What India can learn from the Israel start-up ecosystem

20 Sep, 2017 / mvsblog

Israel is often known as the Start-up Nation. Through its vibrant ecosystem and human capital, Israel generates more startup companies than large, industrial nations like Japan, China, Korea, Canada, Germany and the UK. There are nearly 6,000 active start-ups, with 1,300 start-ups being founded every year. Apart from favorable government policies, they have a strong military-backed platform for research.

Corporate biggies such as Google, Apple and Facebook have their biggest R&D centers in Israel outside of the US. In fact, last year saw exits worth $9.2 billion. Compared to the US, Israel has attracted per capita over twice as much venture capital investment and 30 times more than all the members of the European Union combined. Israel is the second most innovative nation in the world, according to the World Economic Forum’s Global Competitiveness Report 2016-2017.

According to The Startup Ecosystem 2017 report compiled by the Startup Genome project, which tracked 55 start-up ecosystems across 28 countries, Israel’s capital Tel Aviv was ranked sixth in the world, whereas Bangalore was at No. 20 and the only Indian city mentioned in the list. There are many reasons why the Israeli ecosystem is ranked far superior to ours and we can learn a lot from them. Some of the best lessons are:

Do not penalize failure, learn from it: One of the basic cultural differences between India and Israel is how the latter view failure. In Israel, failure is not penalized. Entrepreneurs who created companies that failed are looked upon as people who gain from their experience. It is critical that people who fail are not looked down upon. As the country is located in a warzone, Israelis have developed a refuse to die mentality and they strive to progress forward no matter what. Persistence is key and they are never afraid to challenge the status quo.

Setting up incubators to nurture startups: The Israeli government has set up special purpose vehicles to give $600,000 risk-free loans to promising starts ups. If the companies fail, then they do not need to pay back the loan but if they succeed, they pay back a 3% annual royalty. The entrepreneurs want to give back to the ecosystem and 25 leading investors and high-tech entrepreneurs joined hands to set up a unique tech innovation hub called SOSA (South of Salame) in 2013. SOSA has created an exclusive global network that bridges the gap between supply and demand of corporate innovation. The open data policy, city-funded co-working spaces, free public wi-fi and strong relationships with global partners are also enabling factors for this kind of ecosystem.

Rich ecosystem: Tel Aviv has all the characteristics of a global tech ecosystem—Education, entrepreneurial spirit, technology, a global mindset, government support and R&D. Outside Silicon Valley, Israel has been able to build a good ecosystem where the government, corporates, the Israel Defense Forces (IDF), venture capital firms, and startups have aligned themselves. With over 140 scientists, technicians, and engineers per 10,000 employees, Israel boasts the highest number of scientists and technology professionals per capita in the world. The amount spent on R&D in relation to gross domestic product, and the percentage of Israelis engaged in scientific and technological activity, is the highest in the world.

Industry-academia collaboration: It is one of the foremost examples of the rich collaboration between companies, university researchers and entrepreneurs. Israel has led the world in technology transfer from universities to creating new enterprises. Technion, a science and technology research university, makes it mandatory for every student to take a Minor in Entrepreneurship, leading to the creation of 100 student-led businesses a year, with revenues exceeding $32 million. At Hebrew University, researchers are strongly encouraged to liaise with professionals from the industry to deal with real-life challenges and opportunities. That has considerably influenced academic research outcomes and products based on the university’s tech transfer have generated over $2 billion in annual sales.

India would do well to take a leaf out of Israel’s book of achieving global competitiveness and success through their start-ups and aim to take the leap on a global scale.

This article has appeared on Bizztor.

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