Few books can boast having such an impact as Startup Nation, as the title has since then become a frequent nickname when it comes to Israel and its reputed technology industry.
But beyond technology, Startup Nation: The Story of Israel’s Economic Miracle shows how the country and its population are entrepreneurial in their roots and mindsets.
Authors Dan Senor and Saul Singer take us on a journey of half-a-century of innovations and chutzpah.
At the base of the Startup Nation, an undisciplined military and a sense or urgency
“When you’ve been developing technology to find terrorists, finding a fraud in e-commerce is pretty simple”, and this is why the army has produced successful spin-off companies, acting as an incubator.
The renowned Unit 8200 for instance is highly sought after, and today its alumni include founders of ICQ (Israel first prominent exit at $500m+ by AOL) or cybersecurity startup Checkpoint and its 2 900 employees worldwide.
More importantly, the military hierarchical pyramid is “exceptionally narrow at its top”, understaffed in its senior levels, and more individual initiative is given at the lower ranks”. The ratio of senior officers to combat troops is only 1 to 9, versus 1 to 5 in the US.
Soldiers are also defined not by rank but by what they’re good at. The unit within the Israel Defence Force will be looked as an important criteria for recruitment, far more than the university attended. After some years, the networking power of the reserve also create business connections.
The culture of debriefing in Israeli startups also comes from the military: “the debrief is as important as the drill. Each exercise or real operation is treated like laboratory work. it’s usually ninety minutes, it’s with everybody. It’s very personal. It’s a very tough experience”.
Even after victory, the Israel Defence Forces engaged in far-reaching structural reforms based on the same process of rigorous debates, so the Israeli were able to innovate even after victory: “he flow of new ideas prevents the ossification of the military mind”.
But the military is not enough by itself.
Similarly small, threatened countries such as South Korea or Singapore have also compulsory, long national services. If both countries are first-world and technology-oriented, they still lack risk-taking and agility.
A short history of Israel’s economy
Israel’s first great leap happened between 1948 and 1970, with population tripling and per capita GDP quadrupling. It was a time of small entrepreneurs, and small, pragmatist government of Ben Gurion.
http://fr.slideshare.net/innovationiseverywhere/learning-tour-israel-dld-tel-aviv-cybersecurity-and-corporate-innovation
The main innovation was the kibbutz, who today with only 2% of the Israeli population still accounts for 12% of exports. Kibbutz are both “hyper democratic and hyper collective, being self-governed, and a symbol of Israel’s hardiness and informality”.
Between 1973 and 1983, Israel knows a “lost decade” with hyperinflation, lack of growth, and stagnating infrastructure. The political and military leadership are challenged.
In the 1990s and onwards, three factors will help Israel turn around and become a global innovation place:
- a new wave of immigration, in particular with 800,000 highly trained immigrants from the collapsed Soviet Union,
- a new war, which incredibly showed an increase of production from Israeli companies and normal attendance by employees,
- and a new VC industry, with both a US and Israeli government-back innovation grants (called BIRDs), and the creation of 24 incubators as well as ten venture funds where private investors would get a 1-on-1 match from the governments
Israeli are also strong on cross-discipline collaboration and technology transfers from the military to the civilian world.
This multitasking culture make job titles count less, and action count more. Many of the people we’ve met in Tel-Aviv insist on this “quick and dirty” mentality.
For instance, the founder of Given Imaging, initially a rocket scientist who worked on miniaturization, had the idea to implement micro-cameras in pills for medical purposes. The “PillCam” has sold more than a million units.
Other strengths: a strong purpose to build community, equal rights and roles for women in a region usually quite unbalanced
Challenges of the Startup Nation
In near and long future, Israel still faces a few tough challenges:
- Its dependency on exports and other markets expose it to global cycles and crisis. A less strong world economy usually means less money to invest, and the VC industry is key to make Israeli startups test, try and ramp-up
- The tech industry is doing well, but other sectors in the Israel economy have stagnated. The tech sector is funding the rest of the country.
- The two communities with strongest birth rates are not as well inserted in the innovation economy.
- On one hand, Jewish haredims are orthodox communities where women should not work, and men not fo to army and study the Torah.
- On the other hand, Israeli Arabs are culturally and economically isolated, with lower education levels.
- Together, those two communities accounted for 29% of Israel’s population in 2007, and they should account for 39% as soon as 2028.
If the book is clearly a marketing tool for Israel, with little criticism or other angles than the one of the “economic miracle”, it’s still amazing to read and to compare the country’s trajectory with its near neighbors, most if not all economical and political failures, as well as with similar in size countries such as the UAE and Dubai, Singapore or South Korea.