israel startups

29.06.2015

The Israeli startup ecosystem: the military and immigration, unlikely drivers of entrepreneurship

Image | Sam Lavy

Despite being a small country, the entrepreneurial ecosystem Israel began building in the nineties has attracted the attention of half the world. Which makes sense if we look at the data analyzed by PwC consultants a few months ago

In 2014, the sale of 70 startups put $15 billion (about €13 million) in the hands of Israeli entrepreneurs and 39 of these had several rounds of financing exceeding $20 million (about €17 million euros).

It is not only investors that have taken an interest in Israeli’s startups. We also see big companies such as Google, Apple and Facebook acquiring Israeli startups like Waze, a social navigation application; Prime Sense, the manufacturer of the 3D sensor for Kinect for Xbox and Onavo, which specializes in mobile applications. This interest is also clearly visible in the number of innovation centres these giants have opened in the country.

According to Startup Genome, Israel ranks second in the list of countries with the highest density of such companies, the leader being Silicon valley. Of course, despite the proximity in the ranking, the entrepreneurial ecosystem in the country is quite different from that of San Francisco Bay.

Silicon Wadi: an ecosystem of ‘different’ startups

israel startupsImage | Wikimedia

In the book Startup-Nation: The Story of Israel’s Economic Miracle, journalists Dan Senor and Saul Singer analyze the elements that have changed Israel into a startup making machine.

The factors it emphasises first are the great motivation and determination of Israeli entrepreneurs. Very often the Jewish word ‘chutzpah’ is used to define them. “Chutzpah is the feeling that I can do something even if you tell me I can’t,” as was explained in an interview with Gilad Japhet, founder of the Israeli genealogy social network MyHeritage. According to Japhet, Israeli entrepreneurs will never take no for an answer, trying to solve everything even if it seems impossible.

The army as an engine of development

The army also has also made its mark on the entrepreneurial ecosystem. Young Israelis are forced to live in barracks for two or three years and there they develop values ​​such as leadership, teamwork and sacrifice — skills that are important in the entrepreneurial world. This would help explain the potential of Israel as a birthplace of startups and security technology companies — an important aspect of an army of a country marked with war and conflicts and obsessed with protection and security.

On the other hand, due to the history and situation of the state of Israel since its creation, it has chosen to develop a very powerful military industry which, in addition to human capital, has also meant huge economic investments in weapons manufacturing. This situation has served to advance the development of both conventional and electronic structures and also paved the way for the creation of professionals in the technology sector with a very high level of technical training.

Finally, it is important to note that that most of the parents of these entrepreneurs have lived the experience of immigration, hence they have been taught not to be afraid of taking risks.

And we can’t forget the €23.86 million that the government invests in research and development, almost 5% of GDP, making it one of the states most involved in innovation issues. Another ingredient in this successful startup ecosystem has been the partnership between 4YFN and DLD in Tel Aviv, which now hosts one of Israel’s most important technology events.