Start-Up Nation I: The IDF

Doron, our classmate and instructor

We’re back from Israel after an intense week of classes, company visits, and group exercises. We connected the lessons of “Start-Up Nation” to the realities of the Israeli start-up ecosystem and learned even more about what makes these ventures so special. In each of the next three posts, we’ll explore an aspect of the book and its relevance in present day Israeli start-up culture. We’ll then connect those aspects to individual company visits. In our last post, we’ll examine the start-up nation as it stands today – a decade after the publishing of the original book – and hopefully make some informed predictions about what lies ahead.

The Israeli Defense Forces (IDF)

Featured prominently in the book, omnipresent in daily Israeli life, and mentioned at nearly every company visit – it would be impossible to discuss the start-up nation without discussing the IDF. Israel’s mandatory conscription (3 years for men, 2 years for women) is an incredibly formative experience for so many who will go on to become start-up founders.

In most of the world, an individual can travel through life without meaningfully engaging with people outside of their social strata. While of course minor interactions are inevitable, this is likely true when considering deep, sustained interactions over a period of time.

IDF units, however, select individuals on the bases of merit and ability – not family background. This meritocratic staffing system, combined with mandatory conscription, ultimately leads to a relative lack of social hierarchies – as are found elsewhere in the world.

This is furthered by the lack of hierarchy within the IDF. Young soldiers are given leadership positions early and are free to challenge the orders of their commanding officers. Israel realized early on that it could not afford to let its military get bogged down in unnecessary formalities and bureaucracy – so it simply did away with them. As a result, IDF soldiers aren’t trained to simply accept things as they are given – it’s paramount that ideas are tested, and alternatives considered.

As it turns out, this mental framework is quite useful when considering innovation in business. Inability to see past the status quo and formalized rules of society are some of the most common barriers to ideation in business. Israel didn’t set out to create super-innovators in business – rather, it has been a naturally occurring byproduct of the IDF.

Beyond flat hierarchies and a knack for innovation, the IDF also builds the mental toughness necessary to succeed as an entrepreneur. We got a taste of just how much mental toughness is required in the IDF – as we underwent an afternoon of training (edit: light training) with former officers. Running with stretchers on a hot Israeli beach is no easy task – and we weren’t even in uniform. We can only imagine what boot camp would actually feel like.

Running stretchers full of sandbags down the beach in Herzliya

SpacePharma and Zirra

Challenging the status quo can be simple or can really stretch your mind of what is possible. For the latter, two company visits stand out in particular.

Yossi Yamin at SpacePharma has a vision of democratizing access to space. More specifically, he aims to expand access to research and development opportunities in orbit for scientists in a variety of industry. As it turns out, the microgravity conditions of space can have curious and unexpected results in the fields of pharmaceuticals and biochemistry. SpacePharma provides a vehicle through which a multitude of compounds can be launched into space as one package – allowing the various compounds (and their respective researchers) to share the cost burden of accessing orbit.

Examining a model of the SpacePharma boxes sent into orbit

Moshit Yaffe of Zirra, on the other hand, has her eyes set on Wall Street. A lawyer and former investment banker, Moshit has led Zirra as it pioneers AI-driven data analysis of company data shared across the internet. Rather than relying on technical financial data, Zirra will scrape the web for press releases, job postings, and other text-based data sources that can be fed into an algorithm that ultimately renders a buy or sell judgement. Initial results indicate that Zirra is onto something, with a sample portfolio outperforming the S&P 500 over the past 2 years.

Next Time

In our next post, we’ll examine civilian life in Israel and the socio-cultural forces that help drive a successful community of ventures. Check back soon!

