http://www.bbc.co.uk/news/business-15797257
[Thanks to Sarah for this.]
21 November 2011 Last updated at 19:12 ET
Katia Moskvitch By Katia Moskvitch Technology reporter, BBC News,
WATCH: How did Israel establish itself as a fertile ground for
hi-tech start-up companies?
When a grey-haired grandmother clutching a smartphone mounted the
stage at Montreal's Start-up Festival this summer, young Israeli
entrepreneur Guy Rosen knew he had pocketed a very special award.
His company, Tel Aviv-based Onavo, offers an application that
shrinks mobile phone data to help users save money--and appeals to
any age. That made Onavo the winner of the Grandmother's Award for
best start-up, judged by tech-agnostic ladies in the later stages of
life.
Standing in his office in Tel Aviv, Mr Rosen recalls the moment:
"They went on stage and said: 'We love Onavo and we understand what
it does... it is such an easy app to understand'--we just save
money, that's it, period, they loved us."
Guy Rosen is one of Israel's many young, enthusiastic entrepreneurs
who, fresh out of the army, decided to set up a tech firm.
Tiny Israel, a country embroiled in conflicts for decades, has
managed to transform itself from a stretch of farmland into a
high-tech wonder.
Formula for success
Israel currently has almost 4,000 active technology start-ups--more
than any other country outside the United States, according to
Israel Venture Capital Research Centre.
In 2010 alone the flow of venture capital amounted to $884m (£558m).
The result: high-tech exports from Israel are valued at about
$18.4bn a year, making up more than 45% of Israel's exports,
according to the Central Bureau of Statistics.
Israel is a world leader in terms of research and development
spending as a percentage of the economy; it's top in both the number
of start-ups and engineers as a proportion of the population; and
it's first in per capita venture capital investment.
Not bad for a country of some eight million people--fewer than,
say, Moscow or New York.
Serial entrepreneur Yossi Vardi says there is a whole blend of
factors responsible for turning Israel into a start-up miracle. He
himself has invested in more than 80 Israeli high-tech firms--among
them the first web messaging service ICQ. He sold many of them to
technology giants such as AOL, Microsoft, Yahoo and Cisco.
Tel Aviv, Israel For high-tech firms, Israel offers much more than
beautiful beaches
"If you look at how this country was created, it was really a
start-up on the large scale," says Mr Vardi, who has been dubbed the
godfather of Israel's high-tech industry.
"A bunch of crazy people came here, trying to pursue a dream of
2,000 years."
Over just a few decades, Israeli start-ups have developed
groundbreaking technologies in areas such as computing, clean
technology and life sciences, to name a few.
"Look at... agriculture, at the defence industry, at the
universities here," says Mr Vardi.
"The high-tech is a popular story right now, the internet gave it a
lot of visibility, but the story of the culture and the spirit is
part and parcel from the kinds of the cultural genes of [the
Israeli] people."
Continue reading the main story
"Start Quote
These entrepreneurs are thinking big, they are trying to build
global businesses, trying to create something huge"
End Quote Saul Klein Index Ventures
Government's role
But there is more to this start-up scene than certain aspects of
Israeli culture--the lack of hierarchy, a constant drive for
individualism, regular risk taking. The government played a key role
in the rapid rise of this start-up nation.
"The government jump-started the industry," explains Koby Simona
from Israel Venture Capital Research Centre.
One was the creation of the Yozma programme in 1993, a so-called
fund of funds set up to invest in local venture capital funds that
would channel money into new technology firms.
Soon numerous start-ups dotted Israel's industry landscape, and
venture capital funds mushroomed all over the country--a blooming
industry that quickly attracted foreign investors.
Israel's defence forces are also boosting entrepreneurship.
Military service is compulsory, but besides regular military units,
the army also has designated hi-tech units, where computer-savvy
conscripts are constantly prompted to come up with innovative ideas
in disciplines such as computer security, cryptography,
communications and electronic warfare.
"The military enables young people in certain units to get
technological skills, to run large technological projects at a very
young age, where they need to improvise in order to get fast
solutions," says Prof Niron Hashai from the Jerusalem School of
Business Administration at Hebrew University.
