The Start-up Nation – Insights from Israel’s Innovation Hub

by Feb 18, 2020

Innovation in Israel is thriving – this small country is one of the world’s leading start-up nations and most people don’t even know it.

My trip to Tel Aviv in December of last year was both insightful and highly informative in terms of understanding the magnitude at which creativity, innovation and start-up culture is thriving in Israel. I’d like to share with you some information regarding Israel’s booming innovation eco-system, while also providing you with some insight into Israel’s cultural and geographical context. 

INNOVATION IN ISRAEL – Today’s Start-up Scene

Israel, also known as the ‘Start-up Nation’, is a leading innovation and entrepreneurship powerhouse that is giving the likes of Silicon Valley, Austin, New York, Beijing and Singapore a significant run for their money. The start-up nation has been deemed the fourth most start-up-friendly country, only just trailing behind the United States, the United Kingdom, and Canada. Although it is a small country made up of a little over 8 million people, Israel is fostering a flourishing eco-system of both invention and innovation.

As a result of the prosperous innovation landscape in Israel, large corporates have set up subsidiaries with the intent of capturing the IP that is birthed in Israel. This is completed by either buying start-ups themselves or investing in start-up companies. For example, US retail giant Walmart recently acquired the Israeli start-up Aspectiva, whose focus is using AI technology to interpret consumer trends and opinions from the web in order for companies to create a better shopping experience.

As a result of the two aforementioned synergies, there are a multitude of Israeli start-ups beginning to successfully go public in the US. An example of this is Israeli cybersecurity startup Armis being acquired by US-based Venture Capital (VC) firm Insight Partners, the deal valuing the start-up at $1.1 billion US dollars with the start-up setting up shop in Palo Alto. Significant funding is coming from global VC groups and corporate investors resulting in a strong acceleration of scale.

In addition to this, I believe there are two interesting factors that should be discussed in relation to Israel’s entrepreneurial success; Israeli culture as well as Israel’s physical geography.

Israeli culture & ENTREPRENEURSHIP VALUES ARE ALIGNED

Tenacity & Chutzpah: One of the reasons for Israel’s booming entrepreneurial scene, is due to the alignment of Israeli cultural values and the success criteria for entrepreneurs. It can be said that Israelis are tenacious, forthright and are constantly selling their ideas and opinions.

In Israel, there is a concept called the spirit of ‘chutzpah’ which ultimately is related to the highly important values of audacity and bravery. If you haven’t already, I highly recommend reading Dan and Saul Singer’s ‘Start-up Nation’. Below is a quote from the book that describes Israeli assertiveness and the spirit of ‘chutzpah’.

“Somewhere along the way – either at home, in school, or in the army – Israelis learn that assertiveness is the norm, reticence something that risks your being left behind.”

Assertiveness: Another value that should be mentioned is that Israelis do not stand on ceremony. If you were to wait for the bus here in Sydney, there would be an orderly queue to get on. However, this would not be the case in Israel, the Israeli forthrightly spirit motivating them to simply get on the bus and be the first on to receive a seat.

These cultural values no doubt, are extremely well-aligned with the entrepreneurial spirit and values, as well as with the culture that lives within other innovation hubs around the world such as Silicon Valley.

Israel’s geography ALLOWS INNOVATION TO THRIVE

Surrounded by enemies & desert: The geographical location of Israel should be taken into account when considering the reasons for Israel’s innovation success stories. Firstly, the nation itself is surrounded by enemies therefore meaning Israel had a burning platform. Secondly, Israel’s desert landscape environment has drastically influenced the need for innovation, particularly in terms of agriculture.

Innovation in all facets: In order to stay ahead of the global innovation race, Israel has had to have a clear, strong focus in multiple areas. These areas include agriculture and innovation, city innovation defence innovation, banking and finance, as well as innovation in healthcare. The country has had significant breakthroughs in almost every one of these verticals, becoming visible to large corporates who have then looked to take those innovations and commercialise them outside of Israel.

Some of my favourite breakthrough start-ups and innovations to come out of Israel can be found below.

3 KEY INNOVATIONS OUT OF ISRAEL

1. MOBILEYE

In 2017, Intel found itself to be no match against the likes of Google, Apple and Tesla in terms of the self-driving car space. So, the semiconductor giant managed to acquire Mobileye, the company now valued at $15.3 billion.

Mobileye is a Jerusalem-based company that develops vision-based advanced driver-assistance systems. This highly elaborate technology ultimately powering the autonomous vehicles of tomorrow.

Intel’s presence in Israel is immense, the organisation building a 135,000-square metre campus for Mobileye that has employed 2,500 people in Jerusalem.

2. SODASTREAM

In 2014, Israeli carbonated beverage manufacturer SodaStream was struggling to increase sales and profit due to consumer awareness surrounding the health effects of drinking soft drinks. However, CEO Daniel Birnbaum decided to re-think the company’s flavour offerings while emphasising the environmental importance of using the brand’s reusable bottles. This combined with their new celebrity ambassador, Scarlett Johansson, allowed the company to sky-rocket – so much so that PepsiCo decided to acquire the company in 2018, the deal being valued at $3.2 billion.

3. WAZE

Waze is a real-time, turn-by-turn GPS navigation software app that is updated accordingly with real-time traffic maps and road hazards, helping commuters lessen the amount of time they are on the road.

One of the biggest acquisitions in Israeli history, Google decided to buy Waze in 2013, the company now being valued at $1.1 billion. However, rather than fully integrating Waze into their existing navigational applications, Google decided to maintain Waze as a separate brand with their headquarters still remaining in Israel. Nonetheless, Google utilised Waze’s data in order to make their Google Maps software smarter.

Jeffrey Tobias

About Jeffrey Tobias

Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well-known startups.

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Managing Director, The Strategy Group

Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well known startups. Jeffrey’s corporate background includes leading global innovation strategy at Cisco, working with large corporates such as Adobe, Westpac, Telstra, Woolworths, and Perpetual.

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