The nation of start-ups

by Dr Param Shah

Despite its size, Israel provides valuable lessons in multiple fields for other countries to follow and learn.

Israel’s total land area is just a little bigger than some of the districts in India and a population that is half of any major metro city of India. Encountered with several climate, geopolitical and geographical challenges, the country has made significant progress in creating an innovation and start-up ecosystem during the past few decades.

According to Start-up Nation Central, in December 2019, there were more than 6,400 start-ups, over 350 venture capital funds and more than 300 corporate R&D centres. In the past decade, Israel saw 587 exit deals – defined as initial public offerings of shares, or merger and acquisitions of Israeli start-ups – for a total of $70 billion, according to data compiled by PwC Israel.

This growth was largely driven by the acquisition of Mobileye (machine learning tech – for self-driving cars, computer vision, and other applications) by Intel for almost $15 billion, in August 2017. The Mobileye exit has been considered to be a great case-study and the success-story for the Israeli start-ups. Traditionally, the US has been the largest market for Israeli tech start-ups and companies. Presently, Israel has the third largest number of NASDAQ-listed organisations (trailing behind only to US and China).

The country has witnessed constant growth and innovation taking place in a wide variety of sectors such as agriculture, cyber security, information technology, water management, defence, semiconductors, and others. This offers great learning examples for other countries to follow and learn.

Several factors have been behind the success story of Israel as a start-up hub. The mandatory military service; the requirements of self-reliance due to the lack of friendly neighbours; scarcity of natural resources are some of them. The immigrant, as well as the diaspora population, is amongst the richest classes in the world – among the rest. Some of the key learnings which countries like India can take from the Israeli start-up ecosystem are as follows.

Local support with global ambition

Several meetings of the European delegates have speakers who share their views and experiences regarding the need to think globally from the very first day, alongside emphasising the responsibility to the local community. In the area of Israeli tech, even the global companies have taken a step back to their roots. For instance, the office of Amazon Web Services headquarters, located at Tel Aviv has a floor available to conduct community events. On the other hand, Intel, who is the largest employer of Israel, has actively supported diversity programs at the workplace.

Reverse innovation model

The Israeli Innovation Authority (IIA) looks at innovation by first understanding the challenge and then working backwards towards the source solutions. This is called the reverse innovation model. For instance, existing organisations are called upon to share their challenges with start-ups. This promotes the creation of joint ventures (even between competing firms to create new market leaders) to address the issues.

Tenacity combined with technical excellence

The need to understand the importance of a second chance is a must for investors as well as entrepreneurs. Organisations may not always succeed in their first attempt to make something new and innovative. Just a couple of days post the official announcement of the maiden 3D-printed human heart, the inventor, Professor Tal Dvir, shared his views regarding the importance of research and development as well as the process which led to a leading breakthrough in science and technology. His message was focused on the need to do more and go beyond one’s comfort zone to achieve the desired results. This is an important part of the work life for any entrepreneur as one is bound to face failure and criticism when they go on the path less travelled.

Government support for start-ups and innovation

The Israeli government has a significant role in the start-up ecosystem, directly as well as indirectly. The government directly supports several entrepreneurship programs, funds, as well as incubators, facilities and mentoring, provide the risk capital. Many of the incubators have been connected with universities to encourage the students with their start-up ideas, and gain experts to mentor. Indirectly, the government supports the start-ups by way of funding strategic R&D projects for water management, agriculture, technology and defence.

Responsibility on young shoulders

The army is an undeniable cultural part of Israel. The significance of this for the entrepreneurship is the systematic scanning of the schools to select the country’s best talent and taking the obligation to bear the responsibility early and learn to be accountable.

In comparison with India, Israel is ahead in terms of entrepreneurial activities and ecosystem development. The flagship program of Prime Minister Modi, Startup India, to encourage innovation and entrepreneurship, has given impetus to the start-up and entrepreneurship movement in India, however, India can certainly take a lesson or two from Israel to further enhance the start-up ecosystem of the country.

Dr Param Shah is Director – UK at the Federation of Indian Chambers of Commerce & Industry (FICCI).

About the Author: Dr Param Shah