Israel’s high tech future

13 January 2012

Israel is far from Silicon Roundabout, but it has branded itself as the ‘Start-Up Country'.

Universities and science minister David Willetts argued in Our Hi-Tech Future, a recent speech, that "our greatest national assets", (universities, science facilities and researchers) are "the best single hope for making our way in the high-tech world of the future, creating jobs and opportunities and boosting high tech economic growth."

But perhaps the "best single hope" is to take a leaf out of the Israeli book by re-introducing conscription. The ethos fostered by compulsory military service in the middle eastern state is often quoted as a driving force behind that nation's high tech start-ups success.

Willetts cited a recent report showing that "Our research community is the most productive in the world. The UK is the clear leader among all eight comparator countries (Canada, China, France, Germany, Italy, Japan, UK, US) on citations per unit spend on Gross Expenditure on Research & Development."

But he admitted "that we are good at generating great ideas in our universities but less good at turning them into the products and businesses of the future."

Finance is one impediment preventing venture capitalists and business angels from backing hi-tech start-ups. New EU fund raising rules could go some way to help start-ups get access to cash.

But the failure to turn research into marketable start-ups and moves into new technology may be nothing to do with money and everything to do with culture.

Writing on the Willetts speech, blogger John Leach said: "The reality is many university professors and academics frown upon enterprising forays and suffocate new possibilities even before they see the light of day."

The solution could be the return of National Service. This is not a fantasy of retired colonels in their club or a popular newspaper rant calling for anti-hoodie measures.

For one of the reasons cited for the success of Israel in hi-tech start-ups is the culture fostered by its military with the compulsory enlistment of the majority of the population, both female and male.

Israel is far from Silicon Roundabout with a population lower than London's. And it has severe problems both within and without its borders. But it has branded itself as the Start-Up Country. Start-up Nation: The Story of Israel's Economic Miracle, the title of an influential and high-selling 2009 book by Dan Senor and Saul Singer.

Blogger and Intel employee Rita Holiday wrote after a trip to Israel that the country's problems drove start-ups: "What jumped out at me on my trip was the amount of innovation and creativity coming out of Israel. It reminded me of something I read once about start-up companies, that if they had too much funding and resources, it could hinder their chances for success. The inherent constraints in starting up a new business, could actually be a good thing."

Tanaka Mutakwa is a software developer and blogger. His blog points out Israel currently has almost 4,000 active technology start-ups - more than any other country outside the United States. He asks how "Israel-a country of 7.1 million people, only sixty years old, surrounded by enemies, in a constant state of war since its founding, with no natural resources-produces more start-up companies than large, peaceful, and stable nations like Japan, China, India, Korea, Canada, and the United Kingdom?"

Key factors for Israeli success, according to its fans.

Military service - This teaches teamwork, individual responsibility, the need for quick thinking and propels young people into adulthood rather than prolonging childhood. The army mixes people from widely different backgrounds but also has specialities covering areas such as information technology and engineering. Units also cover areas essential to defence such as computer security and cryptography.

No hierarchy - Israeli society may be divided by religion and race but not by social class. They tend to marry early and take on more responsibility.

Risk taking - the life and death training in the army is good experience for business risk. Risking bomb and bullets make it easier to accept the ups and downs of a start-up. And sticking around is not always an option. Jewish Israelis come with a folk memory of the Nazi Holocaust and a fear of the Cossacks during the Russian pogroms. So they are always prepared to move on quickly.

The Jewish personality-trait of "chutzpah," in which "from the age of zero, they are educated to challenge the obvious, ask questions, debate everything, and innovate."
Having clear enemies -.Adversity, such as being under attack, small, isolated, and lacking resources, have forced Israelis to be resourceful, to do more with less, to innovate, and to be global.
Immigration into Israel - contentious on the world stage but a source of educated labour.
Government intervention. The 1993 Yozmz programme channelled start-up funds into companies that needed them. These firms attracted foreign investors.
Social cohesion - Israelis say: "The social graph is very simple here.
Everybody knows everybody."

But not everyone is a fan of Israeli entrepreneurship. The gap between the start-up and the mature business ready to take in outside investment is often gaping, sometimes unbridgeable.

Statements such as "Israel has more companies listed on the NASDAQ than any other non-U.S. country" might say more about the perceived weaknesses of the Israeli stock market than about the Israeli company desire for a US listing.

Israeli or not, most start-ups fail. And in Israel, there are country-specific reasons that start-ups here fail (as most do). According to blogger Steve Duplessie:

"...the belief that a company in IT/Tech over the last 20 years can be truly run from Israel. They can't. I am an unabashed fan of all things Israel - but I'm a realist as well. You can make great things in Israel. You can sell to your army buddies in Israel. You can raise money in Israel. You can hire loyalists who will work like dogs and build stellar products in Israel. But you can't grow a big IT/Tech company of relevance in Israel (with very few notable exceptions, of course)."

A Jerusalem Post report says:

"Two decades since Israel's high technology industry took off, many start-up entrepreneurs have yet to develop the skills to position their products in the marketplace, devise effective business strategies and develop the management skills to build large and growing companies."

But whatever the economics, bringing back military service could go onto the agenda of the UK government's next big blue sky thinking fest.

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