, entrepreneurs share their failures with the general public, explaining potential pitfalls to those with dreams of starting a company, or developing or funding a project. At such events you’ll hear former CEOs, founders and startup owners talk about why they didn’t make it. They share stories on their lack of focus, on how they recruited the wrong people for the job, on how they didn’t understand the market…and many more reasons why their ambitions were not realized.
Fuck Up Nights reveal the Israeli approach to making things happen, and shows just how different that approach is from the rest of the world. In an environment where proud and intelligent people gather others around them to share the source of their failures, only great things can happen.
Ariel Shapira is the tech editor for the Jerusalem Post. He researches and writes about the Israeli tech scene, and as an entrepreneur has also been involved in several innovative internet initiatives as founder and co-founder, implementing new state-of-the-art social marketing tools. He can be contacted at [email protected].
