Waze. Monday. Diagnostic Robotics. Via. Orcam. Serie. Fundbox. Moovit. SparkBeyond. Lemonade. What do all of these household-name companies have in common? They’re all from Israel. Around the world, the tiny nation of just some 9 million inhabitants, located smack dab in the Middle East, has gained the notable title of Startup Nation––and it’s no wonder why. Ever since the early 2000s, Israel has consistently invested in the development of new innovation and emerging technologies, continually achieving record-breaking rounds of venture capital investments year over year. In fact, regardless of the Coronavirus Crisis, Q1 of 2020 witnessed Israeli high-tech companies raised an all-time record of $2.74 billion, reports IVC Research Center – ZAG S&W law firm. Israel also has “the highest density of startup companies of any country in the world — about one startup for every 2,000 people.” In addition, Top technology companies like Google, Microsoft, Intel, Facebook, Oracle, and many more, conduct crucial R&D operations right in Israel. But what is the secret sauce to Israel’s success? And what can the United States learn from Israeli innovation with regards to successful strategies? Five key areas emerge when attempting to answer these questions: the government’s role in innovation, innovation as a core of everything, creating unique technology solutions and opening new value chains, the geographic concentration of institutions, and lastly the Israeli startup culture and the infamous chutzpah of the Israeli people.
The Government’s Role in Innovation
In Israel, the government takes an active role in promoting and funding technological innovation, which is key to maintaining a thriving startup ecosystem. According to an account by Avi Hasson, former chief scientist at the Israel Innovation Authority, “It’s key that the government takes on the riskiest investments, paving the way for private capital to follow.” Moreover, Israel has been ranked by UNESCO as second in global R&D spending as a percentage of GDP, with the nation’s expenditure consistently hovering above the 4% mark. Government institutions such as the Israeli Innovation Authority, have been instrumental in providing the nation’s entrepreneurs and idea-makers with the funding they need to pursue trailblazing projects.
The Authority is organized into six main innovative divisions, “Each division offers a unique “toolbox” of customized and comprehensive incentive programs. These divisions thus serve as a launchpad for successful innovative projects, providing entrepreneurs and companies with the most relevant plan for them to realize and implement their ideas, develop their products, and mobilize private investment.” These divisions include the Startup Division, Growth Division, Technological Infrastructure, International Collaboration, Advanced Manufacturing, and Societal Challenges. In addition, Startup Nation Central (SNC), the Israeli non-profit organization that tracks the local innovation ecosystem, has launched a comprehensive, updated directory with over 70 Israeli high-tech companies that offer medical technology solutions in the fight against COVID-19, the disease caused by the novel coronavirus. Furthermore, Israel Advanced Technology Industries (IATI) an the umbrella organization of the high-tech and life sciences industry in Israel is connecting 700+ members. which include venture capital funds, R&D centers of multinational corporations, local small and large companies, technology and business incubators, acceleration programs for startup companies, commercialization companies of universities, hospitals, academia, and service providers.
The success of the Startup Nation was in large part due to the steady capital flow provided by the government that helped to accelerate progress in the technology and sciences, which Israel now spearheads as a global leader. Furthermore, because the Israeli government provides an extra cushion of support for blooming entrepreneurs by going first in with the money, pioneers are encouraged to pursue ideas even if they might fail, as the problem of financial risk has somewhat been mitigated. This is where Israel wins the race––the nation is not afraid to take risks in search of incredible innovative discoveries, which is the true essence of true pioneering and entrepreneurship. With the government acting as a strategic pillar of support, idea makers are encouraged and empowered, and this is a factor of success that the United States can learn from Israel.
Rapid Adoption of Innovation at The Core of Everything
If you ever travel to Israel on a guided tour, you will inevitably discover the genius drip irrigation systems that have enabled the nation to produce some of the best tasting produce in the midst of arid heat and endless sand dunes, which show not a glimpse of water. Why do I bring up drip irrigation as an example? Allow me to explain with the famous adage, “Necessity is the mother of invention.” Ever since its birth, Israel has had but one choice: innovate or die. Surrounded by a challenging environment as well as harsh climate conditions that make living a challenge, the people of Israel have had no other choice than to get creative if they were to even survive. Herein lies the difference in mentality between the USA and Israel. When you live in a constant state of stress you must figure out ways to adapt and ease the pressure––and this comes in the form of technological innovation, such as drip irrigation, the iron dome defense missile system, and life-saving biotechnologies. One such incredible technology is SeeTree known as the intelligent network for trees, SeeTree provides a new way to optimize farming with artificial intelligence in which data on tree health records and productivity is continuously and dynamically updated. This cuts out incredible time and resources for farmers working on large or even small plots of land and helps sustain a thriving horticultural environment. Without novel techs like SeeTree or drip irrigation, Israel would not be able to supply its citizens with the very basic essentials of life––nutrients. In addition, Israel’s SpaceIL organization was able to send a lander to the moon and achieved something that only 1 of 4 nations was able to do so, despite their population is less than 9 million people. The science, technology, and innovation required to accomplish a trip to the moon feels like it should take more than 9 million people. All of this goes to show that when as in Israel innovation is mandated and expected, rather than serving as a secondary suggestion like in the US, transformative ideas become reality.
