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Israel's start-up culture encourages risks, innovation
By Ni Tao |
December 29, 2011, Thursday
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Print Edition
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Editor's note:
FOR a country that's blessed with few natural resources, Israel's economic success is spectacular. With one start-up for every 1,844 Israelis, Israel has more fledgling businesses per capita than any other nation.
Saul Singer, author and retired journalist from the Jerusalem Post, explains that phenomenon in the book "Start-Up Nation: The Story of Israel's Economic Miracle," which he wrote with Dan Senor.
He spoke to Shanghai Daily reporter Ni Tao on December 24 about how Israel has overcome adversity and become innovative, and also about what China, currently in the midst of a national quest for innovation, can learn from Israel's experience.
This is the first part of the interview.
Q: What is the dynamics for the strong innovative and entrepreneurial spirit in Israel?
A: There are many factors. First, Israel has more start-ups than any country outside the Silicon Valley. If you look at all of Europe together, it produces about 700 or 800 start-ups every year. Israel produces about 500 start-ups a year and these start-ups receive about 2.5 times as much venture capital per capita as the US and three times as much as Europe.
As for civilian research and development (R&D), Israel is the highest in the world, about 4.5 percent of GDP. The average for OECD developed countries is about 2.2 percent.
The question is why did this happen in Israel, that's what the book is about. We examine a number of factors. One factor is that Israel itself is a start-up. It shows that innovation is not mainly about ideas or creativity. There are other countries that have as many patents as Israel does per capita. But they don't have nearly as many start-ups. There must be something else beside ideas that are important for start-ups.
We argue that there are two big additional ingredients. Israel is dealing with all kinds of adversity. That is one part of our entrepreneurial spirit. Another is that we are a country of immigrants, who are naturally willing to take risks.
Q: Why do you mention in the book that Israeli society has a high degree of tolerance of failure in innovation?
A: That's very important because you aren't going to be entrepreneurs unless you are willing to fail. Most start-ups fail, in Israel, in Silicon Valley, everywhere. The failure rate is universally very high. So you have to have an attitude in society that it is okay to fail. Failure is part of the steps leading to success. And we definitely have that attitude in Israel. You fail, you don't hide that, you put that in your resume.
Q: What favorable policies do start-ups enjoy in Israel?
A: Compared to the rest of the economy in Israel, the high-tech economy is doing very well. The rest of the economy is doing okay, but nothing special.
That's because it's easier to open a start-up than open a restaurant. For restaurants, you have more taxes, regulation and bureaucracy. But for start-ups in Israel, the government has an almost hands-off attitude. The government also tries to support high tech.
The most important thing the government did was in the early 1990s. They realized that there were a lot of start-ups, but they weren't known. There was no venture capital, local or international.
To encourage international venture capital to come in, they invested money in partnership with a matching program. This was very successful in attracting both Israeli and international venture capital funds.
(To be continued)
FOR a country that's blessed with few natural resources, Israel's economic success is spectacular. With one start-up for every 1,844 Israelis, Israel has more fledgling businesses per capita than any other nation.
Saul Singer, author and retired journalist from the Jerusalem Post, explains that phenomenon in the book "Start-Up Nation: The Story of Israel's Economic Miracle," which he wrote with Dan Senor.
He spoke to Shanghai Daily reporter Ni Tao on December 24 about how Israel has overcome adversity and become innovative, and also about what China, currently in the midst of a national quest for innovation, can learn from Israel's experience.
This is the first part of the interview.
Q: What is the dynamics for the strong innovative and entrepreneurial spirit in Israel?
A: There are many factors. First, Israel has more start-ups than any country outside the Silicon Valley. If you look at all of Europe together, it produces about 700 or 800 start-ups every year. Israel produces about 500 start-ups a year and these start-ups receive about 2.5 times as much venture capital per capita as the US and three times as much as Europe.
As for civilian research and development (R&D), Israel is the highest in the world, about 4.5 percent of GDP. The average for OECD developed countries is about 2.2 percent.
The question is why did this happen in Israel, that's what the book is about. We examine a number of factors. One factor is that Israel itself is a start-up. It shows that innovation is not mainly about ideas or creativity. There are other countries that have as many patents as Israel does per capita. But they don't have nearly as many start-ups. There must be something else beside ideas that are important for start-ups.
We argue that there are two big additional ingredients. Israel is dealing with all kinds of adversity. That is one part of our entrepreneurial spirit. Another is that we are a country of immigrants, who are naturally willing to take risks.
Q: Why do you mention in the book that Israeli society has a high degree of tolerance of failure in innovation?
A: That's very important because you aren't going to be entrepreneurs unless you are willing to fail. Most start-ups fail, in Israel, in Silicon Valley, everywhere. The failure rate is universally very high. So you have to have an attitude in society that it is okay to fail. Failure is part of the steps leading to success. And we definitely have that attitude in Israel. You fail, you don't hide that, you put that in your resume.
Q: What favorable policies do start-ups enjoy in Israel?
A: Compared to the rest of the economy in Israel, the high-tech economy is doing very well. The rest of the economy is doing okay, but nothing special.
That's because it's easier to open a start-up than open a restaurant. For restaurants, you have more taxes, regulation and bureaucracy. But for start-ups in Israel, the government has an almost hands-off attitude. The government also tries to support high tech.
The most important thing the government did was in the early 1990s. They realized that there were a lot of start-ups, but they weren't known. There was no venture capital, local or international.
To encourage international venture capital to come in, they invested money in partnership with a matching program. This was very successful in attracting both Israeli and international venture capital funds.
(To be continued)
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