Lessons from Israel: how the country became the Startup Nation

Some call it a miracle. Others an enigma of the culture. But the statistics surrounding the amount of high-tech startups that are conceived in Israel is astounding. A small country, with roughly 7.6-million people, has approximately 4 800 startup companies and attracts far more venture capital per person than any other country in the world. Dubbed as the Startup Nation, Israel outweighs the United States in venture capital investment per person, totaling US$170 per person compared to US$70 per person in the US. Not too bad for a country that was established 65 years ago.

Some examples of well-known startup companies that have originated in Israel include Waze, a mapping company that was recently acquired by Google; iOnRoad, a mobile app that warns drivers when they are getting too close to the car in front of them; and Conduit, a community toolbar that has received international attention.

A country that breeds one of the most concentrated centers of innovation also houses large, established companies like Teva, a drugmaker listed on NASDAQ with a market capitalization of US$43-billion and Check Point, founded by an army intelligence group, that is now valued at US$11-billion.

So what makes Israel a base to nurture the creativity, innovation, and risk that comes with starting a company?

The military: In Israel, most citizens join the army prior to entering college. In the military, it is common to be an expert in a technology at an early age since technology is a key component in military warfare and military communications. There is also an environment and culture in the army that encourages entrepreneurship and leadership. After leaving the army, a lot of young soldiers know that they want to start a company and solve the world’s problems through technological solutions. They just have to figure out what problem to solve.

Universities: Aside from government incentive, Israel also has some of the best universities in the world that focus on technology, such as the Technion in Haifa. The universities are, in a sense, a playground for entrepreneurs to meet others with similar interests who may later go into business together.

Government resources: The Israeli government encourages young entrepreneurs to take the risk of beginning a startup company by providing early-stage funding. The government also goes to great lengths to provide support to young entrepreneurs by introducing companies to investors, creating partnerships and programs that can provide support for young companies.

Mentors: Since the first generation of innovators are now in their retirement phase, they are offering both financial support and mentorship to the leaders of the next generation. The retiring business leaders are both acting as investors in these high-tech startups and are providing strategic counsel on how to develop a business model and go to market successfully.

One of the strengths and weaknesses of Israeli startup companies is that they often develop a startup and plan to exit early on making a nice chunk of change but never fully develop the company into a large corporation. Everyone wants to be their own boss; however, for major economic growth, employees are necessary.

Perhaps another reason disruptive technology has been emerging out of Israel is that the first settlers of the country had limited resources, pioneering a land that was primarily desert. So whether in agriculture, technology, or business, Israel is a land filled with pioneering minds and entrepreneurs, as this graphic by Mapped in Israel shows.

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This guest post by Visualead co-founder Uriel Peled originally appeared on Tech in Asia, a Burn Media publishing partner. Image: Michael Alvarez-Pereyre / Gvahim via Flickr.