Inventing Unique Technology Solutions And Opening New Social Innovation Digital Value Chains To Scale
Israel has always been on the side of cutting edge developments. Because of the nation’s focus on creating new technology solutions, rather than simply fixing up legacy systems, Israel has been able to supply the world with unique digital value chains. By doing this, regardless of the nation’s size, Israel has been able to secure a multitude of strategic investments from foreign nations, placing it front and center on the global frontier of innovation. Examples of Israeli technologies that changed the world include Firewall, developed in 1993 as the first malware protection software, and the M- Systems founded by Dov Moran, who invented USB flash drive (DiskOnKey) are some of the early advancements that we couldn’t imagine living without today. And on the front of biotechnologies, revolutionary companies like ReWalk, which enable the paralyzed to miraculously stand on their feet again and stroll down streets, or the invention of the flexible stent which saves hundreds of millions of lives per year.
Still, in the business of saving lives, groundbreaking AI company SparkBeyond has used its platform to increase doctors’ ability to detect colon cancer early based on historical medical data, lab tests, prescriptions, and doctor visits. The untold story of the digital transformation isn’t the volume, but the sheer complexity of data. SparkBeyond’s platform interrogates complex data for patterns, testing 4 million correlations per minute to discover insights, micro-segments, fraud rules, drivers, and automating feature engineering for intelligent decision support systems. Powering Fortune 500 and Global 2000 clients like ABInBev, PepsiCo, SEB, and beyond, unlocks >$10Bn in impact across 20+ sectors. “SparkBeyond was built to solve problems, and some problems are more urgent than others. It is up to the creative and entrepreneurial community to aim where it counts, harnessing human ingenuity to overcome the great challenges of our age” says Sagie Davidovich, the co-founder, and CEO of SparkBeyond.
Creating a more sustainable planet is also an area that Israel pioneered, with the invention of Watergen to “create fresh drinking-quality water from nothing but plain air” and the aforementioned drip irrigation system that enables flora to flourish in some of the driest environments on Earth. The case of Israel shows that regardless of the size of the nation, scaling up into a global phenomenon is possible when new social innovation digital value chains are created and presented to economies worldwide. This is a lesson that the United States should internalize and learn from its ally.
Geographic Concentration of Startups and Innovation
According to Forbes, the fact that Israel is such a “tight-knit” ecosystem where universities, startups, and the government work together, is a major contributor to success: “Another factor is the geographic concentration of institutions such as universities, multinationals, and startups. Michael Porter, a professor from Harvard Business School, has studied economic clusters such as vineyards in California and leather fashion in Italy. He argues that a critical mass of related organizations in a business environment allows each member to enjoy the benefits of scale without sacrificing its flexibility. Companies can better tap into talent pools, specialized information, shared infrastructure, and other players in the value chain. As a result, the cluster tends to have greater innovation, higher productivity, and quicker formation of new businesses.” Because of this unique community dynamic promulgated by Israel’s small size, Israel is able to actually take advantage of this, and leverage size in order to scale operations nationally and internationally.
Inspired by Startup Spirit and Chutzpah Philosophy
Chutzpah, or loosely defined as the quality of audacity, is an element that connects all Israelis. Chutzpah is an intangible force that drives Israelis to challenge one another, to question authority, and to take risks all in the name of innovation and progress. Hence, it serves as one of the key pillars of business success and is difficult to understand unless you immerse yourself in the culture. Chutzpah is a careful balance between straightforwardness and bluntness but simultaneously upholding a playful and relaxed spirit, all of which are guided by the direction of innovation. This attitude is perfectly reflected in the startup dynamic itself. The reason why Israeli startups are able to move quickly and efficiently is because of what goes on behind the scenes at work: there are little formalities, bureaucracy, or corporate hierarchy involved. Rather, the focus is on the unit and on team collaboration. Clearly, this model has worked for the Israeli’s for decades and should serve as an encouraging signal to the United States that it is necessary to undergo a paradigm shift in corporate culture in order to nurture idea making and entrepreneurship.
There is no secret sauce to Israel’s success as a startup nation. It is a careful combination of a people that are constantly creating and inventing ideas, an innovation-forward mindset, a deep-rooted understanding of the need to adopt novel technologies in order to survive and thrive, the right mixture of public and private support, and a united cultural framework that helps drive the nation’s pioneers. Although the US is not Israel, we can achieve similar success by learning from the country’s approach and implementing actionable initiatives that will prioritize the digital focus across industries. The time to do it is now. In the words of Theodor Herzl: “If you will it, it is no dream; and if you do not will it, a dream it is and a dream it will stay.”