Exploring Israel, the startup nation (Part 2)
This was written based on experiences and research I did in 2019. This included multiple visits to the Taglit Innovation Center in Tel Aviv and the Peres Center for Peace & Entrepreneurship in Jaffa. I am publishing it in November 2022 so some of the information may now be inaccurate or outdated. Part 1 is here.
Two perceptive writers recently wrote a book called Startup-Up Nation. We are the start-up nation. (Benjamin Netanyahu)
To spell out the obvious double entendre here not only does Israel have an impressive record of creating successful startup businesses in recent years (especially in the technology sector) but it is a rare example of a new democratic nation state started up in the 20th century. New things catch people’s interest but are brittle when they lose those same people’s interest. That is especially true of new nation states who have to defend borders that lack centuries of precedence. There were instances in Israel’s past when its very existence was threatened and many other nation states refused to trade with it. To add to this the soil was infertile and the natural resources that were plentiful elsewhere in the Middle East were lacking. As a startup investment it must have been perceived by some as a shot in the dark at best. However, as discussed in Part 1 some of its greatest weaknesses became some its greatest strengths. Rather than living off and enriching itself off the natural resources it was forced to take a more challenging path. It had to create an economy and an export sector based on human and intellectual capital that was impossible to ignore. In addition, isolation from its neighbors created the perfect laboratory conditions for testing the roll out of new inventions such as electric cars.
Defense
Arguably the biggest weakness that became a strength were the military threats on Israel’s borders from neighboring countries. From the formation of the Israeli nation state the military and defense had to be a top priority. The Israel Defense Forces (IDF) was formed in 1948, the same year the state of Israel was established. To this day every citizen without a specific exemption is expected to complete military service as a teenager. The elite units especially in the air force, infantry, intelligence and information technology have turned out be effective incubators for thousands of Israeli startups. Israel’s equivalent of the NSA in the US or GCHQ in the UK, Unit 8200 has been a pioneer in training highly skilled cyber operatives.
Rafael Advanced Systems Ltd was also formed in the same year as the state of Israel (1948). It has designed, developed, manufactured and supplied hundreds of defense systems for air, land, sea and space applications. The most widely known system is the “Iron Dome” that intercepts rockets and missiles fired at Israel, generally though not exclusively from Gaza.
ELTA Systems is creating technology to find a person trapped in rubble using the location of their smartphone and three dimensional positioning at the resolution of a few meters.
Cyber security
Cyber security is a massive and rapidly growing industry globally. As the world of bits continues to outpace the rate of change in the world of atoms securing the world of bits has becomes more and more challenging. Most consumers and businesses in 2022 already have a significant presence online via laptops, mobile phones and routers but every year brings additional devices like fridges, cars, lights, thermostats and door locks online in all sorts of different settings with different threat levels. This Check Point exhibit at the Israeli Expo encouraged visitors to think about the increasing number of potential vulnerabilities in every day life.
Increasingly personal safety and the viability of companies (and countries) is decided by cyber security. It is unsurprising then that Israel has taken cyber security very seriously from a military and intelligence perspective. Nor is it surprising that it has sought to build an export industry around it. In 2021 the Israeli cyber security industry raised $8.8 billion and exports totalled $11 billion. Israel receives 20 percent of global private investment in cyber security with a mere 0.1 percent of the world’s population. One out of every three cyber security unicorns in the world is an Israeli company. Check Point creates firewall software and VPN (Virtual Private Network) products. It was founded in 1993 and had 2 billion USD of revenue in 2021. The co-founder of Check Point, Gil Shwed, featured in the Israeli Expo at the Peres Center.
Some newer cyber security startups that were featured included Upstream which protects connected vehicles without the need to install software or hardware in the vehicle and Argus which helps automakers prevent, understand and respond to cyber attacks.
Transportation
Here I am meeting the virtual version of Uri Levine, the co-founder of Waze. Waze, initially a competitor to Google Maps, was acquired by Google for $1.3 billion in 2013. Waze pioneered various functionality such as reporting accidents, police presence, speed cameras and blocked roads. Before it was acquired up to a third of 50 million Waze users were sharing information via GPS tracking to update suggested routes in real time.
Mobileye is another success story in the field of transportation. Mobileye uses vision algorithms to help drivers (both human and autonomous) to avoid collisions with other vehicles, pedestrians, animals, debris etc and evaluate a scene in real time.
Chips and R&D
Another route Israeli technology makes its way into products is through research and development within corporations. Intel Israel designed the chip that went into the first IBM personal computer and the first Pentium M microprocessor. In the 2000s Intel put their Israeli branch in charge of building chips for laptop computers and mobile devices for the whole company. Intel spreads its development and manufacturing across Haifa, Petah Tikvah, Jerusalem and Kiryat Gat.
Space
An Israeli spacecraft (Beresheet) attempted to land on the moon for the first time while I was in Tel Aviv (April 2019). It didn’t land successfully but with only three countries (the Soviet Union, the US and China) previously achieving the feat attempting to be the fourth was an impressive sign of ambition.
Amongst other sectors Israeli startups have experienced success in are batteries (e.g. charged within five minutes), an online marketplace for freelance services (e.g. Fiverr), personal safety (e.g. an alert for elderly person falling or children receiving harmful messages), agriculture, water, communication, education, productivity and many others.
I also visited the Bitcoin Embassy in Tel Aviv. Whilst the Israeli currency (the shekel) has performed strongly in recent years you only have to go back a few decades to when the Israeli economy suffered from hyperinflation with an inflation rate as high as 445 percent (1984). With its ultimately fixed supply (eventually reaching 21 million coins) Bitcoin offers Israel and indeed any country an alternative if that was to ever happen again.
Overall it is amazing what the nation state of Israel has managed to achieve in its first century with all the challenges that it initially faced and to a various extent still does. But the story is by no means over and starting up is only beginning. When looking back on the biggest mistake of his life, Shimon Peres (Peres Center for Peace & Entrepreneurship) said:
It remains to be seen if those following in his footsteps end up having the same regret. RIP Shimon Peres and all those who dedicated their lives and in some cases lost their lives in the building and defending of the startup nation thus far.
