Start-up nation: Are there lessons to be learned from Israel’s tech success?
- A risk-taking culture, growing talent pool, state support and military training have shaped Israel’s hi-tech industry
Israel has almost the same number of artificial intelligence (AI) start-ups as China, but with a population that is 159 times smaller. It is a global leader in cybersecurity, developed drip irrigation, the USB flash drive, long-shelf tomatoes and the pill cam.
In short, Israel punches way above its weight class on the global stage in technology and innovation. Last week, I went on a trip organised by the Israeli foreign ministry and visited the country’s top university, promising start-ups and the biggest tertiary hospital in the Tel Aviv area to learn about its use of AI, as well as attended the OurCrowd summit in Jerusalem. I hoped to see if there was a secret formula to the nation’s success, and by extension, whether the formula could be replicated in other countries.
The answer to that is important as countries worldwide grapple with the question of how to seize the opportunities thrown up by new technologies from genomics to AI, and minimise the disruptions that these innovations invariably bring to societies and economies.
My conclusion from the week: there are aspects to the Israeli story of disruptive innovation that are unique to the country, but there are also many lessons that other nations can learn from.
In talking about Israel’s tech ecosystem, the role of the military looms large. Whether it is the compulsory national service that trains its young men and women to work in teams and be mission-oriented, or giving those serving in specialised units like signals intelligence a grounding in skills that are applicable to private industry like cybersecurity, the military almost always comes up in conversations about the secret of Israel’s tech success.
One example, and there are many, is the pill-sized capsule camera, invented by Gavriel Iddan, an engineer at an Israeli defence company, who took inspiration from his work on guided missile technology.
“When you have death wished upon you, the risk of failing at a start-up, so what?” said Jonathan Medved, founder and chief executive of equity crowdfunding platform OurCrowd, one of the country’s most active venture capital investors. “There is a long tradition of turning curses into blessings.”
The scarcity of water, for example, pushed Israel to become a pioneer in reverse osmosis and desalination. The lack of a big domestic or even regional market for its products and services spurred companies to think global from the start.
In the matter of talent, while Israel is a small country in terms of population, it can and has tapped on the wider Jewish diaspora. Still, much more can be done to involve segments of the population, such as Israeli Arabs, ultra-orthodox Jews and women, according to Medved.
“We have to invite people of all kinds, which is what made Silicon Valley great. There’s no reason why different nationalities thinking of a career in hi-tech should not think about working in Israel,” he said.
To be sure, one of the main criticisms against Israel’s tech ecosystem is the “culture of exits”, or the tendency for start-up founders to sell their businesses to bigger multinationals, instead of taking it all that way to become global champions. The most celebrated case in Israeli tech is Mobileye, the autonomous driving system start-up co-founded by Hebrew University of Jerusalem professor Amnon Shashua, that was sold to US semiconductor giant Intel for US$15.3 billion in 2017.
The capital markets in Israel are also too shallow to be able to accommodate huge initial public offerings, meaning any promising domestic start-up contemplating a public listing would have to go overseas.
Still, given the global nature of technology, it is not a net loss as most of the multinational companies that acquired Israeli start-ups end up building research and development labs in the country, contributing to foreign direct investment and employment.
To help the tech ecosystem, the state has a dedicated Israel Innovation Authority to champion research and development in the country. The foreign ministry also includes technology as part of its public diplomacy efforts.
Academia is the last piece of the tech ecosystem. Having top-notch universities is crucial in both supplying the raw talent for the industry, as well as to undertake research that can be commercialised.
We visited the Hebrew University of Jerusalem’s tech transfer organisation, called Yissum, which is set up as a for-profit company wholly owned by the institution to inject more nimbleness and incentivise results.
Some of the prominent companies to have come out of the university include Mobileye. Other innovators include Marta Weinstock-Rosin, best known for developing Exelon, the blockbuster drug that slows dementia caused by Alzheimer’s and Parkinson’s disease.
To ensure that research is attuned to solving real-world problems, Yissum invites companies to invest their time to craft requests for proposals that are then open to the university’s professors and researchers.
In a nutshell, the risk-taking culture (from being in a tough neighbourhood) that underpins Israel’s start-up scene is hard to replicate. But the right government support, encouraging global talent, having strong universities that work closely with industry and government to advance research and development goals – that is doable in many countries.
