I read “Start-up Nation” a few years ago. I read it because I wanted to understand why Israel, without natural resources and without a large market like the US, has been very successful creating high-tech and global companies. The answer to that is mostly in that book. However, I believe that learning by reading (lab) is somehow different from learning by doing (experiencing). That is why, since reading that book, I decided to fly to Tel Aviv when the opportunity arose.
And that opportunity came across last week thanks to Professor Ziv Carmon, the ignitor of a trek-course at INSEAD called “Discover Israel: the Start-up Nation.” He built an impressive 5-days agenda of speakers willing to talk to a “bunch of students from INSEAD.” — Lots of kudos for professor Carmon! — Besides, I now realize that the ultimate goal of INSEAD is not business education but to build a better world through global understanding.
We met with policymakers, entrepreneurs, investors, researchers, startups and incumbent companies. Some of them are the following: Mobileye (1), Yonatan Wexler (VP of R&D of OrCam), Avi Zeevi (founding partner at Carmel Ventures), OurCrowd, Jerusalem Venture Partners, Dr. Yehoshua Gleitman (investor, policymaker and former Chief Scientist of Israel), Dr. Einat Wilf (former MP), Uri Levine (founder of Waze), Prof. Oded Shoseyov (Nano-biotechnologist at Hebrew University of Jerusalem), Windward, Gil Shwed (founder of CheckPoint), Netafim, Beyond Verbal, Damian Goldring (CTO of Consumer Physics), Major-General (res.) MK Yoav Gallant (MP and Secretary of Construction) and Siftech
(1) Update: Mobileye was acquired by Intel yesterday by for $15 billion — the biggest-ever acquisition of an Israeli tech company.
One of the aspects that I liked the most from the individuals I met is that they were very direct and straightforward. No storytelling. So, without further due and using bullet points, here is what I learned from my experience:
1. Life-long lessons:
- In the long run, a growth mindset is the most powerful asset a nation can have
- A growth mindset comes from education (parenting, school, TV…)
- Free lunch does not exist; there is always a trade. At all levels
- It is OK not to be OK all the time. Enjoy the ride
- Understanding (knowledge, education, curiosity) is key to prosperity
- Scarcity + knowledge + resilience = potential opportunity
- You win some, you lose some. But that is the fun
- Experience is needed for understanding: go far, see deep, stay long
2. Lessons from leaders, policymakers, and MPs:
- It takes 25 years of political commitment to replicate the Startup Nation
- Western governments are not willing to make such bet (#shor-termism)
- “If you don’t get better, you get worse” – Dr. Yehoshua Gleitman
- Chutzpah is a healthy dose of overconfidence
- Chutzpah is critical to overcoming any challenge
- Israeli moms want their kids to be entrepreneurs
- Pragmatism, agility and a can-do attitude are the key attributes
- The first Israeli incubator was in a bus station, so no need for a taxi!
- If you don’t interrupt the speaker with right questions, they get bored
- The Israeli way of asking questions is just shooting questions
- Get to the point asap (that is why I am using bullet points)
- The value lies mostly in Research and Services. No value in manufacturing
- In 1992, the government realized the importance of the tech ecosystem
- There’s a market failure in Israel: no private investment in Research
- Israel public funds are mainly invested in Research (#long-termism)
- The government of Israel is sector agnostic (not like the EU’s programs)
- A state leading innovation is an oxymoron: “Laissez-faire.”
- The Israeli grants take 60 days from applications to cash
- Funds’ size for Research is 200$ million (fund’s size is not that relevant)
- The MoM exit multiple of the last Israeli government’s fund is x5
- In series A, per 1$ from the gov., there are 6$ from the private sector
- The world is a competition. Cities as well are competing with each other
- Change is a constant, it is a matter of how we adapt to it
- The world incrementally goes from one disruptive event to another
- Tel-Aviv has a vibe similar to San Francisco, Barcelona or Berlin
3. Lessons from (tech) entrepreneurs:
- High-tech is harder. But if successful, it transforms the world
- Be global on day #1. Their path is 1st the US, 2nd China, and 3rd Europe
- Privacy is becoming a big issue. Not collecting user data is trendy
- A second-time Israeli entrepreneur has x5 chances of being successful
- On day #1, define your values and the DNA of your working place
- Measure upside by measuring how the market will change if u succeed
- Celebrate the first thing of everything: first sale, first round, first hiring…
- Understand the “dark side” (aka the VCs). Play the game, find partners
- Early adopters should be excited about what you are doing. It is a signal!
- Successful consumer services grow through word of mouth and little PR
- Gamification helps users through the 1st frustrations, but most don’t care
- Israeli entrepreneurs care mostly about what the product does
- Israeli companies are generally performing better in B2B than in B2C
- VCs make a decision on founders the first 30 seconds; be ready
- Disruption is not about tech, is about changing the way we do things
- Disruptors are the ones who have nothing to lose
- If you want a new idea, open an old book (in biotech that is the ADN)
- Most of the times, the Media is publishing tech news without checking
- 50% of Israeli founders partner with the wrong co-founder
- At student incubators, they celebrate “Fuck-up nights” (lessons learned)
- Find the right time, the right idea. Find your lifetime opportunity
- The entrepreneur should know his business better than his investors
- Cyber security… A denial attack is just 1-line of code!
- “The first way to get out of a hole is to stop digging,” learn when to stop
- “Don’t be serious, just do things seriously.” I can’t agree more…!
4. Lessons from (tech) VCs:
- In 2012-16, in Israel, IT exits amount ca. $50 billion. Population: 8m.
- In 2012-16, in Spain, IT exits amount ca. $2 billion. Population: 47m.
- 270 Multinational companies (MNCs) have established 320 R&D centers
- Growth money is now available in Israel, critical for building leaders
- Israel is well connected to China and USA; no geopolitical issues
- VCs are only home-run oriented (1 home-run, 1 fund, 20 investments)
- Operational excellence is vital for IRR, and it’s shared among the portfolio
- Their portfolio entrepreneurs refer to other entrepreneurs
- Their portfolio companies are well funded to stay ahead of the curve
- A successful fund in Israel has, on average, a MoM exit multiple of x3
- “Best entrepreneurs are honest with themselves and excellent listeners.”
- Age of successful entrepreneurs in portfolio goes from 27 years to 65
- Current challenge is successful entrepreneurs are not starting 2nd companies
- Partners are available every week to all his portfolio CEOs.
- A successful VC in Israel always adds a lot of value in the post-investment
- The entrepreneur must live close to the biggest market.
- Deal flow analysis: 1.000 businesses per year and 1.5-2% investments
- “We don’t wait big companies to come, we build them.” I see Chutzpah!
- 80% of the VC funds come from foreign Limited Partners (LPs)
- Some VCs are successful doing seed investing (i.e., JVP Cyber Labs)