Learning from Israel's technology ecosystem's success
Israel’s success How did Israel create its ecosystem
Orna Berry, Ph.D.
Corporate Vice President and General Manager for
Israel Center of Excellence
• Israel is cited as the country with the
highest density of startups in the world..
• Attracting VC investment per capita at 2.5
times greater than the US
• Having more companies listed on
NASDAQ than the entire continent of
In 2010, Israel invested 4.3% of GDP in R&D,
compared with 3.9% by Finland, 3.6% by South Korea, and
over 3% by Sweden, Japan, Denmark, and Switzerland.
Science and technology is one of Israel’s most developed sectors.
The percentage of Israelis engaged in scientific and technological inquiry, and the
amount spent on research and development (R&D) in relation to gross domestic product
(GDP), is the highest in the world.
Israel's percentage of the total number of scientific articles published worldwide is
almost 10 times higher than its percentage of the world's population.
Israel boasts the highest number of scientists, technicians, and engineers per capita
in the world with 140 scientists, technicians, and engineers per 10,000 employees (In
comparison, the same is 85 per 10,000 in the United States and 83 per 10,000 in
Israeli scientists have contributed to the advancement of agriculture, computer sciences,
electronics, genetics, health care, optics, solar energy and various fields of engineering.
The Israeli ecosystem model
MoD culture and professional role
• MOD (military of defense) - Culture of service is mandatory for most
young Israelis the Israel Defense Forces
– Exerting responsibility in a relatively unhierarchical environment where
creativity and intelligence are highly valued
– Minimal guidance from the top, and are expected to improvise, even if this
means breaking some rules
.. Creates unique technological environment
Every year hundreds of technology soldiers of technology divisions go
through unique training programs focusing mainly on advanced security
These graduates later join the academia and continue to the industry as
founders, junior and senior executives.
Their alumni spreads across academia and the industry.
Tight connections between the army, industry and the academia lead to a
constant cycle of innovation.
Due to the country’s small size, Israeli start-ups target their market globally
rather than focus on one area or challenge of a specific market.
Government role is to establish the policies to
enable and support the ecosystem
In the late 1960s, the notions of high-tech and the “knowledge economy”
were not part of the lexicon.
The Israeli government made a crucial strategic decision:
- It would jump start and breed a science-based sector by providing broad
financial support for commercial R&D
- This policy would make up for market failures
The first manifestation of the new strategy was the creation of the Office of
the Chief Scientist in 1969
The Office of the Chief Scientist (OCS)
The key instrument is the Matching Grants Program
- This is administered by the Office of the Chief Scientist (OCS) at the
Ministry of Industry, Trade & Labor, the main government body in charge of
Firms submit proposals for R&D projects
The OCS reviews the applications according to set criteria
- The technological and commercial feasibility and merit
- The risks
- The potential of these projects for generating expertise
From the early 1990s, a series of novel programs were set up
The most important were:
- The Technological Incubators Program
- The Yozma Program for jump-starting the venture capital sector
- The Magnet Program for creating consortia of industry and academia
The Venture Capital Scene
Foreign VC investments, increase the opportunity for more multinationals
of local companies
The venture capital industry was born in the mid1980s and has rapidly developed since.
In 2012, 70 active venture capital funds, of which 14
are international VCs with Israeli offices
From 1993-2008, local VC raised almost $14B
Actual VC-backed investments reached a high of
2.7% of GDP in 2000
Government policies as well as the deep connection between
Government-MoD-Industry- Academy have managed to unleash the
potential embedded in Israel’s abundant human capital
- Trained young cadres of ICT specialists in the defense sector
- The immigration from the former Soviet Union and technologists’
massive recruiting into the high-tech industry