Have you wondered how a tiny nation of 7.1 million people, which is the same as the population of a mid-sized Asian city, surrounded from all sides by enemies that want it to be destroyed, where people live with a constant fear of war and violence, has managed to become the biggest rival to the Silicon Valley?
Yes, we are talking about Israel, the startup nation. Israel has no natural resources of its own. It is located in a tiny stretch of land in the Middle East, with no water and no oil. But what Israel has in plenty is a never ending supply of entrepreneurial talent.
Israel produces more startups than much bigger nations such as Japan, China, Korea, India, Canada, Australia and the UK. Indeed, it is only the Silicon Valley in California that can match the scale of Israeli entrepreneurship.
There were 1,400 new startups in Israel in 2015, which raised $3.58 billion. There were 69 Israeli startups that were acquired by top companies such as Apple, Intel and Google for a total of $5.41 billion.
The scale of Israeli entrepreneurship is unprecedented and hard to imagine. Israel has many promising startups that are valued at $1 billion or more, and several that look set to break the barrier, such as Fiverr.com and Moovit.
What explains the extraordinary success of Israeli startups? We attempt to arrive at an explanation.
#1: A strong international focus – What makes Israeli startups unique, from say, Indian or British startups is their international focus. None of the Israeli startups develop products for the local market. They use their own market as a launching pad with an aim of targeting the global market. Israel benefits greatly from immigration of skilled professionals from around the world, and Israeli companies are never short of skilled workers. This allows them to develop a strong global focus and expand to several parts of the world, especially to the U.S. and Europe.
#2: “Fail But Fail Fast” –Israelis have an ability to take major risks, which is not seen in any other culture in the world. This applies not just to the startup entrepreneurs, but also to the investors in these companies. There is a tolerance for failure and an entrepreneur is not branded as a loser for failing. The motto in Israel is to “fail but fail fast”. Many Israeli entrepreneurs succeed in their 5th or 6th attempts. Every failure is used by entrepreneurs as a learning experience; so that they don’t repeat the same mistakes the next time. One can attribute this attitude to the fact that life is in Israel is very uncertain, given that the country is targeted by terrorist attacks every now and then. So the people here are used to taking risks and retain their equanimity even in the face of failure.
#3: Just do it and get done with it – Unlike major corporations and large businesses in many countries, Israeli startups do not believe in wasting too much time over planning. When an entrepreneur finds an idea with a disruptive potential, they don’t waste too much time thinking about it and move on to the next stage. Investors are interested in the “big idea” and do not care if the business plan is not properly proofread. Speed is critical in the tech industry and success is achieved when one proceeds with alacrity and adapts to the latest market trends quickly.
#4: Networking – Israeli startups do not work alone in private, behind closed doors. Startup entrepreneurs share their knowledge and experience freely and are on friendly terms with their competitors. Everyone in Israel’s tech industry knows each other and respects each other. Networking is one of the reasons for Israel’s success. Anyone in Israel who has a great idea can get a meeting with a top investor arranged through a network of mutual friends.
#5: Pride – Pride is very important and people in Israel are very proud of their country. There is a desire to achieve success not just for themselves, but also for Israel. No country celebrates inventors and entrepreneurs like Israel does. So entrepreneurs feel like they are valued by their country and have a strong loyalty towards it, which ensures that the best talent remains in Israel, instead of migrating to the U.S. or other developed countries.