In Israel, failure carries no stigma

WHAT DOES Israel’s technology scene mean for the UK? The British government’s recent White Paper on economic growth called for a “stronger partnership between British and Israeli companies to exploit the potential synergies between Israel’s high levels of innovation and British strengths in design, business growth and finance.”

This is the core of what the future partnership between the UK and Israel should be, matching the innovation and technological brilliance of Israel, the “start-up nation”, with Britain’s skill and experience in building large successful companies.

Outside of Silicon Valley, Israel is the high-tech capital of the world. In addition to boasting the highest density of start-ups in the world, more Israeli companies are listed on the NASDAQ than companies from the whole of Europe. With per capita venture capital investments in Israel being 2.5 times greater than in the US and 30 times greater than in Europe, investors are turning to Israel in increasing numbers to take advantage of exciting new opportunities.

It is home to the research and development facilities of over 60 major multinational companies, including Google, Microsoft, HP, Apple and Intel.

So, how is Israel punching so far above its weight? In less than a decade, Israel’s world-class high-tech economy has flourished, built on the strong foundations provided by world renowned academic institutions, a series of astute government initiatives, the relationship between the army and the private sector, access to foreign capital and Number of hightech start-ups in Israel, the highest number outside of the US Number of multinational companies that have their R&D (research and development) facilities in Israel The average acquisition price of Israeli technology start ups in 2011 Amount of its GDP that Israel spends on R&D — double that of the UK Israeli firms listed on Nasdaq a culture that rewards success and innovation.

Israel spends about five per cent of its GDP on research and development — double that of the UK. It has eight universities which feed directly into businesses as well as through various funding programmes, set up and co-ordinated through Israel’s Chief Scientist’s Office. This unique department is responsible for allocating much of the government’s financial support, and is a key facilitator in helping Israel’s plethora of start-up companies find their feet in a competitive business marketplace.

The Israeli entrepreneurial culture is also a key factor, where failure carries no stigma, and everyone seems to live for today.

It is no surprise then that in 2011, Israel had over 3,500 tech start-ups, the highest number outside of the US.

These companies are supported by Israel having the highest venture capital (VC) per capita ratio in the world and a successful history of profitable exits and sales to foreign multi-national companies, including the recent acquisitions of Anobit by Apple, Worklight by IBM and Snaptu by Facebook.

It is clear that for investors looking to capitalise on a developed market with the yields of an emerging one, Israel is definitely the place to be. It is also evident that to take their product to a global audience, Israeli companies require foreign capital and partnerships.

Innovate Israel has provided a platform to do just this, allowing UK and European partners to directly target Israeli technology companies looking to expand into Europe, by clearly sending out the message that the UK is open for their business. Toby Coppel is a partner at Virgin Green Fund, and the former managing director of Yahoo! Europe. He was one of the speakers at Innovate Israel