Ayla Matalon, executive director of the MIT Enterprise Forum of Israel, on It Takes a Village: Startup Nation Israel Evolves. Presentation delivered at the Global Entrepreneurship Congress in Johannesburg, South Africa (March 2017).

1. It takes a Village
Start-up Nation Israel Evolves
Ayla M. Matalon
MIT Enterprise Forum of Israel
in cooperation with the Coller School of Management
Tel Aviv University

2. Entrepreneurial ImpactIntroduction
Enablers
History
Current
Summary

3. Innovation & Large Companies

4. Innovation & Large Companies

5. © B l u m b e r g C a p i t a l 2 0 1 6 | C o n f i d e n t i a l
Startup Nation Israel
Sources: EY Report, Geektime Annual Startup Report, PwC Exit Report, NASDAQ, Startup Nation Central
#1
Startups
Per Capita
89
companies on
NASDAQ
#1
Expenditures on
R&D per Capita
$4B
Funding raised in
2015
$11B
2015 exits and
M&A value
>50%
Exports derive from
Hi-Tech and Life
Sciences

6. Physical and
Social
Infrastructure

7. Entrepreneurship Enablers
Physical Infrastructure
• Education & Skilled Labor
• State Efficiency
• Adequate Legislation
• Government Support
• Financial Infrastructure
• Corruption

8. Academic Infrastructure
• Technion – Israel Institute of Technology (1912)
• The Hebrew University of Jerusalem (1925)
• Weizmann Institute of Science (1934)
Israel (1948)
+ Government Research Institutes

9. © B l u m b e r g C a p i t a l 2 0 1 6 | C o n f i d e n t i a l
Academic and Technical Leadership
#1
TAU has most VC
backed
entrepreneurs
outside US
(#9 Global)
4 Universities in
top 50 Shanghai
ranking for CS
Sources: Pitchbook, Wallstreet 24/7 special report, OECD, Shanghai Ranking, Worldbank 2010
#2
Among OECD in
post high-school
education
(46% vs average of 33%)

10. Engineers per 10,000 Employees (135)

11. Government Centers
of
Excellence:
+
* Crypto
* Image Processing
* Communications
* Speech Recognition
Tel Aviv voted 2nd most supportive place for start-ups WW
Startup Ecosystem Index’s Report
Supportive Infrastructure

12. My Market lies Over the Ocean
Israeli Entrepreneurs Look Overseas to their Market

13. Entrepreneurship Enablers
Social Infrastructure
• Flexibility and Adaptability (Uncertainty)
• Independent Thought
• Informal; Low Power Distance
• Tolerance for Failure

14. Entrepreneurship: OK to Fail?
• Most start-ups fail
Apple crushed Modu
yet…
a phoenix of startups rose

15. It is OK to Fail
Case Study: Singapore
Singapore’s launch to encourage entrepreneurship.
Ed Mlavsky, Entrepreneur & VC:
“I told the Singapore minister that his country would never be
able to build a technical entrepreneur-based VC industry due
to the prevailing culture of ‘fail once and you’re out forever’.
… Several years later, I was shown the new syllabus in high
schools in which ‘it’s OK to fail and start all over if you give it
your complete commitment’ was the message.”
Source: Dr. Ed Mlavsky, entrepreneur and VC , & the “father” of the BIRD Foundation.
Dr. Mlavsky played a major role in role in turning Israel to the Startup Nation it has become.

16. © B l u m b e r g C a p i t a l 2 0 1 6 | C o n f i d e n t i a l
The Israeli Culture
• “Chutzpah”
• OK to fail
• Immigrant culture
– flexible,
understand
adversity,
inventive
• Dream big
• Heavy
responsibilities at
early age
Source: Harvard Business Review, Erin Meyer

17. From Jaffa Oranges to Start-up Nation

18. Theodor Herzl: Co-Founder, Israel
“If you Will It, It is no Dream”

19. Until late 70’s
• First Global R&D Centers
• Start-up Seeds
• First investment bodies: Discount Investments, Elron
• BIRD Foundation
• Government regulated
• Agriculture, Tourism, Textile + Defense
• Gov’t R&D Support

20. The 80’s: more Start-ups
(+ … Start-up Nation Goes to School:
more Multinational R&D Centers)
+ a VC: Athena

21. In 1990 the Israeli Export Institute forecast
for the decade to come saw the export of
Oranges as the leading export sector

22. • Private sector bring 1.5 times gov investment
• Structured as Limited Partnerships
• 5 year buy back period exercised by 8 of 10
• No government involvement
• No special taxes
Birth of Israel VC industry
The Yozma Initiative

23. IT Sector Drives 1990’s Growth
• +16% per Annum (average)
• 5% GDP (1990) ->14% (2000)
• 1/3 GDP total Growth
• IT Exports Grew X6
• Reached $15B by 2000
• 1/3 total Exports

24. 24
Exports by technology intensity
Source: BOI
0
200
400
600
800
1000
1200
1400
1600
07/200001/200107/200101/200207/200201/200307/200301/200407/200401/200507/200501/200607/200601/200707/200701/200807/200801/200907/2009
High Technology Industries
Low Technology Industries
Medium-Low
Technology
Industries
Medium-High Technology Industries
$ millions

25. Industrial production by
technological intensity
Source: Makov report (2007), CBS (Israel 2008). EU average: Italy, Belgium, Denmark, Finland and France.
21 25 30 30
24
25
33 30
24
36
31
31
31
15
6 10
0
20
40
60
80
100
120
Israel USA Canada EU average
Low-Tech Medium-Low Tech
Medium-High Tech High-Tech

26. Multinationals @ Israel

27. Outsiders’ Views
Bill Gates, Founder & CEO (ret.), Microsoft
“Israelis have a high rate of computer literacy … Israel is a major
player in the high tech world… The quality of the people here is
quite fantastic. The level of techY integration puts Israel at the
cutting edge of world technology.”
Ray Stata, Co-Founder & Chair, Analog Devices
“Israelis are capable of Making the Impossible Possible”
Larry Ellison, Co-Founder & CEO, Oracle
"What's really different about Israel compared with other places
we do business is the number of partners we have in the
technology area. Israel has always had a wealth of intellectual
talent."

28. Questioning Authority:
PayPal acquired an Israeli startup named FraudSciences.
President Scott Thompson went to Tel Aviv to meet with the
FraudSciences team.
He told [Senor & Singer] about his first meeting with the staff:
Every question was penetrating. I actually started to get nervous
up there. I’d never before heard so many unconventional
observations — one after the other. Junior employees had no
inhibition about challenging how we had been doing things for
years. I’d never seen this kind of completely unvarnished,
unintimidated, and undistracted attitude. I found myself
thinking, “Who works for whom here? Did we just buy
FraudSciences, or did they buy us?”
Source: Dan Senor, Saul Singer, Start-up Nation: The Story of Israel's Economic Miracle: Published by Twelve (Reed Elsevier), 2009.

29. Made in Israel

30. Israel’s Entrepreneurial Infrastructure
IT TAKES A VILLAGE
Ayla Matalon
MIT Enterprise Forum of Israel