Israel has a unique startup ecosystem with an x-factor
Israel’s 75th Independence Day is an opportunity to reflect on the uniqueness of its technological ecosystem.
Four elements make an effective startup ecosystem. Israel has five, making the country the best place in the world to build tech companies, and as a result, has the highest number of startups per capita in the world, is a leader in “most attractive ecosystems for startups,” and in the number of acquisitions of global technology leaders.
The four elements are: entrepreneurs; investors; engineers and experience. The fifth is an Israel-specific foundation, a derivative of compulsory military service.
entrepreneurs
Israel has a proportionally greater number of entrepreneurs than any other country in the world, and one of the main reasons for this is the low fear of failure.
In the end, people will choose the path of entrepreneurship when their passion outweighs the sum of fear of failure plus opportunity cost. Therefore, reducing the fear of failure is the key to creating more startups.
How is it done? By regulation, for example, there are no penalties for failure, lower taxes on success, etc., and media coverage that portrays entrepreneurs as heroes will help achieve this goal.
investors
Ecosystem investments should be considered extra lucrative by investors, thanks to increased returns and decreased risk.
Increasing returns from the ecosystem can be achieved through the participation of government funds. For example, equalize programs for foreign investments and reduce risk by having system stability, a transparent tax system (ie no taxation of investors in the ecosystem) and a stable democracy.
engineers
You just need to have more engineers. Governments can easily increase the number of engineers by providing work visas to non-locals who come to work.
The United States is a pretty effective example, and Canada is even better.
It’s a matter of decision. The other alternative is simple, encouragement through taxation, for example, offering a 10-year discount for engineers who complete their studies. In the end, they will pay more accumulated taxes than others. So the investment will pay for itself.
experience
A very successful CEO was once asked, “How do you become so successful?” to which he replied, “Two words: right decisions,” which was immediately followed by the next question, “But how do you know how to make the right decisions?” He said, “One word: experience,” which led to the last question. “And how do you gain experience?” To which he replied: “Two words: wrong decisions.”
Entrepreneurial experience is critical to making fewer mistakes, which increases the likelihood of success.
This is also the reason why many entrepreneurs and business owners write books about their careers and the business world in general. This was my motivation for writing my book, “Fall in Love with the Problem, Not the Solution: An Entrepreneur’s Handbook,” to share my experience with readers and increase their chances of success.
The new generations benefit from the experiences of the previous ones. Waze, which I helped found, was Israel’s biggest outlet for a consumer app. Since then, many other Israeli companies have sold for more than a billion dollars, and before the 2022 crisis, there were about 70 unicorns in Israel. Its founders pay it back to the ecosystem by helping their peers and less experienced entrepreneurs.
Compulsory military service
The X-factor, the uniqueness of the Israeli ecosystem is compulsory military service.
At age 18, all Israelis (male and female) are conscripted for two to three years of compulsory service. As a result, they develop a set of behaviours, values and skills that will later serve them as entrepreneurs, such as a never-give-up attitude, teamwork, trusting colleagues, leadership and responsibility.
These skills simply make people better entrepreneurs and probably better professionals later in life. The most significant part of military service is that you join at a very young age and when you complete it, you are still very young. This allows people to take advantage of all the experience gained and use it in their personal and professional life.
Over the past three decades or so, Israel has nurtured generations of entrepreneurs based on these foundations, educating them to never give up, fear failure, providing tax and other incentives, building special funds to support tech startups and much more. and that’s what made Israel the most amazing place to build a startup.
For his 75th birthday, I wish that the conditions and state of mind of the government will allow it to continue to do so for many more decades.
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Israel has long been hailed as a hotbed for technological innovation, a trend that does not appear to be going away anytime soon given the most recent news of Waze founder Uri Levine’s unlocking of the secret behind Israel’s vibrant tech startup scene. Uri recently shared his insight with the online business-minded community, and the results have been illuminating – and electrifying.
Levine’s findings reveal that Israel has become a veritable powerhouse in the tech sector, with more than 5,000 startups and over $6 billion of venture capital investments in the last decade alone. In his own words, Levine unlocked the secret by discovering that, “building a successful startup in Israel is mostly a question of mastering the art of networking, not necessarily of technical excellence”.
Levine’s finding points to a larger trend among Israeli startups and entrepreneurs – teaming up with like-minded contacts that create a strong network of support and resources. This approach places emphasis on collaboration and community building, leading to a high rate of success and innovation.
Combined with other key factors like an open economy, access to capital, and a deep pool of engineering talent, this collaborative and supportive atmosphere looks set to continue to drive innovation, drive investment, and ultimately create a thriving tech landscape for years to come.
At Ikaroa, we are proud to be part of this thriving Israeli ecosystem and are keen to leverage the full potential and opportunities this affords us to continue to build our business and technology. Armed with Uri Levine’s insights and guidance, we now understand the essential elements that constitute the unique and optimally productive environment we are fortunate to be part of, and are truly inspired to provide the world with products and services that are not only innovative, but also build upon the trust and collaboration that form the bedrock of this ecosystem.