Once back in the real world, many military alumni use the newly
acquired experience to launch their own technology start-ups.
Tel Aviv Tel Aviv has several high-tech hubs: Herzliya is popular
with international tech giants; Rothschild Boulevard is home to many
young start-ups
And then, of course, there is Jewish immigration--a key driver of
the country's economy since its foundation.
The biggest and the most important wave of immigration came from
Russia, says Prof Hashai.
"Many were very smart people with technological background," he
says.
"Maybe they were not so much entrepreneurs, but when these guys meet
Israeli-born guys, many interesting things happen."
Lost decade
The first start-up boom of the 1990s lasted just a few years though.
When the global dot.com bubble burst in 2000, the fortunes of
Israeli venture capital started to decline.
Today, industry insiders speak of a lost decade.
Samuel Keret, Waze Waze, a web community-based GPS app, has been
extremely popular in the US and Israel
Still, venture capital continued to flow into the country, and now
investors are reaping the rewards.
During the past two or three years, all around Tel Aviv a new
generation of start-ups has begun to emerge, ready to prove that
Israel's high-tech industry is back in business.
Take Takadu, a company founded in 2008 that offers smart water
infrastructure monitoring, remotely detecting leaking pipes in
real-time all around the world. One of Takadu's customers is
Britain's Thames Water. When a water pipe in London bursts, chances
are that it will first be spotted by a computer in Tel Aviv.
Another example is Boxee. The five Israeli founders decided from the
get-go to headquarter the company in Delaware in the United States,
but locate the company's research and development office in Tel
Aviv.
Boxee tries to provide the missing link between content on
television and the internet. Once you connect Boxee's small shiny
black cube to your TV, it will also link wirelessly to your home
network. With a remote control, you can then browse and watch all
online content on the big screen--not just your movies, YouTube
videos or web TV, but also videos uploaded by your friends to
Facebook, Twitter and other social networks.
Shortly after its launch in 2008, Boxee's little box could be found
in more than two million homes across the US, Canada and the
European Union, says Tom Sella, one of the firm's co-founders.
Then there is Waze--a firm that has developed a free app that turns
your smartphone into a web community-based GPS device.
It will guide you through a city's road labyrinth, but combines the
map with updates from other users--or "wazers"--from traffic jams
to construction works to accidents.
Silicon Boulevard
The bright Middle Eastern sun may be setting slowly, painting Tel
Aviv's roofs in warm shades of red, but one part of the city will
continue to buzz for many hours.
Onavo's app
Please turn on JavaScript. Media requires JavaScript to play.
Tel Aviv-based start-up Onavo offers a free smartphone application
that shrinks a phone data to help users save money--and appeals to
any age
This is Rothschild Boulevard--also known as the Silicon Boulevard,
home to the offices of many hot start-ups such as Face.com and
Soluto.
Some of them do not mind following in the footsteps of ICQ, 5Min,
LabPixies and others, who have been scooped up by international tech
giants.
Take the Gifts Project, for instance, set up by a handful of young
enthusiastic employees sharing a tiny office with a balcony that
looks out to Rothschild Boulevard and sports a huge logo of a pink
pig. They've just been bought by the world's biggest online store
eBay.
Others want to strike out on their own. One of them is Soluto, a
firm that aims to make computers more user-friendly and crowdsources
technical support that helps computer users anywhere in the world,
for free.
Whatever their strategy, it seems that they are here to make an
impact.
"These entrepreneurs are thinking big, they're using the latest web
technologies, they are trying to build global businesses--they're
not satisfied by building something small, they're really trying to
create something huge," says Saul Klein, a Tel Aviv-based investor
working for British venture capital fund Index Ventures.
"I think the new Israeli technology scene is almost rebelling
against the last 10 years, where Israel for many years has
underdelivered.
"This is Rothschild Boulevard--and I believe this is the place to
watch."
Sony and other companies, Israel Many foreign companies set up their
research and development hubs in and around Tel Aviv
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