Casey Buckley is a 2020 MBA Candidate at Columbia Business School

A Closer Look at Start-up Nation: Prologue

The author’s copy of the text (feat. half a pad of mini post-its)

Fifty MBA students from Columbia and Interdisciplinary Center (IDC) Herzliya met up tonight in Tel Aviv to kick off a week-long intensive course, “A Closer Look at Start-up Nation”. Inspired by Dan Senor and Saul Singer’s 2009 book, “Start-up Nation: The Story of Israel’s Economic Miracle”, the 5-day course will introduce students to individuals from all areas of Israel’s innovation ecosystem – from start-ups and research and development (R&D) divisions of multinational firms to venture capitalists (VCs) and business-focused non-profits. We hope to take away valuable learnings about the genesis of Israel’s start-up culture, how to work with Israel’s high-tech industry, and – more broadly – how a cluster of factors can lead to innovation-rich geographies such as “Silicon Wadi” (the Israeli “Silicon Valley”).

Israel leads the world in per capita R&D spending – benefitting from both the R&D divisions of large multinationals such as Intel, Google, and Microsoft as well as a high concentration of start-ups. Outside Silicon Valley, Israel claims the top spot in per capita start-ups and is also the world leader in per capita VC investments. Not confined to early-stage ventures alone, Israel has more companies listed on Nasdaq than Korea, India, and Japan combined.

The book, for those who have not had the chance to read it, does a wonderful job of weaving together the aspects of Israel’s history and sociopolitical structures that contribute to this innovation-rich environment. As an example, the book explores the non-hierarchical nature of Israeli society and how a willingness to challenge the status quo leads to more innovative thought and design. Mandatory conscription in the Israeli Defense Forces (IDF) serves to enshrine egalitarianism as a societal value and instills a mission-driven culture amongst citizens. Lastly, on a cultural note, failure is not viewed as shameful but rather as an aspect of growth and development in life. While each of these conditions may be found in a number of societies, the book argues that it is the union of these factors that has allowed Israel to become the high-tech powerhouse it is today.

This blog will view the course through the lens of Senor and Singer’s text – providing updates on the latest decade of Israeli start-up development as well as supplementary learnings related to the themes found in the book. It is our hope that, through careful evaluation of this confluence of factors, we can identify the most crucial aspects necessary to build a culture of innovation – and what competitive advantage, if any, can persist for Israel’s high-tech sector in the long-run.

Casey Buckley is a 2020 MBA Candidate at Columbia Business School

Why Multinationals Look to Israel for Innovation

GIP Israel’s first full day of meetings focused on how three massive multinational corporations have tapped into Tel Aviv’s rich entrepreneurial ecosystem.

Konnekt is an open innovation campus that connects Volkswagen’s brands with start up talent around Israel. Its Director of Development, Hemdat Sagi, discussed the local surge in autonomous driving and mobility “game-changing technology”, along with her experience as a businesswoman in an industry that continues to struggle with gender representation.

Microsoft’s Reactor Tel Aviv follows a similar concept. Startup Success Manager Tor Tsuk sees herself as a tech matchmaker, pairing emerging Israeli companies with Microsoft’s vast network of partners.

Finally, the group visited The Bridge Builders – a commercialization program that helps Israeli entrepreneurs develop their startups, and subsequently connects them with the dozens of brands owned by Coca Cola, Turner, and Mercedes Benz. General Manager Gab Czertok’s advice to aspiring founders who want to differentiate themselves? “Learn to listen!”

Next stop, Jerusalem!

T-minus 24 Hours to Global Immersion Israel

🌎🌍🌏

Columbia Business School students have begun to arrive in Tel Aviv for the week-long Global Immersion Israel: Leadership and Innovation tour.

Led by Professor Todd Jick, Columbia MBA candidates from across the globe – including the United States, China, Philippines, India, Norway, Germany, Paraguay, and Brazil, among others – will spend the week meeting with Israeli business leaders and public officials.

Few economies can claim to have evolved more rapidly than Israel’s in the seventy years since it declared independence. From its modest socialist beginnings, Israel has solidified its place on the vanguard of technological innovation.

Earlier in the semester, guest lectures by Dan Senor (co-author of “Start-Up Nation”) and Seth Siegel (author of “Let There Be Water”) set the stage for what promises to be a week full of conversations about entrepreneurship, the role of government, and business as a form of diplomacy.

