Israeli technology companies: What next for the start-up nation?
THE young must shout if they want to be heard. In a stone hangar in the old port of Jaffa, 30 entrepreneurs have five minutes each to present their start-up companies to a panel of digital luminaries and an audience that includes potential investors. Not everyone in the room is ready to shut up and listen, so the hopefuls must battle against the din. Feng-GUI explains how, by simulating human vision, it can tell advertisers and designers which areas of a web page are most likely to grab people’s attention. CopyV promises to send large files quickly and securely. With Fooducate, “a dietician in your pocket”, on your smartphone, you can scan bar codes in the supermarket and find out what’s really going into your trolley.
Israel’s legions of young technology firms clamour for attention and money. Rapid-pitch events like this one, at DLD Tel Aviv, a two-day conference in November, are common. More than 300 firms applied for a slot at DLD; 100 turned up; the lucky 30 were chosen by raffle. Yossi Vardi, a technology entrepreneur who has invested in 75 start-ups since 1996, says that he receives between three and eight approaches every day.
Dan Senor and Saul Singer called Israel “The Start-Up Nation” in a book of that name in 2009. The label has stuck because it fits. Everybody and his brother-in-law seems to be starting a company—with old schoolmates or army colleagues, in a spare room or the parental home. Starting a business is easier than ever, thanks to advances in information technology. Budding designers of smartphone apps can rent space when they need it on a remote server rather than buying huge amounts of computing power. “The internet has democratised the right to innovate,” says Mr Vardi.
Israelis innovate because they have to. The land is arid, so they excel at water and agricultural technology. They have little oil, so they furrow their brows to find alternatives. They are surrounded by enemies, so their military technology is superb and creates lucrative spin-offs, especially in communications. The relationships forged during military service foster frenetic networking in civilian life. A flood of immigrants in the 1990s gave national brainpower a mighty boost (see article). The results are the envy of almost everyone outside Silicon Valley.
Small country, big dreams
But even in Israel turning tech start-ups into big companies is difficult. For all the comparisons with Silicon Valley, Israel has not begotten a Hewlett-Packard, an Intel or a Google. Its best companies are often bought by American giants while still in their infancy. The biggest home-grown technology company is Teva, a drugmaker which is listed on NASDAQ, an American tech-oriented stockmarket, with a market capitalisation of $43 billion. In information technology the biggest is Check Point, a security specialist founded by veterans of Unit 8200, an elite army-intelligence group. Also on NASDAQ, on which Israel has more companies than any foreign country bar China, it is valued at $11 billion—no minnow, but no whale.
Very young firms have a good deal of support, which is getting stronger. Accelerators, in which entrepreneurs can shape their ideas and meet advisers and investors, are springing up: this week, for example, UpWest Labs, which intends to bring five to ten Israeli start-ups to Silicon Valley for ten-week stints, began its first programme. As well as meeting helpful people, the hopeful entrepreneurs receive $20,000 in seed money.
“There’s a plethora of opportunities at a very early stage to raise $20,000 or $100,000 to get a minimum viable product out there,” says Liat Aaronson, the executive director of the Zell Entrepreneurship Program, a scheme for final-year undergraduates at IDC Herzliya near Tel Aviv. The difficult bit is turning small firms into bigger ones.