The Secret Sauce Behind Innovation Ecosystems — Part 2: Tel-Aviv with Valerie Zarka
A startup nation shaped by public initiative and the military
FABERNOVEL and PARISOMA are publishing a series on global innovation ecosystems, as part of a research project. We look at the world’s most influential ecosystems through 3 lenses: Money, Talents, and Culture. After focusing on Silicon Valley with Csaba Szabo (Part 1), we interviewed Valerie Zarka, Founder & CEO of More Than Digital.
Valerie came from a world of digital communication agencies and started her career in companies such as BBDO, Ogilvy, and Carat (Dentsu). This is where she learned the challenges to innovate in large organizations. Three years ago, after many trips between France and Israel, she decided to bridge the gap between Europe and the Tel-Aviv innovation ecosystem. She planned to start with both acculturation and partnerships.
Together, we discussed first the key role of the army in the creation of top-notch engineers. Then, we talked about how the government invests in tech companies. Finally, we dealt with how military conscription has an impact in networking.
1. The rise of a new innovation wave influenced by public policies
1990–91: A tipping point
Between 1990 and 1991, the Tel-Aviv ecosystem experienced the convergence of several factors. First, the country was in the middle of a conflict who left many skilled workers without a job. Then, after the collapse of the USSR, Israel saw an intense wave of immigration. Approximately 37% of 900,000 immigrants had a graduate degree. Finally, many R&D centers from foreign companies such as Motorola and IBM had already started to set up shop in the area. They did so to take advantage of a large pool of talents.
To leverage this dynamic, the government decided to structure the ecosystem with new infrastructures and ambitious investment plans.
Public infrastructures and public funding
On the infrastructure side, they created 24 public incubators, managed by the Office of the Chief Scientist, a public entity part of the ministry of economy. On the investment side, the government created a $100M fund of funds called YOZMA. The purpose was to irrigate public money into the ecosystem. To create this new generation of Israeli VCs, investments were required to involve YOZMA, Israeli private funds, and foreign venture capital funds, especially many American ones.
A successful impact 20 years later
These actions created a fertile ground for the rise of successful tech companies. Tel-Aviv went from an ecosystem with 500 startups in the early 90’s to more than 5,000 startups in 2017. Moreover, most of the global tech companies now have an office with a strong willingness to be part of the ecosystem. Google, Facebook, and Amazon have followed a first generation of American companies: Cisco, Microsoft and Qualcomm have an office in the region. There are now more than 300 local R&D centers. For example, Apple has 1,000 employees in its R&D centers around Tel-Aviv. They were used to work on the development of the iPhone 8.
2. A unique ecosystem influenced by the army
The Israeli army, a “school” for entrepreneurs
“The army plays an important role in the innovation ecosystem, both in terms of culture and talents.” At 18, everyone has to spend between 2 to 3 years of military service. There, they “quickly” work on concrete projects where they get trained on the job. Promising students in mathematics and science go to departments where they will learn about computer science.
Then, at 20, some of these “kids” are able to manage teams, sometimes of over 100 people. For these reasons, they evolve in a culture built around peer-to-peer learning, critical thinking, and reactivity. Furthermore — and contrary to what we can think, they have the liberty to not respect orders as long as they can bring solutions to the table. This environment creates generations of « autonomous » minds encouraged to take initiatives.
Importance of networks
“The army is the place where everyone creates its network.” Each year, each adult under their 40’s needs to give two weeks to the army. As a result, it strengthens connections between people who work in the private sector. According to Valerie, these networks of army “alumni” make it easier to get introduced to tech executives.
Business-driven universities
She also highlighted the importance of universities and their connection to the army and the local network of startups. They encourage researchers to do applied research and incentivize them through patents registrations. Each university has technology transfer centers to connect with external players and commercialize their IPs. For researchers, the bridge to join the private sector is also important and valued by companies.
If we look at Tel-Aviv through the lenses of Talents, Culture and Money, we can consider the Israeli ecosystem as Silicon Valley’s little sister. It’s a complete ecosystem with only its size as its limitation. Its talents are trained on top-notch skills early on in their careers. They grow in a military environment encouraging autonomy and entrepreneurial values. And the government has always been supporting the ecosystem to connect to local or external investment pipes. Yet, the Israeli ecosystem is currently reinventing itself. Initially known to be the startup nation, Israel is aiming to become the scale-up nation. There is a strong desire to go bigger. It does not necessarily want to see its startups acquired by large tech companies. Instead, American or other large markets are targeted from Tel-Aviv.
This article was originally published on FABERNOVEL Insights.
More about Valerie Zarka:
Valerie Zarka spent 14 years in digital agencies in France (B2L BBDO, Ogilvy One, Dentsu Aegis Media…) serving key accounts and French public authorities to design, manufacture and manage their digital ecosystems. She is now assisting the same companies towards innovation through her company, More Than Digital. She lives between Paris and Tel Aviv.
