In a single afternoon, I went from meeting with a Tech Crunch Disrupt finalist to learn how they raised a seven-figure sum from VCs to jotting down the hotline number for ordering gas masks to be delivered to your door, in case chemical weapons from Syria spilled over. Welcome to Israel, the World’s #2 startup ecosystem, which I toured in June with Bizrael, a program to introduce aspiring entrepreneurs to the Israeli high-tech revolution. I wanted to see for myself the reason that tiny Israel, of all places, is by far the closest contender to Silicon Valley. What did they have that Berlin (#15 in the startup ecosystem) lacked? And with all of the resources offered to immigrant entrepreneurs, should I consider Israel as an option?
What makes Israel the Startup Nation?
Intel microchips, cellphone camera technology, drip irrigation systems, the swallow-able camera pill, and cherry tomatoes (cherry tomatoes, people!) – all of these products were invented in Israel. What else? If you don’t mind apocalyptic undertones, check out this video.
My question was this: Why Israel? Why is Israel’s most talked about acquisition Google’s purchase of Waze for one billion dollars, while Berlin’s most talked-about deal is GetYourGuide acquiring Gidsy for an undisclosed, presumably much smaller, sum?
99 Problems, but Funding Ain’t One
Startups in Israel have healthy capital through the startup lifecycle. Check out these stats:
- In 2012, 575 Israeli startups raised money from investors, both local and foreign. Of these, 157 were seed-stage companies.
- The total dollar amount raised was $1.92B.
- VC-backed deals (i.e. deals in which at least one VC fund participated) amounted to $1.37B, Of these, Israeli VC funds contributed around $516M.
- In 2012, VC investment in Germany was 252 million euros, with 133 million going to Berlin.
There is significantly less investment in Berlin, and also a significant funding gap before and after product market fit.
Say what you will about the Israeli Defense Force, but holy scheisse, they teach people to code. High tech training, coupled with team formation, gives Israel a strong advantage. 36% of high-tech entrepreneurs in Israel served in one of the IDF technological units, including the founder of Waze. 29% of high-tech workers were also originally trained in these units.
Not to get too scientific on y’all, but check out these startup maps of Israel vs. Berlin with a breakdown by industry. By the way, these startups maps were created by a current IDF soldier and all around amazing guy, Ben Lang.
Here is one example of the different startup industries: Life Sciences is not a category in Berlin, and only three startups in the health care category appear on the map. In Israel, there are 49 Bio and Medtech startups listed, which makes sense since Israeli Life Sciences companies raised the most money in 2012 – a total of $497M.
I do not believe that better pitches is the secret ingredient that make Israeli a powerhouse, but after watching the Betahaus Global Pitches in Berlin last weekend, I think it is worth mentioning the difference in pitch techniques. Here is the scenario: You pour your heart into your startup, into your pitch, and when you finish a judge asks you:
1. A Stupid Question
2. A Condescending Question
3. A Valid Question You Can’t Answer
In Europe, the presenter will look embarrassed and answer politely, often without providing any additional information. In Israel (please note that the founders were pitching to our group, not to funders) the founders turned the tables. They made the questioner feel ridiculous for asking, or doubting their idea, restated that their startup was one of the best in the world, and that there is NO WAY it will fail.
Cool Stuff Happening in Israel
Our 15-day itinerary was packed. We visited consultants, VCs, industrial parks, universities, and even a pharmaceutical company and a desalination plant. Here are the top startups and organizations that are worth checking out:
- Jerusalem Tech Park and Glide
While it doesn’t quite have the hype of Factory, Jerusalem Tech Park is pretty incredible – 15 acres of offices and green space that houses hi-tech companies including Glide, a video messenger that allows you to send and receive short video messages that can be seen live or later.
- Upside Israel – The Aliya Incubator
If you are a Jew looking to build your startup, you must reach out to David Goldberger or Jonni Niemann. Upside Israel provides full business development, cross-marketing and funding combined with relocation services.
Their marketing material doesn’t do them justice, but these guys are worth getting to know. They created an interactive game that is all about collaboration and the new entrepreneur. And they don’t just talk the talk. You’ll be seeing this group in Berlin in no time.
Visiting Israel? Check out this awesome coworking space in the heart of Jerusalem. It is just like Betahaus, but with access to VC.
Yet another global innovation platform connecting startups to investors, but these guys have serious partners and sponsors. Berliners, take note, as they are expanding their presence in Europe.
Israel: The Ultimate Dichotomy and Why I’ll Be Staying In Berlin
Israel, and Jerusalem in particular, is an insane dichotomy of high-tech powerhouse and backwoods ideals. For instance, a mere ten-minute stroll from state-of-the-art Jerusalem Startup Hub will bring you to Mea Shearim, the ultra-Orthodox neighborhood. This is an entire part of the population that actively rejects technology. They have kosher certified cell phones that only allow calls, and block internet, messaging, and video capabilities, because G-D forbid sexting may occur.
Or there is the whole deal with kosher wine. Starting after the grapes are picked, for wine to be kosher, it must be produced, packaged and poured by Sabbath observant Jews. Even if the wine is made by Jews, if a non-Jewish waitress pours your glass at a restaurant the wine is no longer kosher. So how do you get around this? By BOILING the wine. Seriously.
I loved Israel and its intensity. Without a doubt, the country lives up to its Startup Nation reputation. But, after three weeks, I was ready to board my flight back to Berlin, with its lack of international VC capital; where the only piece of protection I should invest in is not a gas mask, but a bike helmet; and where my riesling does not need to be boiled before being served by a shiksa waitress.