"In Israel, innovation and entrepreneurship are the norm; early adoption is the rule, and thinking ‘out of the box’ is a daily phenomenon"
Bernal Goldberg, Washington State Israel Business Council
How did a nation of 7.1 million, surrounded by enemies and short on natural resources, develop one of the world’s strongest economies? How did Israel go from agricultural backwater to high-tech powerhouse in just 60 years?
Dan Senor, a fellow at the Council on Foreign Relations, and Saul Singer, an editor at the Jerusalem Post, explore this fascinating story in Start-Up Nation: The Story of Israel’s Economic, profiling the people and highlighting the values that have made such a “miracle” possible. Senor and Singer also credit Israel’s success to a pragmatic industrial policy, well-timed market reforms, and the influx of scientists, engineers, and mathematicians from Russia.
Some of the best innovations in biotechnology, environmental technology, fraud detection and cyber security come from Israeli companies. In fact, Israel not only has the largest number of companies listed on NASDAQ outside of North America, but it also has the highest level of venture capital as share of GDP, a key factor of a country’s innovative efforts.
What aspects of Israeli society lead to such an innovative and entrepreneurial culture?
To answer this question we need to look deeper in the history. Historical discus shows that expressive innovative activity takes leads in Israel culture and mentality.
First, it is «Refuse to die Mentality»
Being located in such a volatile region prone to wars and violence, Israel has been an individualistic nation since its founding. The countries as a whole, and Israelis as individuals, have a “refuse to die” mentality. Therefore, they strive to survive and progress forward, no matter what. This demeanor of resilience has been instrumental in the establishment of the country’s unique entrepreneurial spirit and wildly successful startup scene.
Second, Life-Death Stakes Motivate Tech Entrepreneurs
Military enlistment is mandatory in Israel and plays a huge role in providing invaluable experience for many budding tech entrepreneurs. The military’s largest unit, the internationally-acclaimed intelligence unit 8200, responsible for introducing more technology millionaires than many business schools, provides its soldiers with knowledge and experience in the fields of tech and cyber security while working under intense pressure, with great responsibility, and often primarily independently.
The experience that many current and future leading Israeli tech entrepreneurs gain during their time in the military provides them with high-level analytical, rapid data-processing and quick decision-making abilities. They are often under enormous pressure with life-and-death stakes — experiences that set them up for success in the hi-tech world.
Third, it is The “Chutzpa” Nature. Not only does the military provide Israelis with knowledge and experience, but also it acts as a social leveler. Since most Israelis, regardless of background, serve together in the same conditions, it is in Israelis’ nature to challenge their authorities — whether in the military, government, or in their careers. While perceived as rude by some, this “chutzpa,” or gutsy, nature is in fact a causal factor in the Israeli frame of mind that no obstacle is too difficult to overcome.
After Israelis have given three years of their lives to the army, they want to hit the world and do something big. Israelis are passionate people. They’re not afraid to think globally and take risks. They want to be creative; they’re always trying to reinvent if something is not good enough. They want to make things better, even if these things are already “perfect,” so to speak. The army greatly influences this mentality because the IDF is always trying to improve, always trying to develop better products and better strategy. Israel has a huge advantage in this regard. Someone who has just left the army will have incredible technological and R&D skills, but also the mindset of an entrepreneur. Sometimes they might not have the marketing skills, but that comes afterwards. The skills and the vision are there.
Also, entrepreneurs have to be very flexible and adaptable. In Israel, people always have a Plan B. It is something we learn from the army. If I don’t have money, they just go on to the next step, contact people for a new project without panic.
Forth it’s «CAN-DO Nature». Israeli culture promotes appreciating what you have and enjoying life in the present as best you can. In the startup world, Israelis know when to exit and enjoy the fruits of their labor, rather than holding on too long to their companies or being overly greedy. In this culture, money is not the sole focus of ventures. In the end, Israelis strive to change the world, rather than just focusing on how much their idea will be worth if it makes it big – though they tend to make it big in the end, anyway.
In the Israeli culture, when someone has an idea, execution is immediate. Of course, some ideas don’t work, but the pace of innovation is so swift that genuine breakthroughs are made all the time. Entrepreneurs are very future-oriented, eager to integrate Israeli talent and innovation into the rest of the world.
Fifth its innovative culture of Israel is about changing the World. Israel has always had to be creative and strategic in solving issues, whether geopolitical, economic, societal, religious, etc. Therefore, Israeli startups aim to solve real issues and improve and help the world. Their focus is typically on B2B, rather than on fluffy consumer technologies.
Much can be learned from Israel’s successful startups: Persistence is key, never be afraid to challenge the status quo or your authorities, be disruptive, and focus on solving real problems. But most of all, the focus should not be on the money — be excited by what your company is doing and concentrate on achieving something great.
Adopting the Israeli mentality of not taking “no” for an answer and “refusing to die” is crucial for startup success. There’s tough competition out there and it takes trying everything and putting everything you have into your company before letting it go in order to achieve real success.
The governmental support in Israel is very impressive; a lot of innovative support programs are created for sustainable innovative system development and innovative culture as well. The Office of the Chief Scientist (OCS) of the Ministry of Economy, an independent authority managed by professionals (and not politicians) is in charge of creating public policies to support the private sector by fixing important market failures that could hinder innovation. By collaborating with the private sector to inject “risk capital” into the economy, the government shares the risk that otherwise the private sector alone would be unwilling to take. There are several companies of marketing support for scientific patents established by universities in Israel, «Magneton» program for university-industry cluster dealing with the development of technologies, Program «Nofar» for financing scientific research development ( till 90% governmental finance), program «Tnufa» for individual innovators, active work of techno parks, service agencies for technological transfers, etc.
While there are many other factors that also play an important role in the success of this ecosystem (mostly related to culture such as risk-taking behavior and not being afraid of failure), there are important policies that developing countries could learn from. The challenge for developing countries is to internalize the benefits of long-term strategies that often are put aside due to short-term political considerations.
This is good for Israel, to showcase its future. It demonstrates that Israel is an incredible place – not because of the past, not because of the Holocaust or Zionism or its history, but because of its people and what they can accomplish. The emphasis should not be on what the world owes to Israel, but on the role Israel will play in the rest of the world.