Turning the ‘Start Up Nation’ into the ‘Stay Here Nation’

Much has rightly been made of Israel’s ‘Start Up Nation’ phenomenon. With the world’s highest percentage of high tech production relative to GDP, our technological prowess is one of the single biggest factors in fuelling Israel’s robust economy. Our knowledge-based success is the envy of countries across the world and an achievement to be proud of. However, if we are to maintain and then develop our position as a global tech powerhouse, then our leaders must indeed lead.  Too many of our start-ups have sold out to foreign buyers and while nobody can blame ambitious Israeli entrepreneurs for cashing in, it is time to truly nurture some of our greatest Israeli business successes at home. The time has come to ensure that the ‘Start Up Nation’ becomes the ‘Stay Here Nation.’

There is any number of theories explaining how a country of just eight million became a technological superpower. Some point to the role of military intelligence units such as Unit 8200 as outstanding natural incubators for Israel’s leading engineering and technological talents. Indeed, the founders of leading Israeli IT companies including NICE, Check Point and ICQ all served in Unit 8200. Others argue that the high percentage of talented engineers and computing experts who immigrated to Israel from the former Soviet Union during the 1990s provided a timely boost to the country’s tech industry. Another factor may be our invariably uncertain geopolitical reality, which has produced a natural tendency to think outside the box and to take risks. Either way, our ‘start up’ success is no coincidence. By the same token, it is unlikely to continue to flourish if left to chance.    

The truth is that despite the fame and riches attributed to Israel’s tech revolution, precious few start-ups have developed into large Israeli companies. Understandably, Israeli innovations such as the USB flash-drive attract the attentions of industry leaders and so the Israeli company that developed it, M Systems, was sold to California-based San Disk. Other start-ups are swallowed up by global giants such as Intel and Google, who may have a big Israeli presence but yet their profits still end up elsewhere. Of course, hugely popular Israeli navigation app Waze could also reportedly soon succumb to this trend, with Google apparently poised to make a purchase. For many Israeli tech entrepreneurs, a swift exit and an accompanying hefty profit is understandably the aim. Perhaps this process is reflective of an Israeli tendency not to think too far beyond tomorrow, given the existential threats constantly hovering on the horizon. If short-term thinking is indeed an Israeli trait, it is one which does not serve us well.

Because Israeli tech companies rarely mature into major market leaders, the country is also deprived of significant employment potential. In 2011, high-tech accounted for just 8.4% of employees in Israel’s business sector, a number dwarfed by the industry’s impact on the economy as a whole. Work opportunities at start-ups are typically restricted to engineers or research and development jobs. The other non-technological roles needed to run any big company simply do not exist and in the current climate of short-termism, they appear unlikely to ever materialize.

Unless we are careful, our ‘start up’ success will come to represent a missed opportunity. It is up to our leaders to take a long-term perspective and encourage start-ups to grow and develop here in Israel. Instead of effectively developing intellectual property for the benefit of foreign business, we need local talent to blossom into companies which boost growth. This may be partly a question of money and finance. However, such is the reputation of Israel’s ‘start up’ scene that there should be no shortage of fund-led investment opportunities to help boost the chances of promising initiatives achieving sustainable corporate growth.

What is perhaps just as important is a change of mindset. Start-ups must know that the conditions for growth exist here in Israel and that the government is committed to their long-term success. This can take the form of financial or tax incentives to remain in Israel and to employ fellow Israelis. Such a pledge could also mean the simple provision of affordable, convenient and well-equipped spaces for expansion, such as the rapidly growing industrial park and commercial zone in my own city of Modi’in, where we are making a concerted attempt to offer an attractive home to small and large businesses alike. Indeed, we have dedicated 236 hectares to this effort, investing 200 million shekels along the way. No doubt there is a multitude of measures that our start-up CEOs would like to see implemented. It is up to our leaders to engage deeply with Israel’s brightest tech talent and to work out how to secure their future prosperity here at home.

Ultimately, this is a necessity if Israel is to retain its competitive economic edge. After all, it is surely only a matter of time until new economic giants such as China, through sheer weight of numbers if nothing else, begin to make major strides in technology and innovation. Instead of exporting our best assets to Silicon Valley, Israel’s Silicon Wadi must mature into the destination for talent from abroad. The first step to achieving this is for Israel to become the industry address not only for plucky local Davids but also for home-grown global Goliaths.