Final thoughts on Israel

Since coming back from our whirlwind adventure in Israel two weeks ago, I have gushed to my friends and classmates about Israel’s historic landmarks, hospitable people and the innovative and entrepreneurial spirit that beats throughout the country. I’ve developed a newfound appreciation for the incredible achievements that modern-day Israel has made in business – especially given the unique geopolitical challenges facing the country—as well as developed a deeper understanding of the cultural factors that have shaped Israel’s identity and in turn its business environment. Still, one week is not enough to fully map out the complexity of Israel’s history, economy or politics. These are some of the takeaways about Israel that struck me during the trip and the questions I want to continue to explore:

  • Startup nation to scaled up nation? Israel is well known for its plethora of tech startups and its strong engineering talent. However, we came across differing perspectives on whether Israel had the potential to develop startups into larger tech empires. During our trip, Intel announced it was buying autonomous driving technology firm Mobileye for $15 billion – a very successful exit for the Israeli company. While the book Startup Nation argues that the diversity of Israel’s people and mandatory military service has fostered a strong environment to build startups, can the country sustain continued growth in the tech sector? Furthermore, is the Israeli market big enough to bring startups to larger scale or is a sale to a non-Israeli company the optimal solution for Israeli startups to grow?
  • There is no one-size fits all solution to the conflict in the Middle East. What’s the next best option? Israel has very delicate relationships with its neighbors in the Middle East, many of which are in the midst of political turmoil and many of which do not support Israel’s existence. There are numerous issues underlying the conflict in the Middle East but there is no way to please all stakeholders. However, having open conversations across all countries in the region will be key to navigating the complex political environment and finding solutions that can tackle one issue at a time.
  • Israeli’s “survivor” attitude carries through into business. One of the things I appreciated the most about Israeli people is their optimistic and hopeful attitude, even in difficult times. Israelis truly are survivors and their determination to achieve the goals they set forth is an asset in the business world and something we as aspiring leaders should strive to embody.– Nathalie Tadena, CBS’18
    Chazen Israel Section B

Reflections from Israel

‘Have you heard of the routing app, Waze? It’s Israeli.’ my driver asked me, as I got in the car en route to the airport for my flight home.  I could see the app predicting my arrival at the airport at 6:14pm, a full three hours before my flight.  I loathed this seeming waste of time – a common phrase in my pre-CBS consulting career was ‘if you’ve never missed a flight, you’re getting to the airport to early’.  But, we had been warned about the Tel Aviv Airport Security, and after accidentally going to Newark airport instead of JFK on my way to Israel, I couldn’t risk another stressful airport experience.  I replied that No, I hadn’t heard of Waze and wondered if it was really that much better than Google Maps?

When my driver asked me how I had enjoyed his country, it was hard not to conceal my new found love for Israel. The food, the entrepreneurial spirit, the history… so many things flooded my mind.  But being back in the states and reflecting on my trip, my favorite aspect by far is the people.

The Israeli culture is rich with history, religious background, and stories of both oppression and hope.  And what I didn’t appreciate until my trip was the clear camaraderie that binds Israelis together.  Whether this is because the nation is relatively young, because of the history of what the Israeli people have been through, or because of something else, is unclear.  But the immediate closeness I witnessed time and again amongst Israelis was undeniable.

Over the course of the trip, we visited many companies. Three companies talked to us about the same recent sale of an Israeli start-up (Mobileye) to Intel for $15 Billiion.  Even my cab driver brought it up to me.  Most people spoke about the value of their army experience.  And everyone talked about being focused on continuous improvement and their own internal hope.

Coming from the states, a country that in so many ways is about diversity, it’s striking to see such a degree of similarity across Israelis. I look forward to my next (and hopefully soon!) trip to Israel to further uncover its culture.  And for the record, we pulled up to my gate at precisely 6:14.

Haley Smith, ’18 – Group A, #Israel #IsraelChazen

Shalom Israel!

0138682700d04e2f8a48d20839ab7700I can’t believe that my Chazen Israel trip has come to a close! As business school students, many of my classmates and I came into the trip expecting our itinerary to focus on Israel’s business environment. But to truly understand the nuances of a country’s economy, one must first understand the underlying history and culture. This week has been incredibly inspiring and I have learned so much not only from speaker presentations and formal tours but also from hearing about the personal experiences of our trip organizers and everyday Israelis we encountered on the street.

