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It's okay for start-ups to take risks and fail
By Ni Tao |
December 30, 2011, Friday
|
Print Edition
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Editor's note:
This is the second part of Ni Tao's interview with Saul Singer, co-author of "Start-Up Nation: The Story of Israel's Economic Miracle."
Q: Many Israelis start-ups have developed into notable Nasdaq-listed firms. But their size is relatively small. What holds them back?
A: This is something that bothers Israelis. They complain about it a lot. They say, why can't we grow big companies? In fact this was so common that Israelis have said for years that "where is our Nokia" because Nokia was an example of a big tech company coming from a small country. Israelis now don't say "where is our Nokia" because Nokia is now in trouble and not the model anymore.
I went to Finland to find someone there and ask them what they think of Israel, for the book. And someone says, oh Israel, you have many more start-ups than we do. Your start-ups get 10 times as much average investment as ours do and their turnover comes faster. I realize that in Israel we want Nokia, while in Finland they want more start-ups. In fact the envy for start-ups is almost everywhere. To me it's somewhat ironic that in Israel we think about how to grow big companies. So I tell Israelis that if you want more big companies, do more start-ups, because the next Facebook, or Microsoft, or Google is going to come from start-ups.
Let's say a start-up entrepreneur takes a company from zero to US$100 million. Then he'll think okay, very good, very successful, now do I go to take it into a billion-dollar company? That would mean marketing, sales, management, all these processes I'm not good at. It's a two-stage business, so the entrepreneurs say, would I rather grow this company or sell it and do another one? And often they chose the latter.
As the system matures, entrepreneurs gain more experience, and are ready to do more. So more big companies will naturally come into being in Israel, and I don't have a problem with keeping doing great start-ups. That's our comparative advantage in world economy. It's a very good niche to be in.
Q: Immigrants are the lifeblood Israel's economic growth. Yet in recent years the immigration has slowed. How has the government responded?
A: If you look at it 20 years from now, there won't be so many immigrants compared to now. And we also hope 20 years from now there will be peace, or even sooner, so that not every Israeli child will have to serve in the military. That hasn't happened yet. But someday it'll happen.
Q: China is formulating policies to create a climate favorable for innovation. What do you think of its efforts?
A: First it's important to understand that while there may not be a culture in China as friendly to innovation as in Israel, that's not necessarily an obstacle. Most of the US is not Silicon Valley. Silicon Valley has its own culture inside of the US. Countries like China can develop a culture inside a culture.
There can be an innovation economy concentrated on certain areas that have its own culture, which is separate from the main Chinese culture. I don't think it's an obstacle.
In most countries it's not the norm to be entrepreneurs, even in Israel, most people are not entrepreneurs. People think it's risky. The bigger obstacle is that people don't think it is okay to fail. You can create a culture in some part of China where it's okay to try and fail, and therefore to be an entrepreneur.
The Chinese government can do something to encourage government and venture capital investment. But the goal should be private investment. The government's role is just to stimulate private investment, not to replace it.
(To be continued)
This is the second part of Ni Tao's interview with Saul Singer, co-author of "Start-Up Nation: The Story of Israel's Economic Miracle."
Q: Many Israelis start-ups have developed into notable Nasdaq-listed firms. But their size is relatively small. What holds them back?
A: This is something that bothers Israelis. They complain about it a lot. They say, why can't we grow big companies? In fact this was so common that Israelis have said for years that "where is our Nokia" because Nokia was an example of a big tech company coming from a small country. Israelis now don't say "where is our Nokia" because Nokia is now in trouble and not the model anymore.
I went to Finland to find someone there and ask them what they think of Israel, for the book. And someone says, oh Israel, you have many more start-ups than we do. Your start-ups get 10 times as much average investment as ours do and their turnover comes faster. I realize that in Israel we want Nokia, while in Finland they want more start-ups. In fact the envy for start-ups is almost everywhere. To me it's somewhat ironic that in Israel we think about how to grow big companies. So I tell Israelis that if you want more big companies, do more start-ups, because the next Facebook, or Microsoft, or Google is going to come from start-ups.
Let's say a start-up entrepreneur takes a company from zero to US$100 million. Then he'll think okay, very good, very successful, now do I go to take it into a billion-dollar company? That would mean marketing, sales, management, all these processes I'm not good at. It's a two-stage business, so the entrepreneurs say, would I rather grow this company or sell it and do another one? And often they chose the latter.
As the system matures, entrepreneurs gain more experience, and are ready to do more. So more big companies will naturally come into being in Israel, and I don't have a problem with keeping doing great start-ups. That's our comparative advantage in world economy. It's a very good niche to be in.
Q: Immigrants are the lifeblood Israel's economic growth. Yet in recent years the immigration has slowed. How has the government responded?
A: If you look at it 20 years from now, there won't be so many immigrants compared to now. And we also hope 20 years from now there will be peace, or even sooner, so that not every Israeli child will have to serve in the military. That hasn't happened yet. But someday it'll happen.
Q: China is formulating policies to create a climate favorable for innovation. What do you think of its efforts?
A: First it's important to understand that while there may not be a culture in China as friendly to innovation as in Israel, that's not necessarily an obstacle. Most of the US is not Silicon Valley. Silicon Valley has its own culture inside of the US. Countries like China can develop a culture inside a culture.
There can be an innovation economy concentrated on certain areas that have its own culture, which is separate from the main Chinese culture. I don't think it's an obstacle.
In most countries it's not the norm to be entrepreneurs, even in Israel, most people are not entrepreneurs. People think it's risky. The bigger obstacle is that people don't think it is okay to fail. You can create a culture in some part of China where it's okay to try and fail, and therefore to be an entrepreneur.
The Chinese government can do something to encourage government and venture capital investment. But the goal should be private investment. The government's role is just to stimulate private investment, not to replace it.
(To be continued)
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