The Startup NationHow Innovation & Entrepreneurship Have Become Part of

the Mindset of Israelis

Shira Abel

• CEO & Lead Strategist, Hunter & Bard

‣ Award Winning Marketing & Branding Agency

• Previously Professor of Marketing for Startups at Tel Aviv/ Jaffa Academic College

• Mentor at: 500 Startups,

• Founding Mentor at: Google Campus TLV, Microsoft Ventures Accelerator TLV

• MBA, Kellogg School of Management

- Jason Cohen

“A true unfair advantage is something that cannot be easily copied or bought.”

Agenda

Policy Helps

History of Innovation

Mindset Matters

The Army Sets the

Foundation

The Ecosystem

How it Affects Exits – The Waze Story

The Future

Policy is not enough

A quick point

Mindset MattersIsraelis Think Different

- Guy Kawasaki

“Israel has five million people, six million entrepreneurs, and fifteen

million opinions. Singapore has five million people, six entrepreneurs, and

one opinion.”

Reward Status Achievement Self Expression Competition Altruism

Points

Levels

Challenges

Virtual Goods

Leaderboards

Gifting & Charity

Words – Your Mindset is Showingme·far·gen Hebrew pleasure derived by someone from another person's good fortune.

vs

scha·den·freu·de German pleasure derived by someone from another person's misfortune.

The Banana Analogy

We’re Connectors

Copyright © 2017 Startup Genome LLC. All Rights Reserved. 

“When we look at where startups report having the highest shares of customers

elsewhere, we see a mix of top-performing ecosystems and smaller places. Tel Aviv

ranks first, where one-third of startups sell to customers outside of the

immediate region.”

History of InnovationIsraelis have made a few neat things…

Population Growth History The population of Israel has steadily and consistently grown since the inception of the country in 1948

Source: Israeli Central Bureau of Statistics

GDP Growth History GDP has consistently increased over time

Source: World Bank

GDP/Cap Growth History GDP per Capita has also steadily increased over time

Source: World Bank

GDP Formation over Time As a testament to the strength of the Israeli economy, the business sector has steadily increased as the primary source

of GDP, while reliance on governmental production has continued to decrease over time, indicating a diversifying and growing economic base.

Source: Israeli Central Bureau of Statistics

Exports over Time Israeli industry has developed from small establishments that engaged primarily in agricultural products and textiles, to a

global, high-tech industry incorporating cutting-edge methods and advanced technologies.

Source: Israeli Central Bureau of Statistics

A History of Innovation

Israel has an extensive history of “game changing” innovations that have led to world-wide integration and use.

1960 1980 20001950 1970 1990 2010Cancer Screening, WEIZAC Early Computer, Amniocentesis

Blood Detoxification, UAV’s, 8088 Processor

Digital Printing, Firewall Security, Instant Messaging, Pillcam

Water Purification, Missile Defense, Mobile Eye, “God Particle”

Drip Irrigation, Desalinization

QuasiCrystals, Ubiquitin

Flash Drives, Centrino Chip, Breast Tumor Imaging

Source: Times of Israel

Policy HelpsGetting the Incentives Right, in the Right Order

Timing

According to Brad Feld it takes about 20 years for a startup ecosystem to grow and develop.

Innovation Office – The R&D Fund

Gives partial financing of 20 to 50 percent to “Approved R&D Programs”– programs lasting one or more years that will result in the development of a new product or in a significant improvement to an existing product. The development may also lead to a new industrial process or to a significant improvement in an existing industrial process. Support for the Beta Site stage of a project can also be accredited as part of the R&D expenditure and is recognized as an important and integral part of the R&D process. The annual budget of approximately NIS 1.5 Billion (~USD 375 Million) supports applied R&D for hundreds of companies.

Innovation Office – The R&D Fund

• Obligated to pay royalties when a project results in a commercially successful product.

• Royalties are used to fund future grants

• Royalty payments are typically a percentage of the total annual revenues derived from the sale of a developed product: 3% of revenues acquired during the first three years and 3.5 percent from the third year onward.

• Total royalty payments may not exceed the amount of the grant plus interest, except in cases involving the transfer of production rights abroad, which incur different payment terms.

Innovation Office – KIDMA Program (Cyber) Terms• Applications may be submitted for a period of up to two years

• Projects are entitled to the maximal 50 percent of the approved budget

• Young companies (up to 10 employees and within the first three years of existence) are additionally entitled to 25 percent of overhead costs

• Additional funding is available for advanced training in the cyber field, market research, marketing consulting, business plan preparation and participation in cyber technology events, up to NIS 125,000 (not to exceed NIS 25,000 per individual activity)

• Additional funding is available for returning resident scholars (Senior R&D) to be incorporated in the budget as a standard deviation of the maximum salary, up to NIS 35,000.

