It was the first time I had ever travelled to Israel. My expectations were high. Everyone told me that Tel Aviv has one of the biggest start-up scenes in the world. And when I looked at the numbers, they told me the same: Israel reprents the largest concentration of startups per capita worldwide. Additionally Israel has the second largest concentration of technology related startups after California. There are 800 – 1400 new Israeli start-ups every year. Now I wanted to see and experience this unique scene for myself. I wanted to understand why there is so much innovative power in this rather small country.
Our trip started with one of the most important investors in Tel Aviv. We met him in his office on the 25th floor of a high-rise. In the course of the meeting it turned out that I would not only be enthusiastic about the view – I mean look at the picture! – but also about his explanations for Israel’s uniquness.
Worldwide focus of Israeli startups
First of all, with only 8,5 million inhabitants Israel doesn’t have a sustainable market. For many companies, this is a target group that is just too small. Secondly, Israel is geographically isolated and they are far away from all the other markets (Europe, US). That means if a startup wants to draw attention to themselves, they have to produce innovative, even dispruptive technologies and business models – and that’s what they are actually focusing on. Later I’ll tell you a little bit more about the companies I visited.
Military R&D units
Another very exciting difference between Israel and many other countries is that there are not only academic research centers, but also military research and development units. These units focus on security, IT security, cryptography, communication, and so on. That’s why the best of the best go to the technology sector, and ultimately this industry is very strong in Israel: 15% – 20% of deep technology came from Israel.
All Israelis are required to serve in the army. During this time strong bonds develop between people. With these information in mind, it was no longer surprising that many of the startups we met had some kind of military background.
Multinational R&D centers
In addition Israel’s expenditure on R&D as a percentage of its GDP is the highest in the world. And the number of multinational-corporation (MNC) R&D centers in Israel is among the world’s highest, and is the highest per capita. 1 There are approximately 400 multinational R&D centers which develop core products for the rest of the world.
The knowledge of these three unique characteristics helped me to better understand the background of many startups and the israeli startup scene.
Here are some articles inspired by my journey (more will follow):