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Will Start-Up Nation ever grow up?

One of the problems of the being the “Start-up Nation” is that Israel has many small companies and has difficulties growing big companies.
General view of  Tel Aviv on December 27, 2010. (Abir Sultan/Flash 90)
General view of Tel Aviv on December 27, 2010. (Abir Sultan/Flash 90)

Israel is world renowned for being the “Start-up Nation” but for one of the industries’ most prestigious alumni it’s not enough just to revel in success; Yoav Chelouche firmly believes that the biggest challenge of the day is how to integrate Israel’s burgeoning high-tech sector into the wider economy.

Chelouche recently finished a three-year spell as Co-Chairman of Israel Advanced Technology Industries (IATI) – the largest umbrella organization in the country for the high tech and life science sectors – where he worked hard to try and promote this agenda.

“The consensus on the big issue facing the Israeli high-tech is how to grow our companies so they become international industry leaders. One of the problems of the being the “Start-up Nation” is that we have many small companies and we have difficulties to grow big companies. Of course not every company is suited to become an international giant, but we have many companies which could grow to become leaders in their markets.”

Yoav Chelouche speaking at an AlmaLinks event in New York
Yoav Chelouche speaking at an AlmaLinks event in New York

Chelouche has been in the forefront of the country’s technology industry for nearly 40 years and currently works as an investor with Aviv Venture Capital and has also been involved with several organisations – such as Appleseed and Ta’asiyeda – which seek to bring the use the success of the high-tech world to strengthen the rest of Israeli society. During his time with Scitex, Chelouche was heavily involved in creating ties with the Asian market and increasing his company’s market share worldwide.

In 2010 he was selected as one of ‘50 Alumni who Changed the World’ by French University INSEAD (where he graduated from in 1979 with an MBA in Business), and is a former President and CEO of Scitex Corporation, Israel’s flagship technology company for many years.

“When I was CEO of Scitex, we were the first Israeli company with operations all over the world but where the centre was in Israel. In addition we produced physical products and not only software. This is important; because when you build a physical product you create jobs outside the small circle of high-tech software developers and bring your success to the wider economy. As companies grow and succeed they can acquire more enterprises and create more jobs in Israel. This is true of Teva, Checkpoint, NICE and others.

“The way to get there is not from the direction of investment. The way is to change the index of excellence. In the past every Jewish mother dreamed of having one of her sons being a lawyer and one a doctor. But now things have changed and she is happy if her son works in high-tech. Start-ups are now the heroes of our culture and this means more and more companies are being created.

“In Israel we have created the situation where there is the world of high-tech and the rest of the economy. If you want to earn money you need to go to one of two places; somewhere with a strong union or to high-tech. The high-tech world is secluded today because there are more and more big companies busy in the field of software. If you are creating more software you are not creating more employment.

“Unfortunately high-tech is not generating a lot of employment outside of the industry itself. How do we make this island bigger? If the technology companies don’t use many services beyond catering, lawyers, real estate, but are also thirsty for manpower – what we need to do is increase the number of people employed in the high-tech industry itself, in fields like programming, mathematics and more.”

“So the big challenge is to grow the number of people who will join the tech world. The growing awareness that we are short of people has launched multiple programs targeting women, orthodox Jews, Arabs and creating opportunities for them in the world of tech. Sometimes this means making special arrangements in the workplace and sometimes it means supporting operations in places like Bnei Brak or Nazareth that do not demand significant travel to work. These early successes are beginning to create a major positive shift in society. High-tech provides about 10% of the jobs in Israel and we can grow that while creating a significant impact on wages and quality of employment.”

Despite being one of the youngest countries in the world, there are over 7,000 start-ups in Israel with 600-700 new ones being registered each year. Israel is among the three countries with the highest number of companies traded on the NASDAQ, plus more than 300 global international high-tech companies have a research and development centre located in Israel.

”We have a great model and we are amazing entrepreneurs, but now is the time to expand the horizons. It was one of the things I pushed most when I was chairman of IATI, I understood that in the world of high-tech we are very isolated from local industries.”

“Our high-tech journey started thanks to connections with world Jewry. Jews from America were among the first investors in risk capital in Israel. Wall Street people were the first to build the connections between the high-tech world here and in New York. Their financial and marketing knowledge met young and talented people who gained during their service in the army a tremendous amount of technical knowledge and leadership skills. Together with smart and forward looking Government support programs we began a journey which transformed the country.

“On the social side, entrepreneurs became the heroes of Israeli society. This is very important for the development of a creative society which encourages risk taking and accepts the fact that failure is part of the process. Success is never guaranteed and failure is a good, if undesired teacher. This is a unique phenomenon. In many countries failure carries a heavy social cost and it is difficult to start again after having failed once.

“The entrepreneurs of today are very sophisticated and smart. They know the whole world because they are brought up in an international world; it is much more open before them, thanks to the internet and globalisation. On one hand, it’s easier and cheaper to start a company in terms of cost of infrastructure; like hardware or software, the amount of money needed to start a company and get some technology and market validation is much lower than historical levels. The internet, cloud, open source software and sophisticated outsourcing capabilities have reduced the cost of entry. On the other hand the world runs at a much faster pace. It’s much more competitive and on every good idea that you come up with here, someone in China or Silicon Valley has already thought of it.

“Speaking of China. Our tech industry is busy directing its focus toward Asia. We are witnessing a wave of Chinese corporate visits, investments in venture funds and acquisitions of Israeli companies. That being said, the cases of success in China remain limited, the complexities of the market and the lack of respect to intellectual property results in significant difficulties. China remains a big challenge and the quest for successful business models continues.”

Points to consider: What does an entrepreneur need?
1. Courage to be bold. You need to be ready to take on yourself risks that may appear “unreasonable.”

2. You have to be able to overcome loneliness, starting a company can be a pretty lonely business. Teams are more likely to succeed.

3. Leadership skills, either charisma or technological leadership and an ability to attract after people. The most important thing is getting the first followers and believers. This is crucial in turning an idea to a project with momentum.


Yoav Chelouche is Managing Partner of Aviv Venture Capital and an advisor to AlmaLinks.

About the Author
Carmit Sapir Weitz is an Israeli journalist and writer for many national publications including Maariv. She is Media Director for AlmaLinks, working to bring new stories of the Start-up Nation to the world.
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