• An aggregate amount of at least 80% from the total expenses of the approved program, shall be granted for salaries of R&D personnel.

• Individual consulting from the Program Coordinator is available on behalf of the Chief Scientist for companies applying for the first time.

Project Centers of Multinational Corporations

Government financing will be one of the following (of lowest value):

• 40 percent of the Project Center’s operating expenses

• 50 percent of the accumulated investment funding given to the Israeli partner in the project

• Accumulated investment funding given to an Israeli partner in national preference zones or from traditional industry

The ArmyImagine coding 12 hours a day for 3 years

The Army Is The Center

• Israeli youth serve in the army (IDF) between three to five years

• The IDF is centered on C4I (command, control, communications, computers, and intelligence) systems

• Soldiers must become experts in IoT and other cutting-edge technologies

• Many students prepare themselves with honor subjects in high school, combined with an extended curriculum in the IDF computer training, and later in universities

• After the army / university these individuals tend to either start or join startups, often in information security, and as of late IoT

Fast Experience

“An IDF soldier serving and advancing in an IT unit will at the age of 20 typically control a budget and has operational responsibility equivalent to that of a mid-career IT executive twice his age employed by a US firm. The soldier will carry this experience when they enter the working world; either with a high-tech company developing solutions or as an IT professional where they will become a natural development partner for those creating new solutions.”

The EcosystemIsraelis Support Israelis

2017 Global Startup Ecosystem Ranking

Key Findings

Israeli Ecosystem - 2017

• 40 years, 250 Israeli companies have gone public on the Nasdaq, most of them based in Tel Aviv. Today, only China and the United States have more firms on the Nasdaq

• Expertise gleaned from the country’s elite military intelligence forces, combined with support from the government has helped raise $581 million in funding for cybersecurity in 2016

• 300 multinational R&D centers operating in Israel

Tel Aviv Ecosystem - 2017

• Tel Aviv held strong as one of the top startup ecosystems in the world, falling only one spot behind from #5 to #6 to make way for Beijing

• Tel Aviv is still in the top 10 in the Performance Index

• Tel Aviv is tied with Los Angeles for the highest percentage of startups who reported that the product they are developing is the first of its kind or in a completely new category, at 51%. The global average is 35%.

• Tel Aviv startups have the highest percentage of Foreign Customers outside their continent at 37%, indicating a strong ability to go global. 69% of startups in Tel Aviv immediately target the U.S. or U.K. markets, the 2nd highest rate in the world behind only Estonia.

Metrics

Jerusalem Ecosystem - 2017

• Mobileye, a company that creates software for driverless cars, raised $890 million in its US IPO, making it the largest Israeli IPO in the United States. In March 2017, Intel made a bold move by purchasing the Jerusalem-bred company for $15 billion.

• 65% of Jerusalem startups begin by targeting the U.S. or U.K

• Jerusalem startups have the 7th highest rate of Immigrant Founders in the world at 34%, interestingly, more than double the percentage of Tel Aviv (16%).

Metrics

2016

2016

A total of 75 tech startups were sold, raising $4.6 billion in total funding.

ExitsThe Waze Story

The Future

Your options according to Yoda.

Do.Do not.Try.

Thank you. Please Connect!

http://www.linkedin.com/in/shiraabel @shiraabel

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References & ReadsAll of the stock photos are taken from https://unsplash.com https://www.youtube.com/watch?v=ReRcHdeUG9Y http://www.youtube.com/watch?v=7QmCUDHpNzE http://www.youtube.com/watch?v=ZUG9qY http://www.economy.gov.il/Publications/Publications/DocLib/RnD_IncentivePrograms_English.pdf https://startupgenome.com/thank-you-enjoy-reading/ www.economy.giv.il/madan http://www.csoonline.com/article/3065168/internet/israel-government-spurs-innovation.html

@shiraabel

• - I've heard that the military plays a role in promoting entrepreneurship in Israel - Is that the case and how does this work?

• - Young people's (college grads) occupational preference. Do young adults desire to become entrepreneurs in Israel. One of the main impediments in East Asia is young people's reluctance to pursue risk and their preference for safe jobs (large businesses, civil service, etc.)

• - Your experience with Israeli entrepreneurs and ecosystem, and the difference between Silicon Valley

• - Your opinions on promoting entrepreneurship and innovation in Asia