U.REKA Open House & Ideation Bootcamp has just concluded and 32 qualified teams joined classes and workshops with experts from different industries. They presented their business plan and application of Deep Tech in the search for the finalist to the next incubation phase. One highlight at the event is a talk on ‘The Roots of Israeli Ecosystem Success’ by Dagon Alony, Head of the Economic and Trade Office, Embassy of Israel to Thailand. Let’s see Israel’s idea and method in successfully building a “Startup Nation”.
Surviving economically by being a center for innovation.
Dagan began by sharing about the history of Israel that it became a new nation around 70 years ago. It is located in a desert area between Europe, Asia, and Africa. Its land is smaller than the northeastern region of Thailand with a population of only 8 million. Also, it is faced with complications with its neighboring countries. As challenges surround Israel coupled with its limited resources, Israel focused on developing the academic sector and determinedly building innovation in order to survive economically.
Israel began systematically and continuously investing in its human resources. This is clearly seen from the investment in the scientific research and innovation sector. In 2016, it is 4.3% of the GDP which is higher than in the USA, Finland, and Germany. Also, more investment comes from the private sector rather than the government.
Investments in scientific research and innovation are coupled with human resource development. Israel houses many engineering scholars, as seen from the engineers per capita. Therefore, there are enough human resources to support the development. This is paired with supportive policies by the government that is suitable for the overall process which we will discuss further.
The comprehensive support gives Israel the know-how for building innovation in that it became an important R&D hub for technologies of the world. Tech firms flock to invest their R&D in Israel. Examples are Intel and IBM that entered Israel since the 1970s. Also, Apple invested 400 million USD in Israel startups and established an R&D center in Israel, the only center outside of the USA.
The human resource development strategy to become the world hub for R&D proves to have significant economic outcomes. As a result, Israel’s GDP per capita ranks 20th in the world.
The government’s role and management practices to fulfill the ecosystem.
Dagan shares that although the proportion of Israel government’s investment in R&D is much smaller than the private sector, yet the solid foundation that drives the ecosystem for scientific research and startup stems from the government’s plan and policies.
The Israel tech ecosystem consists of 6 entities namely the government, academic sector, startups and incubator, private fund or VC, large local corporations, and multinational corporations (MNC), all of which are supported by the government in different aspects.
In every process, the Israel tech ecosystem involves the government, from pioneers to supporters. The government’s role in the ecosystem can be defined as follow:
- Support innovation from startups to solve the nation’s problems. The government will search for startups to join an in-house or joint accelerator program. The accelerator’s objective is to solve a specific social problem such as water resources management or public health. This adds value to innovation development while solving problems. Dagan gave an example of an accelerator program which searched for a startup in water management. This resulted in an innovation that provided sufficient water supply for the citizens. Aside from solving local issues, Israel supports startups to export innovation to solve problems of the world which brought back income for the country.
- Investing in innovation from the educational sector. The academic sector is the brains of the country. One problem is that innovation in the educational sector mostly doesn’t fit the market situation at the time while investors, who seek profit, don’t want to invest. The Israel government stepped in to invest, especially in Deep Tech. An example is the autonomous car technology which began as an idea by a university professor in 2010. The government invested and supported the startup which, today, was sold to Intel at 16 billion USD.
- Established TTO to convey technology from labs to businesses so that academics can continue the research. The government collaborated with leading universities to establish the Technology Transfer Organization or TTO. Their roles are to commercialize technologies from labs, register patents, and seek VC funding.
Today, there are 16 TTO in Israel, each one focus on different technologies relating to the universities’ expertise.
- A policy to invest with partnered VC. The Israel government has a great method to stimulate VC investments. The government will invest in a startup together with the VC by providing a closely equal sum. If the investment is successful, the VC can buyback stocks from the government to gain total management rights within 5 years. If unsuccessful, there is no need to repay the government.
- Tech department in the army. Israel requires an army in a context different from other countries. Conscription in Israel recruit both males and females, however, the government view that this age group’s capabilities have much room to develop. Therefore, education is provided while joining the army and the cream are recruited to join the technology department. Here, they can profoundly learn about technology, so they can take the knowledge and skill and become entrepreneurs in the future.
“The Cultural Ingredient” of Israel in becoming a Startup Nation.
A core element that makes Israel what it is today is the mindset that is sifted and melted into a culture. Dagan points out that although Israel is a leading nation for innovation, they clearly focus on people rather than technology or innovation. They view that technology, innovation, and products are problem-solving tools while innovation development seeks to solve human problems.
A reason why Israel startups are successful is they nurture a mindset that customers are a priority. Israeli see products as problem-solving tools for customers. This is the reason why the government encourages startups to solve local public issues, it is because they are actual problems.
Education in Israel teaches students to learn how to spin-off technology to innovation and, finally, to businesses.
“Israeli don’t think out of the box, they don’t’ have a box. This makes it easier to set a goal and spin-off.” - Dagan shares at the U.REKA Open House & Ideation Bootcamp.
Aside from acquiring experience, in the incubation process, the market situation, country policies, and business services are also important. These are necessities for startups that will grow globally. Also, trial and error are inevitable, entrepreneurs who have failed will know what to avoid and have more tolerance. The success factors are knowing what to avoid and endurance, they are the core attributes in Deep Tech development.
This is the overview of Dagan’s session that enlightened us on Israel’s path to innovation development, which led them to successfully become a ‘Startup Nation’. The session was greatly beneficial for U.REKA participants who are entering the Deep Tech innovation development process. Surely, U.REKA Open House still has more stories to share, follow Digital Ventures for more updates.