It takes a VillageStart-up Nation Israel Evolves

Ayla M. MatalonMIT Enterprise Forum of Israel

in cooperation with the Coller School of ManagementTel Aviv University

  

 

Entrepreneurial ImpactIntroduction

Enablers

History

Current

Summary

Innovation & Large Companies

Innovation & Large Companies

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Startup Nation Israel

Sources: EY Report, Geektime Annual Startup Report, PwC Exit Report, NASDAQ, Startup Nation Central

#1 Startups

Per Capita

89companies on

NASDAQ

#1 Expenditures on R&D per Capita

$4BFunding raised

in 2015

$11B 2015 exits and

M&A value

>50% Exports derive

from Hi-Tech and Life Sciences

Physical and Social Infrastructure

Entrepreneurship Enablers

Academic Infrastructure

• Technion – Israel Institute of Technology (1912)

• The Hebrew University of Jerusalem (1925)

• Weizmann Institute of Science (1934)

Israel (1948)

+ Government Research Institutes

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Academic and Technical Leadership

#1 TAU has most VC

backed entrepreneurs

outside US (#9 Global)

4 Universities in top 50 Shanghai ranking for CS

Sources: Pitchbook, Wallstreet 24/7 special report, OECD, Shanghai Ranking, Worldbank 2010

#2 Among OECD in post high-school

education (46% vs average of 33%)

Engineers per 10,000 Employees (135)

Government Centers of Excellence:

+* Crypto* Image Processing* Communications* Speech Recognition

Tel Aviv voted 2nd most supportive place for start-ups WWStartup Ecosystem Index’s Report

Supportive Infrastructure

My Market lies Over the Ocean

Israeli Entrepreneurs Look Overseas to their Market

Entrepreneurship Enablers

Social Infrastructure

•Flexibility and Adaptability (Uncertainty)

•Independent Thought

•Informal; Low Power Distance

•Tolerance for Failure

Entrepreneurship: OK to Fail?

• Most start-ups fail

Apple crushed Modu

yet… a phoenix of startups rose

It is OK to FailCase Study: Singapore

Singapore’s launch to encourage entrepreneurship.

Ed Mlavsky, Entrepreneur & VC:

“I told the Singapore minister that his country would never be able to build a technical entrepreneur-based VC industry due to the prevailing culture of ‘fail once and you’re out forever’.

… Several years later, I was shown the new syllabus in high schools in which ‘it’s OK to fail and start all over if you give it your complete commitment’ was the message.”

Source: Dr. Ed Mlavsky, entrepreneur and VC , & the “father” of the BIRD Foundation.

Dr. Mlavsky played a major role in role in turning Israel to the Startup Nation it has become.

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The Israeli Culture• “Chutzpah”

• OK to fail

• Immigrant culture – flexible, understand adversity, inventive

• Dream big

• Heavy responsibilities at early age

Source: Harvard Business Review, Erin Meyer

From Jaffa Oranges to Start-up Nation

Theodor Herzl: Co-Founder, Israel

“If you Will It, It is no Dream”

Until late 70’s

• First Global R&D Centers

• Start-up Seeds

• First investment bodies: Discount Investments, Elron

• BIRD Foundation

• Government regulated• Agriculture, Tourism, Textile + Defense• Gov’t R&D Support

The 80’s: more Start-ups(+ … Start-up Nation Goes to School: more Multinational R&D Centers)

+ a VC: Athena

In 1990 the Israeli Export Institute forecast for the decade to come saw the export of Oranges as the leading

export sector

• Private sector bring 1.5 times gov investment

• Structured as Limited Partnerships

• 5 year buy back period exercised by 8 of 10

• No government involvement

• No special taxes

Birth of Israel VC industry

The Yozma Initiative

IT Sector Drives 1990’s Growth

• +16% per Annum (average)

• 5% GDP (1990) ->14% (2000) • 1/3 GDP total Growth

• IT Exports Grew X6

• Reached $15B by 2000

• 1/3 total Exports

24

Exports by technology Exports by technology intensityintensity

Source: BOI

0

200

400

600

800

1000

1200

1400

1600

High Technology Industries

Low Technology Industries

Medium-Low Technology Industries

Medium-High Technology Industries

$ millions

Industrial production by Industrial production by technological intensitytechnological intensity

Source: Makov report (2007), CBS (Israel 2008). EU average: Italy, Belgium, Denmark, Finland and France.

21 25 30 30

2425

33 30

24

36

31 3131

15 6 10

0

20

40

60

80

100

120

Israel USA Canada EU average

Low-Tech Medium-Low TechMedium-High Tech High-Tech

Multinationals @ Israel

Outsiders’ ViewsBill Gates, Founder & CEO (ret.), Microsoft “Israelis have a high rate of computer literacy … Israel is a major player in the high tech world… The quality of the people here is quite fantastic. The level of techY integration puts Israel at the cutting edge of world technology.”

Ray Stata, Co-Founder & Chair, Analog Devices“Israelis are capable of Making the Impossible Possible”

Larry Ellison, Co-Founder & CEO, Oracle"What's really different about Israel compared with other places we do business is the number of partners we have in the technology area. Israel has always had a wealth of intellectual talent."

Questioning Authority:

PayPal acquired an Israeli startup named FraudSciences. President Scott Thompson went to Tel Aviv to meet with the FraudSciences team. He told [Senor & Singer] about his first meeting with the staff: Every question was penetrating. I actually started to get nervous up there. I’d never before heard so many unconventional observations — one after the other. Junior employees had no inhibition about challenging how we had been doing things for years. I’d never seen this kind of completely unvarnished, unintimidated, and undistracted attitude. I found myself thinking, “Who works for whom here? Did we just buy FraudSciences, or did they buy us?”

Source: Dan Senor, Saul Singer, Start-up Nation: The Story of Israel's Economic Miracle: Published by Twelve (Reed Elsevier), 2009.

Made in Israel

Israel’s Entrepreneurial Infrastructure

IT TAKES A VILLAGE

Ayla Matalon

MIT Enterprise Forum of Israel