There’s a special place in the world for startups and we aren’t talking about Silicon Valley.
Viber. Wix. ICQ. Waze. What do all of these companies have in common? These popular apps all have their roots in Israel, a melting pot of culture, religion and yes we aren’t sugar coating it — conflict. But in the same way that the last decade has been good to the Philippines, lifting itself up from being the “sick man of Asia” to an overperforming infrastructure and GDP growth hub, Israel has been making waves in research and development. The startup scene is vibrant in Israel — namely in key cities Tel Aviv and Jerusalem because of a few key factors that make this small country unique.
For one week I immersed myself into the startup culture of Jerusalem. I toured startups, accelerators, VC’s, co-working spaces. For those who need a step back, a startup is an entrepreneurial venture that is set up to meet a certain demand. But what makes this type of company particularly interesting is that it is designed to be lean and agile — meaning it needs to scale very quickly. As to how quick, some may say that these companies need to grow around 5% every week — whether it be sign ups, page views, or the holy grail of metrics — revenue.
Instagram, Uber, Waze, Facebook, Twitter — these were all startups once and have since exited or become acquired by bigger fish (in the case of Instagram and WhatsApp being bought by Facebook and Waze (formerly called FreeMap Israel — being bought by Google). Silicon Valley painted the perfect picture of a startup ecosystem as the location was nourishing to the tech community in general. But rising real estate costs and other factors made it harder for startups to cut costs – a major impediment to being agile.
Enter Israel, ‘the land of milk and honey’ and now the Promised Land for technology entrepreneurs. From my immersion, I’ve gathered that startups thrive in Israel because of three key situations that are unique to the geography:
Israel needs to innovate because of their geopolitical situation
With negative immigration, scarcity of resources and conflict in neighboring countries, Israel has needed to fend for itself. They invented drip irrigation, engineered crops (the cherry tomato was invented in Israel), built the iron dome missile defense system (the technology which they also repurposed to combat agricultural pests) and made such huge advancements in medical technology and automation. “Adapt or die” is a common catchphrase in the startup world and this has been inculcated into their culture. The scarcity of resources encourages “thinking inside the box” to immediately address needs.
Israel has a unique military
Speaking of culture, the military plays an active role during the formative years of every citizen. By law, all men and women are required to serve in the military — 3 years for men and 2 years for women once they turn 18. Service is considered a rite of passage and since conscription is mandatory, strong bonds are forged which become vital in civilian life as well as employment.
Unlike in the Philippines where the most training a civilian received was with the ROTC, military service in Israel throws you in the middle of a hot bed – military intelligence, tank and chopper pilot, artillery. For many women, they may opt to do what is the equivalent of the NSTP in the Philippines which involves a lot of community work, which helps open doors to being great tour guides and public relations specialists.
It has become such that in one way or another, the military had influenced the careers of these tech entrepreneurs in one way or another: Hanan Lipskin, an entrepreneur who develops an anti cyber-bullying app for children called ‘Keepers’ used to work in military intelligence. Another tech entrepreneur Zeev Farman, CEO of Lightricks (makers of the ever-popular app Enlight) says that although he didn’t benefit directly from military service, he did meet his co-founder while in service.
An Israeli startup immediately needs to go global in order to survive
The total population of Israel is a bit over 8 million people — which by comparison is way below the total population of Metro Manila with about 10% living in Jerusalem and half of that in Tel-Aviv. In other words, you could fit the entire population of Israel inside Metro Manila and it still would not be as crowded as it is now in the city.
That being said, there are over 5,500 startups in Israel, which if you think about it. brings a huge disparity in supply vs demand for tech services. As such, due to their small population an israeli startup always sets itself up to be acquired – such as how Waze was acquired by Google and just recently, Mobileye was acquired by Intel.
Failure is an option in the startup community, so much so that the culture of failure is not frowned upon, even by the Israeli government. With about USD $100 million in the bank reserved solely for entrepreneurs the government takes an active role as both VC fund and accelerator. Any Israeli citizen can pitch their concept to the government and after undergoing a rigorous vetting system, they receive seed capital. If their venture succeeds, the seed money is returned. If a venture fails, the government calls it a learning experience and the doors are left open to try again in the future.
In his book "Startup Nation," Saul Singer has branded Israel as the new Promised Land for research and development. It is a welcome label backed by astounding facts — Israel has the second largest number of companies on NASDAQ next to China, with more than 4% of GDP invested in research and development.