In just our last couple of days on the trip, we woke up early to watch the sunrise at the ancient desert fortress Masada, covered ourselves in mud and floated in the Dead Sea, visited an Air Force base where we learned about the influence of mandatory military service in Israeli culture and discussed the latest technological innovations in the healthcare space with Tom Ran of the Weizmann Institute of Science. There certainly has been no shortage of activities or learnings from this week.

Prior to this trip, I had heard and read much about Israel in the news and had long associated the country with ongoing conflict. Still, I had difficulty forming my own opinions on the geopolitical issues involving the country and knew I wanted to come to Israel to better understand why it was the subject of such divisive debates.

In reflecting with my Chazen group on all that we have done and learned this week, it became apparent that the Israel we experienced on the ground was very different and far more multi-faceted than the Israel we read about in the news. I have been pleasantly surprised by the warmth the Israelis have shown us as well as the level of passion and patriotism they show for their country. Many of my classmates remarked that this trip instilled in them a newfound appreciation of Israelis as survivors who always have hope even in the face of overwhelming challenges. In many cases, my classmates saw that many of the issues that Israel faced were similar to issues their own home countries have faced.

While my classmates and I can come away from this experience with a much richer knowledge of Israel as a country, our discussions this week only scratched the surface of the complexity of Israel’s roots and challenges. As future leaders, it’s important that we continue to push ourselves to learn more about the issues that make a market unique and find ways to draw connections between different cultures.

— Nathalie Tadena ’18

 

Israel: a modern day miracle?

Haley Smith ’18: Israel, Section A

It’s hard not to be surprised when you consider the success story of Israel as a nation. Their neighbors are generally unsupportive of them as a country.  Israel is a young nation, being established in only 1948, and thus has had less time to develop expertise and processes, strong academic institutions or global companies.  Beyond this, amongst their population there are large amounts of conflicts, specifically regarding Holy Sites (which also happen to be some of the biggest tourism draws for the country).  This conflict and ensuing safety concerns by tourists have the potential to put much of their tourism industry at risk.

So, what explains Israel’s success? After all, despite these barriers they have top academic institutions, push the limits on cutting edge technology, have one of the most successful start-up communities in the world, and have an incredibly high caliber military system.  Could it be that Israel’s youth works to its advantage?  Maybe Israel actually has the same type of edge that nimble start-ups have over legacy corporations.  Israel is smaller but more agile, able to adjust quickly in changing fortunes.  Israel is also not wed to legacy processes or habits as many other governments and agencies are.  In fact, Israel is explicitly focused on quite the opposite – continuous improvement, which means constant change.

This focus on continuous improvement came up time and time again. At every speaking engagement and in an incredible amount of anecdotes, we consistently heard the value Israelis place on constantly being open to criticizing and improving existing processes.

At a start-up, the CEO was constantly asking how he could improve his radar technology and make it less expensive.  The Mayor of Jerusalem was questioning how he could scale the capacity for structured tourism in Jerusalem.  When we met a woman from a rural area by the Dead Sea, she was questioning how she could further her career beyond what was normal for her micro-society (for the record, she’s already learned English and written a book in a community where most women don’t finish high school).  Even a student leader from our trip sat down on Day 2 to ask me ‘Is this trip the best it could be?  How could we be making this better?’

Most potently, when we visited the air force base, pilots told us about the Israeli Military’s improvement charts, which articulate mistakes made by cadets. The charts require cadets to openly state every single mistake that happened, what caused it, and how to avoid it the following mission.  Our speaker stated ‘A mistake made twice is unacceptable.’  Even when a mission goes perfectly, the officers discuss how it could have been even better.  One officer said this has been so deeply ingrained in him by the army that every time he parks a car, he looks at the lines to evaluate how tidily and efficiently he parked his car.

