Israel’s start up model – a success or not?

It was just another monthly meeting of the Jerusalem Business Networking Forum. As the co- moderator, I had asked three people to introduce themselves via elevator pitches:

  • Phil referred to his new concept for developing a unique rotor for verticle take-off. This was layman’s speak for a new kind of helicopter.
  • Stephen spoke of his diagnostic kit to prevent “graft versus host disease” a tragic and frequent complication in stem cell treatment. 
  • Pinchas described his company’s ability to offer significantly more memory space on mobile devices.

Was I just lucky in choosing these three people from the audience?

I think not. The guest speaker was Dr Ed Mlavsky, a pioneer in the early 1990s of creating venture capital facilities in the early 1990s, specifically in Israel. He listed a host of interesting stats.

During 2010, Israel saw the creation of 250 high tech start ups. In the state of Michigan, the equivalent number was barely three. In the same 12 months, 391 Israeli firms raised US$1.26 billion in investment! Not bad for a slow year in the global economic cycle.

From the other side of the coin, it is worth reflecting that there are now over 124 multinationals operating in the Holy Land. And why? Well, much of this trend was started by Ed, when he led the nascent Bird Foundation project. This partners American multinationals such as Oracle with local start ups with 50% of the cash coming from the mutual governments.

The result? In the first 13 years alone, US$4.5 billion of direct sales were created via 300 companies. The knock on effect to the rest of the economy – in terms of income tax, employment, higher IP, export and more – has yet to be verified. Israel now has similar agreements with several more countries, including Singapore, Russia and Korea.

These are not isolated anecdotes. Telmap was founded in the year 2000. A decade later and with over 200 employees, the company was recently purchased by Intel. Israeli IPOs on Wall Street are still  very popular today. And the reasons why I could detail an extremely long here was neatly summed up this week by Francisco Sanchez, the US Under Secretary for Commerce.

There is a lot of American money invested here, mainly because Israel has done good work good work on money laundering, and this country has amazing skills. In addition, the Israeli government also strongly supports innovation.

It is very likely that 2012 will see a global recession. Israel will not be immune to that. The point  is that others struggle, Israelis believe that thy have an economic model that will lessen the fall out and can be readily copied. If you do not believe look at what Phil, Stephen and Pinchas have already achieved.

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One Comment on “Israel’s start up model – a success or not?”

  1. Michael Horesh Says:

    Click here for a summary of Israel’s succeeful start ups in October 2011:

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