How can Israel: a country of only 8.4 million people, located in one of the most politically unstable regions of the world, and boasting few natural resources be at the epicenter of a thriving startup culture and a global hub of research and development? I was fortunate to visit Israel this May, with a view to examining exactly that, on an Australian Israel Chamber of Commerce Trade Mission co-led by Carol Schwartz and Elizabeth Proust. While Israel’s innovation reputation has experienced a similar meteoric rise to that of Silicon Valley in recent years, let me give some context for those less familiar with the country often referred to as the ‘Startup Nation,' as to why Israel is of such a global interest:
- Israel has the highest concentration of startups in the world;
- It is a major destination for venture capital, receiving twice as many investment dollars per person as even the United States – and 30 times as much as Europe or China;
- Over 60 Israeli companies are listed on the NASDAQ, which is more than all European companies combined; and
- They have done it at a pretty quick pace- Israel has accelerated from oranges being their largest export 20 years ago, to technology now being a $US50 billion GDP contributor.
There's so many contributing factors to this extraordinary growth story that this could become a War and Peace length long read if I'm not careful! So, I'm going to steer clear of discussing policy settings (like the role of Israel's immigration policy) and Israeli institutions like YOZMA, the IDF- for those interested in these aspects of Israel's journey, Startup Nation by Dan Senor and Paul Singer comprehensively covers them. However, I did want to distil some more informal observations from our trade mission that provide interesting food for thought for those of us wondering how Australia might be able to grab a slightly bigger slice of the innovation pie.
Here are my four big takeaways from our trade mission:
1) They start ‘em young- One of our speakers was a mother of a seven-year-old boy, who commented that parents in Israel a decade ago hoped that their children would grow up to be a lawyer or a doctor; now those same hopes are for their children to be entrepreneurs. Parents (through both school and extracurricular activities) are focused on finding ways to connect their children with programs that give them early entrepreneurial exposure: opportunities to take risks, and to learn about the machinations of solving commercially valuable problems and the day-to-day work involved in running a business. As this parent commented, “The new measure of success is: has your child had an exit by 21”.
This hits on the head of a conversation I continually find myself in with principals and educators across Australia: how important it is we create the conditions to allow children to “fail safe” within the schooling environment. Irrespective of whether they are destined to be an entrepreneur, in an increasingly non-linear and fluid career landscape, the skills of adaptiveness, inventiveness, and problem solving will be critical for all young people. This demands not only a shift in our pedagogy but, as several of the parents on our delegation commented, a shift in parenting. We need to ensure we are encouraging our young people to take on risk, despite the statistical reality that this’ll sometimes mean they don’t succeed, to help them build the capabilities that position them for a greater likelihood of success in their post-schooling life.
2) There's power in a coordinated national narrative- Everyone we met was singing from the same hymn sheet when it came to the ‘Startup Nation’ and the incredible success and international competitiveness of the Israeli tech scene… it was as though every Israeli we met was an unofficial ambassador. There’s a lot to be said for focusing your nation (not to mention foreign eyes, interests, and investors) on such a positive and compelling narrative… it has no doubt played a significant role in the materialisation of the nation’s innovation ambitions. While we may not have the same rampant global success story when it comes to technology and R&D, it did make you reflect on our tendency in Australia to downplay the individual and collective successes our country has had, and continues to produce. We should be proud of the phenomenal startup stories of companies like Atlassian, Canva, and Airtasker, and the R&D success stories of Caterpillar, Sirtex, and the cotton industry- just to name a few. The more visible these stories become, the more role models we will have to inspire others to cast out in pursuit of their own unique contribution.
3) If they bottle ‘Chutzpah,' we need to import it! Watching presentation after presentation from Israeli entrepreneurs (particularly the young women) you couldn’t help but being impressed by both how young they were and the incredible confidence they conducted themselves with. You walked away with the sense that it didn’t matter how many naysayers tried to talk them down, or how many setbacks they faced, they were going to find a way to make their vision a reality. The Yiddish words Israeli’s use for this attitude is ‘chutzpah’; the meaning of which is loosely akin to ‘audacity’. While Australian culture is known for cutting down our ‘tall poppies’, in Israel chutzpah is celebrated.
