Israel: Where Startups Are a National Priority

Recently thirty executives from some of the most prominent Fintech, technology, and financial companies in Toronto travelled to Israel as part of a trade mission with the Mayor of Toronto, John Tory. Their goal was to learn what the Israelis are doing differently when it comes to startups and innovation and how similar models can be implemented in Toronto.

Why Israel? Geographically, Israel is a small country about the size of Vancouver Island or the state of New Jersey with a population of only eight million people. Even though it is small its startup culture has been hugely successful. In 2015 alone there were 1400 new startups formed, $4.4 billion dollars invested in startups, and about $9 billion dollars in startup acquisitions. And one of their major cities, Tel Aviv, is the second largest technology cluster in the world behind Silicon Valley.

Through an invite by Ryerson’s DMZ (our incubator) I had the privilege of being one of the thirty delegates. Here are my key takeaways from the mission.

Mayor John Tory and I in front of the West Wall

The Israeli Mindset

The Israeli mindset is one of entrepreneurial spirit and drive. Everyone is encouraged to be an entrepreneur and start his or her own business or help build one. Even if they fail it’s seen as a learning opportunity rather than a mistake.

Investors in Israel, much like Silicon Valley, understand that disruptive innovation seems risky but results in huge rewards.

This approach has resulted in some prominent Israeli companies including Fiverr, Wix, Waze, and Viber to name a few.

National Focus on Innovation

Due to the size of Israel and its location in the Middle East it lacks natural resources. To ensure the country is competitive at a global economic level the government has focused their efforts on turning the country into a technology focused service based economy. This push has helped the whole country focus on innovation, from the private sector to the public sector.

This can be seen with the huge amount of government support for entrepreneurs from the federal level with the chief scientist office (funding support of industrial R&D with an annual budget of $400M) to the municipal level with government-supported incubators like Tel Aviv Global (a library that focuses on getting government involved with regulation based startups).

In Israel you get this feeling that if you start a business the government, investors, and the country will be there to help you grow it.

Tel Aviv Global — Municipal Supported RegTech Incubator

Global from Day One

In Israel every technology startup is required to think globally from day one. The local startups realize how small the country is and know there isn’t a scalable market internally. The constant question entrepreneurs are answering is “How do I get my product into North America or Europe to grow?”

There is huge upside to this approach that might not be immediately obvious. When you build a globally scalable business you inherently do two things. You build a product or service that is disruptive by nature (because you’re entering markets that are saturated with local products) and you collaborate to get contacts on the ground that can help you understand the local culture.

One great example that was amazing and disruptive was a startup out of the city of Be’er Sheva. A small team built anti-virus software that did gene sequencing for malware to predict derivatives of the malware before they were even built. Within 18 months PayPal acquired them.

The global first mindset also promotes internal collaboration between startups. Since they are not competing within Israel they are able to work together to export their expertise to the world.

Eager Enterprise and Talent Pool

Apple’s only R&D centre outside of California is in Israel. And Apple is not the only one. Microsoft, Intel, Paypal, and many more MNC have all set up offices in Israel. They have done it to attract talent and startups.

Israel has focused its education system on training the best STEM talent globally.

The view from the Bahai Gardens in Haifa, Haifa is home to the STEM only Technion University

This push is primarily due to the efforts of the Israeli Defense Force (IDF) who provide high technical training to young people during their mandatory service. The brightest young minds are exposed to the most advanced technologies in the world right after high school.

They can then build on their knowledge at the various universities across the country that focus on training them in specialized areas like cyber security. These skills can be easily applied to industry via startups or multi national corporations (MNC).

If we are able to implement some of these key-driving factors of innovation that Israel has done so well we can make Canada and other growing startup countries more attractive to startup founders globally.

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