Top 4 Learnings from Israeli Startup Ecosystem

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It’s been an active week in the Finnish startup and innovation scene – Stream Festival, Smart City Week, Mindtrek, KASVA – just to name a few. While being at the epicenter of all the action revolving around the topics of startups, businesses, tech and the future, Catapult had a few fruitful backstage discussions with investors and serial entrepreneurs from Israel. They flew to Tampere, Finland this week to share key insights on the startup ecosystem of Israel, and ultimately answer the question “How could a small nation, like Israel, has as per capita more startups, more VCs and more tech professionals than any other nation in the world?”

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Here is what we’ve learnt:

1. It’s about the culture. Technology will come.

A key factor of Israel’s startup innovation ecosystem is the strong collaborative work and interconnections among its people, which in return promotes exchange of ideas. The culture of sharing, whether it’s information or resources, has been one of the most fundamental principles of open innovation concept. Israeli startups elevate themselves by sharing success stories and also support fellow entrepreneurs by sharing failures and lessons learned. Learning from failures is an essential part of gaining experience, hence sharing it may as well help others.

Sharing? It also comes down to how companies position themselves in the eyes of the public and VCs. – Being humble is good, but being ballsy is even better when it comes to promoting your talent, showcasing your startup tech, leveraging the power of social media to let the world know about your ventures. It’s all about connecting to people and ideas, building strong networks, actively sharing your startup milestones. The network of people grows from army to school to neighborhoods, and many social circles overlap expanding to larger interconnected networks, wherein community connections easily become industry connections and vice versa. A strong sense of community also creates “pay it forward” culture.

The habit of discussing things – seems so basic at first sight – yet lacking in many cultures (especially in the North Europe). In Israel, it is quite normal to discuss new business ideas or projects over dinner with friends and family, which may transform into the first prototype next morning – things move forward. Fast. The culture also happens at a higher level – there are organizations in place that foster innovation in various industries. Like, for example, Israel Innovation Authority. Anya Eldan, the general manager of the startup division at Israel Innovation Authority, explained: “We’re a very small and multidisciplinary country. There is one degree of separation. You can reach anybody very quickly.”

2. Stay close to startups – Open Innovation.

Israeli startups have received €1.7 billion across more than 230 deals so far this year. And the funds come not only from VC firms, but also corporates. Israel Innovation Authority, already mentioned earlier, recently launched a program called Technological Labs Innovation, which encourages corporations to support startups in their respective fields. More and more corporates in Israel adopt the open innovation concept. And even though these corporates might invest in and eventually acquire startups, their main objective is integrate into Israel’s innovation ecosystem and get insights on the latest developments in tech field. It also allows corporates to discover startups and co-develop technologies that they can later offer to their customers. Head of communications for Microsoft’s accelerator program, Maya Grossman, describes, “Innovation is not easy. If you want to stay close to innovation, you need to stay close to startups.”

3. Kids are the future

.Israeli culture of openness, innovation, hard-work, transparency and determination is laid down already in childhood. At Stream Festival, Neve Gull, an Innovative Pedagogy Entrepreneur at EduVationIL pointed out a few things that the teachers integrate in 4th graders’ program to build the next generation of entrepreneurs, engineers and innovators. Even though, she stated that there is not much Finland can learn from Israeli educational system, there are a few things that do indeed foster the more collaborative and innovative mindset. Neve Gull describes, “We are detecting kids’ talents in 4th grade – whether they have skills in math or programming. We enhance and push the best students forward teaching them analytical skills and computer skills, so that later in life it will be easier for them to start programming. It starts early. We also build school assignments around the project work, which teaches young kids uncertainties, deadlines, goals, remote work, leadership, collaborative tools. It also stimulates their ability to see various solutions to a singular problem – knowing there is always more than one way.”

4. What happens without the money?

It wouldn’t be a complete discussion on the startup ecosystem if we didn’t cover the essence of VCs funds in Israel and how investors look at startups before flowing their cash into them. In all fairness, nothing happens without the money. But one of the Israeli investors on stage of Stream Festival posted a question, “What happens without the money? Can the startup have the capacity to lead the team, understand the market and the depth of technology? Are the founders – people with experience and exposure? If yes to all questions, my money is in it”. Finding a smarter solution by spending as little time and money as possible may as well be the main trait of the Israeli innovator. Once a VC sees the potential and capacity within a startup to achieve great results without yet any considerable investments, deliver outstanding tech, generate the first cash flow and have a strong team – money starts pouring in. Here is a snapshot of the private market landscape in Israel.  

Naturally we also covered the topics of knowledge transfer, unicorn exists and commercialization of university research – we leave these topics for the next series of insights about Startup Nation.

Meanwhile, a thought: change doesn’t happen overnight. And culture may as well be the hardest things to affect. But even though we cannot so swiftly adapt the best practices from Israeli mindset and cultural dogmas, we can surely start by integrating the open innovations concept. Which means working with startups, fostering innovations, and supporting emerging technologies.

Stay tuned for more industry insights and digital sneak peeks!

Yours, Catapult team.

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