How Israeli startups can help governments prepare for the future

On December 15-16 this year, the Jewish Confederation of Ukraine together with partners (Combat Anti-Semitism Movement, the Center for Jewish Impact, Euro-Asian Jewish Congress) held the 3rd Kyiv Jewish Forum. The theme of the new global challenges that the world is facing today has become the “golden thread” through all the discussions of the Forum.

In this column, I would like to share with the readers the ideas that were voiced during the panel discussion “Lessons From the ‘Startup Nation’ – A Celebration of Jewish Entrepreneurship” by Israel Tal Paz, Co-Founder & CEO, SeeTree; Eshchar Ben Shitrit, CEO, Redefine Meat; Inbal Arieli, Founder and Co-CEO, Synthesis and Nimrod Cohen, Co-Founder, Tel Aviv University Ventures

No longer a startup nation

The whole world knows Israel as a nation of startups. However, in 2020-2021, the landscape of Israeli technology companies has changed so significantly that experts suggest new terms – a nation of large companies – a scale-up nation, or a nation of unicorns (a technology company valued at over $1 billion). There are over 70 such companies in Israel today.

If a decade ago, the goal of most of the founders was to sell their startup to a technology giant, today more and more Israeli companies are growing and attracting investments on their own. Israel ranks third in the world after the United States and China in terms of the number of companies listed on the NASDAQ. And this is in absolute numbers! While not all of these companies will bring profit to investors in the long term, the growth and scaling of the Israeli tech industry will continue. This is inevitable, since scientific and technological progress leads to a constant increase in demand for solutions in the areas of cybersecurity, the “Internet of things”, new medical and agricultural technologies, etc.

“Skills for the Future” are at the heart of Israeli culture

As a businessman and venture investor, I have long wondered if the successful experience of Israeli tech companies can be adapted to other countries and industries. Many of the answers I found in Inbal Arieli's book “Chutzpah”, which reveals the secrets of Israeli entrepreneurial thinking. 

The news consists of two parts: “good” and “bad”. The “bad” piece of news is that there is a complex set of prerequisites at the heart of Israel’s unprecedented success. The key of which is culture and mentality. What world leaders now call “skills for the future” (the World Economic Forum has compiled a list of them at the end of 2020) are the qualities that are valued and nurtured in Jewish culture from childhood. Creativity, innovation, critical thinking, leadership, teamwork are developed here not only through special training programs or methods; these skills are instilled in children in every Israeli family. Therefore, Israel in this sense has privilege over other nations. And this is something that is really hard to recreate.

The state also plays an important role in the development of entrepreneurial thinking among young Israelis – boys and girls at the age of 18 receive a unique practical experience in the army, the service in which is obligatory. Only the former members of the special secret unit 8200 have created about 1,000 startups. In 2010, a group of the Unit 8200 alumni headed by Inbal Arieli founded Start-Up Nation Central – an organization which promotes development of start-ups based on the principles and practices of Israeli security services. 

It is widely believed in business that the best thing the state can do for an entrepreneur is not to interfere. This statement is not always true for Israel. The state has supported innovative businesses since the 1970s. In the 90s of the twentieth century, a startup ecosystem began to form as a result of the interaction of the state, business, science and education.

A perfect example of such a partnership is TAU Ventures, a venture capital fund founded by Tel Aviv University. The fund operates in line with the global trend of creating investment instruments based on the world's leading universities (MIT, Stanford, Berkeley). “It’s part of their reputation as a University, the branding of the University. It is also a tool for the development of new technologies, support for students, alumni and so on. But it’s not about being philanthropic. It’s a real business. It’s about making the best returns that we can to our investors,” says Nimrod Cohen, founder of the Tel Aviv University Venture Fund. Several of his previous projects have already become “unicorns” (companies such as YOTPO, Bringg). Several more companies that Nimrod Cohen has invested in are expected to reach a billion dollar valuation in the near future. However, the investor claims that the unicorn status is not unique in itself. It is unique that such companies are becoming the norm for Israel.

TAU Ventures focuses on investing in companies in the early stages, that is exactly when funds are most needed. “It is very important to support Israeli entrepreneurs and technology in the very early stage. Because without the early stage money there would be no “unicorns” later on. If you do not have babies, you don’t have lawyers, doctors and others, right?” Nimrod Cohen is convinced. Many government support programs focus specifically on securing early-stage funding as well.

Challenges as a catalyst for entrepreneurship

The unique and challenging history of the Jewish people also contributes to its success. Thanks to the difficult process of forming modern independent Israel, today this country unites a large number of goal-oriented talented people. A common feature for them, which is rarely found in other countries, is the willingness to overcome difficulties for the sake of a higher goal – building a successful state and society. Warren Buffett described this situation as “a disproportionately high amount of brains and energy.” 

Limited natural resources and persistent external threats promote entrepreneurship, rather than hinder it, as one might expect.Difficult conditions require unconventional solutions from the Israelis. As a result, Israel has been successfully confronting for many years the challenges that most of humanity is facing for the first time today or will only face in the near future: solving security problems, providing food, building effective health and education systems, and many others.

A new look at the “old” industries

Another component of success is interdisciplinary teams that bring together specialists from different fields, with different ways of thinking, experience and worldview. Thanks to this, new technologies are penetrating deeper and deeper into such “traditional” areas as agriculture, medicine and many others.

For example, the agrarian sector. Both in Ukraine and in Israel, it is one of the drivers of economic development. The difference between Israel and Ukraine is in the radically different level of natural resources: water and fertile land. Israel is successful in this sector primarily due to its business culture and innovations. 

Companies such as Redefine Meat, which produces meat from plant-based ingredients using 3D printing technologies, and SeeTree, which collects and analyzes data for smart farming, offer solutions that can save the growing population of the earth from the threat of future hunger. There are hundreds of such businesses in Israel – large, medium and small. There are dozens more of them that are currently being formed in numerous start-up incubators. Many with the support of the state, many with the support of more experienced entrepreneurs and investors.

Good news for the rest of the world

The good news is that “skills for the future” can and should be developed. Just as sport develops muscle skills, so the key competencies for success in today's unpredictable world can and should be developed by CEOs of companies, as well as leaders in the government and NGO sectors. 

How exactly can one train these skills? “It is important to understand that there is no one specific formula that fits everyone. It is important to take different elements and create optimum settings for them. It is important for entrepreneurs and innovators to create the dynamics, where you can ask a lot of questions, where you actually do not follow best practices. Because if you follow these best practices and if you follow existing knowledge and experience, your chances of disrupting, of creating something completely new, are very very little, says the author of the book “Chutzpah” Inbal Arieli. “Another example is creating multi-disciplinary teams, but not just as a cliché and slogan of diversity,” she adds.

Success can be achieved in “any place, where you take good people, you train them, you give them the values, you let them succeed and you let them also fail, and you help them throughout the way, you encourage this as you go forward. The examples of the State of Israel can be implemented all over the world,” said Co-Founder and SeeTree CEO Israel Tal Paz during our conversation. It sounds surprisingly simple, and only entrepreneurs and team leaders know how difficult it is to put it into practice.

On the other hand, from my own experience, I can say that there is no business without difficulties, and they should be treated as challenges that only spur you to overcome them. The more difficult the task, the more interesting it is, and the more valuable is the final result.And the result of the application of the Israeli experience is very promising. After all, if thousands of companies have succeeded, then the experience may very well be scalable.

Boris Lozhkin, President of the Jewish Confederation of Ukraine, founder of the Kyiv Jewish Forum, venture investor.