Understanding Israeli Entrepreneurship
Two weeks ago, I had the pleasure to join the Hong Kong delegation to visit Israel to understand their entrepreneurial culture and to visit a few of their startup companies. Before the trip, I have heard many good comments, through investment communities in China and Hong Kong, about the entrepreneurial culture of Israel startups as well as the very high quality and level of engineering of Israeli products developed by these startup companies. This trip would be a good opportunity for me to see it for myself.
The week-long trip was well organised with visit to historical sites of The Old City of Jerusalem, Yad Vashem — The World Holocaust Remembrance Centre, Dead Sea and Masada Fortress to give us a good understanding of the Israeli culture and history; the Technion — Israel Institute of Technology to understand the level of academic and R&D capability; to speak to the prior Chief Scientist of Israeli government to understand the ecosystem to nurture Israeli entrepreneurship and startups; and to visit Israeli antiterrorist training site and air force base to understand the military training each Israeli citizen is mandated to take. Last but not least is to visit and speak to the founders and cofounders of many high-quality startups.
The trip is designed to give us the understanding of all the factors why Tel Aviv is amongst the top 5 innovation hubs of the world (published by Medium — Top Tech Hubs Around the World Aug 10, 2018 and Expert Market — Top Tech Cities in the World 2018).
History and geo-politics of Israel
Over thousands of years, Jews had been under constant suppression by their rulers and had resulted in many waves of expulsion and exile from their ancestral homeland as well as persecution form the countries they reside. The most notable and notorious persecution is the Holocaust which was a genocide during World War II in which Nazi Germany systematically murdered some six million European Jews, around two-thirds of the Jewish population of Europe, between 1941 and 1945.
In 19th century, many Jews aspired to return to “Zion” or the “Land of Israel” resulted in five waves (from 1881 to 1930s) of immigration of Jews from different countries to Palestine, administrated by British authorised by the Mandate for Palestine. With countries around the world turning away Jewish refugees fleeing the Holocaust, a movement known as Aliyah Bet was organised to bring Jews to Palestine. By the end of World War II, the Jewish population of Palestine had increased to 33% of the total population resulted in intense conflicts with the British (ruling the Palestine area) and Arab communities about the immigration limits of Jews after the World War II.
Although the State of Israel was declared unilaterally by Jewish community on 14 May 1948, it has resulted in many wars between Israel and its neighbouring Arab countries since then and the tension between Arab and Israel remains high to this date.
Independence and resilience
With this unique backdrop of history, Jewish people has learned, over the years, to survive in environment with very limited resources and under the constant threat of being persecuted.
It is in Israeli’s blood to survive in adverse condition and improvise with whatever resources they have and not to reply on the others to help. This historical and political background gave the Jewish people and now the State of Israeli the unique characteristics of entrepreneurship: innovation with practical engineering, determination and never give up, willing to take risks and learning from failure in order to succeed.
Military training and service
The Israel Defence Forces (IDF) differs from most armed forces in the world in many ways. Since its founding, the IDF has been specifically designed to match Israel’s unique security situation. The IDF is one of Israeli society’s most prominent institutions, influencing the country’s economy, culture and political scene.
It’s clear that the culture and values instilled by the IDF as a whole have helped breed a unique type of leader, who is well suited to thrive in tech startups. There is a strong correlation between a startup and a relatively junior officer in the Israeli army. Obviously less life threatening in a startup, there are still lots of stressful situation such as quick decision making, improvising with limited resources, covering your team members without asking, and etc. can be simulated and learned from the military training and service.
All Israeli men and women are mandated to take military service at the age of 18 until they are 20 or 21. And despite their young age and inexperience, they are given the same degree of responsibility and autonomy as an officer, sometime responsible for the lives of a unit of 100 soldiers.
This unique experience gained by the Israeli young men and women is one of the key reasons why Israeli entrepreneurs are more successful than others.
High quality education
Israeli people are well educated and Israeli society highly values education. Education is a core value in Jewish culture and Israeli parents strive to provide their children with the highest standards of education possible.
Israel has one of the most well-educated civilian populations in the world, ranking in fourth place with 46% of all adults holding at least an undergraduate degree. The Israeli economy is largely scientific and technological based, the labor market demands people who have achieved higher education, particularly related to science and engineering. Such high education will give competitive edge to the young people searching for employment.
The Israeli high quality education system has been attributed as one of the key factors for Israel’s economic development and technological boom in recent years.
Unique innovation ecosystem
Avi Hasson, the ex-Chief Scientist of the Innovation Authority explained to us that Israel has one of the best innovation ecosystem in the world after Silicon Valley of USA.
He further explained that other than the top-notch universities and academic R&D centres such as the Technion, Hebrew University, Weizmann Institute of Science, Bar-Ilan University, Tel Aviv University, and University of Haifa, there are 350 corporate R&D centres from major multinational companies such as Apple, Google, Microsoft and etc., recently established in Tel Aviv and other cities in Israel.
The purpose of their presence is to tap into the technical talents and the unique innovation culture of Israel to build their Centre of Excellence and to look for acquisition opportunity of Israel startups that will either improve their company competitiveness or to create new markets using innovative technologies from Israel.
“The total R&D spent (excluding defence) per GDP in 2017 is 4.3% which is the highest in the world”, Avi said.
With this unique booming startup and innovation community, there is no shortage of capital from investors coming from all over the world. However, the Innovation Authority of Israel also invests into startups. Instead of competing with the commercial capital investment, Innovation Authority only invests in the most risky innovation and startups where commercial sector may find it too risky to invest. Most of these startups will end up failing but it will give valuable experiences and opportunities to other startups to improve on their innovative ideas. The key of government investment is not to get financial returns but rather to create a “not afraid of failure” innovative culture which I find quite unique to Israel.
An entrepreneur country fighting for its survival
I personally have visited many innovation and startup communities in Beijing, Shanghai, Shenzhen, Silicon Valley, New York City, Israel is quite unique with its unique entrepreneurship and innovation culture for the reasons mentioned above. It is a young country of 70 years and is a country of survival supported by its innovation, engineering, entrepreneurship, as well as a strong sense of urgency, alertness and energy. I highly recommend to Hi-tech startup founders and investors to visit Israel to explore and look for collaboration and investment opportunities. And I look forward to building a long term and sustainable cross boarder collaboration with the Israeli startup community.
