How Has Israel Became The Start-up Nation

When a country is small, surrounded with hostile neighbors, with a narrow market, where every entrepreneur has to think how to sell its products abroad, it is a must to think globally, says Ori Sobovitz, OurCrowd in an interview in the “UpDate” Show hosted by Boycho Popov and Elena Kirilova.

Also, such small country has to have a well-developed army. In the Israeli army there are many different units for research and development, as well as very technological departments. There is also transfer of knowledge from the army to the industry. Today Israel is leader in soil salting in the world – can you imagine? And we are living in a desert.

“The Israeli government understand very early that it has to invest in human resources because the country does not have natural resources. This is the biggest resource that we have. Israel understands that it is our nature, and our strategic business plan.” – Sobovitz explained.


For the people who went to the technical departments of the army, the experience is critical. Think about how many places there are in the world where young people have a big budget, talented group near themselves, mission and task that usually is being defined as impossible. When they know that it is a life and death matter, they find out that they have to succeed. And they do everything to make things happen. Also, there the young people challenge the experienced once and their commanders by asking questions and suggest new and different solutions.

Israel spends more than any other country in the world development – it is 4,3% of GDP. However, the pure costs for research and development is only 0.6% which is the lowest amongst all OECD member states. These numbers show that the government knows how to capitalize its investments, but also, shows that it has to invest more.


Government investments in startups

The government today invests in start-ups or even in green-field research in any field: AI, cyber-security, agriculture technologies, etc. They invest up to 50% of the share of the start-ups, and if and when the company is successful in its technology, and then in its sales, the investors will get only those money they have previously invested, with no interest. If the start-up fails, then the loan is remitted. It means that the government takes a huge portion of the risk. A professor from the Jerusalem University has proven two times – in 2008, and in 2014 – that each shekel invested in start-ups returns from 5 to 8 times in the economy.

If a venture capitalist invests money in a start-up and it fails, the investor is sad. However, if the government invests money in a start-up that fails, the talent, the knowledge, and the experience is being kept for other projects.


Technological eco-system

The educational system in Israel is in top level. We are suffering with lack of engineers. We have one of the best research universities in the world. The model is simple: many companies acquire star-ups, and when it is successful they are not transferring it outside Israel but stay here and hire new people to develop their operations.

We have around 6,000 startups today and plenty of venture capitalists which along with the excellent academia, entrepreneurship, and human capital forms our unique ecosystem, sais Sobovitz. For example the startups gained USD 5,2 bn from investors.


More about OurCrowd, strategy investments you can find in the video (in Bulgarian dubbing).


Source: Interview at MeetUp on BloombergTV Bulgaria hosted by Boycho Popov