I couldn’t help but juxtapose these confident young Israelis, with focus group I’d had a week earlier with a group of Aussie teenagers; unanimously the topic they wanted the most time and focus to be devoted to was: ‘how do we build confidence?’ While anecdotal, their suggested focus is consistent with the litany of youth surveys and mental health studies we have seen come out over the past few years that suggest uncertainty, anxiety, and stress amongst our nation’s young people are dramatically rising. I probed a few of our speakers to try and get to the bottom of the apparent confidence chasm between the youth of our two nations, and one of the things they kept coming back to was the period of service young people did in the Israeli Defence Force. Their comment about the three compulsory years of military service was not intended to advocate for conscription but to draw attention to their country’s preparedness to put faith in their young people by giving them significant responsibility at an early age. Those in the elite squads of the Israeli Defence Force (the ranks of which have a high correlation with teams of successful Israeli start ups) are running enormous budgets and strategic military operations before they are out of their teens. It’s a crucible for confidence and resiliency development- not to mention a rapid-fire learning curve. While I'm not remotely advocating for conscription, it did make me think about how important it is that we create more vehicles through which to give young people responsibility: greater project based/entrepreneurial learning challenges through school and universities; an equivalent to the AYAD program to second young people into non-profits and start-up roles; and accelerated industry leadership structures or co-leadership models.
4) Industry and academia have to get into bed with one another- While Scientific American magazine ranked Australia as 12th in the world’s best 40 countries for science, our record for translating publicly funded research into commercial outcomes is poor. Australia ranks 33/33 in the OECD for businesses collaborating with universities and publicly funded research organisations. In Israel there wasn’t a meeting we had where the importance of the close, interdependent relationship between academia, government and industry wasn't talked about. According to the Bloomberg Innovation Index, Israel leads the world in the number of researchers per capita and is second in research and development.
One thing that was very apparent with Israeli universities is that they’re not particularly interested in the number of journal articles their faculty have published, they benchmark themselves on the number of patents filed and the commercialization of student and researcher IP. At Yissum, the technology transfer arm of Hebrew University, representatives proudly talked us through the investment and specialist capability the University had devoted towards commercialising its IP and the returns they’ve secured. Yissum has registered over 9,300 patents covering 2,600 inventions, has licensed out 800 technologies and has spun-off 110 companies. Successfully commercialised Hebrew University technologies currently generate over $2 Billion in annual sales.
Additionally, there seems to be less focus on graduates getting placed into jobs, and more interest in students creating their own. Technion, a science and technology research university north of Tel Aviv, has a strong mechanism to engage entrepreneurs: every student undertakes a mandatory Minor in Entrepreneurship. Technion transfers into the economy 100 student-led businesses a year, with revenues that exceed $US32 million. It left me thinking about the criticality of ensuring that as part of Australia’s higher ed reform conversations we’re thinking about changes to incentives, benchmarking and funding structures to support greater coordination between academia and industry.
Before I finish, it’d be remiss of me not to slightly recalibrate the glowing portrait I’ve painted of the Israeli economy... there is another side to the story. Only an estimated 15% of the population is either directly or indirectly engaged in the ‘start up nation’ ecosystem. While Australians are eager to tap into more of the incredible Israeli innovation, we shouldn’t lose sight of the fact that we’re fortunate to have strong existing industries (like education, mining and agriculture) that (despite their challenges) are strong contributors and solid employers. One social entrepreneur's observation was that the same amount of coordinated effort that catalysed Israeli innovation now needs to be put into ensuring Israel spreads the benefits of across more of its populace.
The Israel Trade Mission was an incredibly interesting and valuable learning experience- due in large part to the diversity of our 30-strong Australian delegation, and the incredible efforts of the Chamber and our two leaders, Carol and Elizabeth. My sincere thanks to everyone involved!