What I appreciate most about this focus on continuous improvement is that we saw it sincerely everywhere. And as I consider how I would describe my time in Israel – it’s the learnings like these that I value most.  Because yes, the sites have been breath-taking, the spiritual history has been fascinating, and the food has been indescribable.  But more than anything, the people have been inspiring.  The Israeli focus on hard work, innovation, and continuous improvement is more than enough to take home with me.

Bridging Israel’s Past and Future

Greetings from the Dead Sea! It’s been a whirlwind of an Israel Chazen trip so far that has provided my travelmates and me with a deeper understanding of Israel’s past and new perspectives on the country’s future.

A quick recap so far —

In Tel Aviv, we interacted with the vibrant tech scene and debated whether Israel has the potential to move from a “startup nation” to a “scaled up nation” that can compete with the world’s tech giants. We heard candid remarks from former Israeli security chief Yuval Diskin about the delicate geopolitical situation in the Middle East and his belief that it is impossible that all dimensions of the Israeli-Palestinian conflict can be solved (though he advocated that Israel, Palestine and Israel’s neighbors must all work together to solve as many of the conflict’s dimensions as possible).

In the Golan Heights, we got a glimpse across Israel’s borders into neighboring Jordan and Syria – countries that face their own complex problems and whose fates are intertwined with Israel’s –   and heard from retired Israeli Army colonel Miri Eisin about country’s most pressing security issues.

In Jerusalem, we traveled back in time to some of the most important sites in Christianity and Judaism in the Old City (including the believed tomb of Jesus); shared prayers and notes at the Wailing Wall; and were inspired by the lessons of a Holocaust survivor and delved into the painful events that led to the creation of a Jewish state at the Yad Vashem Holocaust Remembrance Museum.

In the Judean desert, we experienced the warm hospitality of the Bedouin people and learned one Bedouin woman’s personal story of how she defied tradition to take a job in the hospitality industry in Israel.

While we have touched various cultures and topics throughout our travels these last few days, the extreme complexity of both Israel’s history and the challenges that will impact its future has been a recurring theme throughout our discussions. For example, it is impossible to fully dissect the Israeli-Palestinian conflict, let alone come up with a resolution, in a matter of days. However, this trip has highlighted the importance of asking questions to better understand the elements that shaped the world, cultures and politics around us and the need to spread awareness about complex topics.

— Nathalie Tadena, CBS ’18

 

Haley Smith ’18: Israeli Connections

They say the world is connected through six degrees of separation. And this makes sense.  When you think about the well-connected people we’ve met (professors, guest speakers, bosses) it’s easy to hypothesize just how far our networks probably reach.

In Israel, they say the number is two degrees of separation (or ‘maybe one and a half’ according to our tour guide). The country of Israel and the Israeli people are incredibly interconnected in a meaningful way.  In many senses, this is intuitive.  Israel is a generally homogeneous country – of the roughly 9 million people living in Israel, about 75% are of Jewish descent (the remainder is generally Arab, with less than 5 being non-Arab, non-Jewish).  The country is also relatively small and has a high population density (on par with New Jersey, which is the most densely populated US state).  Between this population density and 92% of Israelis living in urban areas, connecting with one another becomes easier and more frequent.  And finally, Israeli cultural norms and religious beliefs create more opportunities for connection.  Take the compulsory military service for example: for every Israeli, it becomes an additional networking opportunity, introducing individuals to peers and mentors to later call upon for advice, funding, or connections.

Okay, but what does this interconnectedness really mean? To put this in context, it means that a VC fund we visited in Tel Aviv can easily compete with funds in Silicon Valley because of the caliber and reputation of The Tel Aviv VC fund’s network.  It means that one start-up we visited has hired the majority of its 50 person team through friends rather than through a hiring agency.  It means another start-up we visited, whose first round of funding (a casual $9 million) took one week (and one connection) to raise.  And last, (but certainly not least), in the words of one of my Israeli fellow students, it means ‘Guys treat women here very well – because word travels fast if you don’t’.  But what this all adds up to (sans the dating implications), is that work and progress in Israel is accelerated: less time hiring, raising money, finding experts means less time preparing to do your job and more time actually doing value-add work.  It’s easy to see why Israel is so well known for innovation.

Next stop, Jerusalem.