Israel — the startup nation

By AIFL - May 23, 2016

In January, I attended the Cybertech conference in Tel Aviv, on a trip sponsored by the America–Israel Friendship League and the Israeli Foreign Ministry. Also on the trip was Richard Stiennon who wrote about it here. In his illuminating article, he calculated the number of information security vendors per country. Predictably the United States came out on top with 827 firms. Surprisingly, Israel was second with 228. What’s astonishing from Stiennon’s research is that Israel has more security companies than the next 5 countries combined. How is it that Israel has more security firms than the UK, Canada, India, Germany and France combined? The question is even more compelling given that Israel has a population of roughly 8 million; while those five countries have roughly 1.5 billion inhabitants. An excellent resource with detailed listings of Israeli technology startups is the IVC Research Center High­tech Yearbook. It has trend analysis and YOY investor activity, along with detailed profiles of investors, including venture capital funds, private equity funds, incubators, angels and corporate investors investing in Israel. For a visual listing of firms, the Israel CyberScape map from Bessemer Venture provides a listing across 14 information security domains. So just how did Israel become a global information security superpower? Here’s a few of reasons. Israeli Prime Minister Benjamin Netanyahu set the goal of making Israel one of the world’s five leading global cyber powers. When a government makes something a priority, and backs it up with financials incentives including research and development grants, which Israel has done; that’s a compelling initiative to generate interest. Obviously government incentives alone are insufficient to generate a global industry. Dr. Jimmy Schwarzkopf, Managing Partner at Israeli market research and strategic analysis firm STKI notes that Israeli youth serve in the army (IDF) between 3 to 5 years. A modern army; the IDF is centered on C4I (command, control, communications, computers, and intelligence) systems. To use these complex systems, young soldiers must become experts in IoT and other cutting­edge technologies. With that, many students prepare themselves with honor subjects in high school, combined with an extended curriculum in the IDF computer training, and later in universities. When they finish their army service, many of these well trained individuals tend to either start or join startups, often in information security, and as of late IoT. Another viewpoint from Ron Moritz, founding partner of TrueBit CyberPartners, building on the army notion, is that despite being ranked among the top armies in the world, the Israeli army mantra often is not to worry about the how; it’s just about getting the job done. The main focus is to make it work. The solution could be ugly, it could be a Band­Aid, it could be a hack. The approach trickles out into Israel’s high­tech sector where problem solving and fast innovation drive products to market. This anti­ bureaucratic approach fuels innovation. Also broadly speaking, the geo­political realities of Israeli have formed an exceptionally creative military which, out of necessity, operates with substantially less formal processes, rigor, and discipline than most armies. A meritocracy atypical of highly­formalized bureaucratic armies, the IDF encourages experimentation and out­of­the­box thinking and quickly rewards those who push the envelope and succeed. As an example, an IDF soldier serving and advancing in an IT unit will at the age of 20, typically controls a budget and has operational responsibility equivalent to that of a mid­career IT executive twice his age employed by a US firm. The soldier will carry this experience when they enter the working world; either with a high­tech company developing solutions or as an IT professional where they will become a natural development partner for those creating new solutions.