If I were a startup, the best thing I could do would be to move to Israel. After, or let's say next to Silicon Valley, Israel is a global leader when it comes to innovation and business startups.
That is why it is also called Silicon Wadi. The startup scene is booming – and bustling with more than 5,000 companies according to Startup Nation Central, which means this country in the Middle East has the largest number of startups per capita. The Israeli Ministry of Economics says that more than 1,000 new companies join the the throng every year. Tel Aviv alone has 1,500 startups. And the country also has plenty of listed companies. There were 99 exits made by Israeli companies in 2014. The value of the exits stood at an impressive USD 6.94 billion. After the United States and China, Israel has the most companies listed on the NASDAQ. But international companies also want to exploit this successfully innovative environment. More than 250 companies of non-Israeli origin have set up their own research and development centers in Israel. Take Apple, for example. Even though they usually only do research and development in their home country of the United States. Other companies are active in Israel at least through investments or partnerships. All this has jockeyed Tel Aviv into second place in the Global Startup Ecosystem Ranking. Deutsche Telekom has also recognized Israels' plus points and has been active there for more than ten years. But more on that later.
These are impressive facts and figures. But why are startups doing so well there at the minute? Other parents also have "smart" sons.
This successful environment is the product of a comprehensive system for fostering business startups. As well as of state and city support and the outstanding education that Israelis receive, including during their mandatory years of military service. And last but not least, of their culture. All this combined has allowed Israel to become a startup nation.
The Israeli government has been supporting founders for many years, in particular with financial startup support. A program was set up back in the nineties which allowed founders to establish startups with just 15 percent of the money needed. The rest is provided by the state in the form of a loan, which the company then pays back if it is successful. There is also financial support for venture capitalists when they work together with foreign investors. As a result, "70 percent of the money now comes from abroad," said Gallit Jacobovitz from the Start-up Nation Central organization. The government invests in startups because it recognized early on that young innovative companies are definitely a positive economic factor. According to the World Bank Report 2012, almost four percent of GDP is invested in research. That is the highest in the world, ahead of Finland and Sweden.
Support is also offered by the cities. Tel Aviv provides young founders with office space free of charge. A former children's library has been converted into a co-working space. Ten promising startups are welcomed here every six months. Just recently, Tel Aviv set up another exchange program that enables founders to work temporarily in another city. Paris, Munich and Berlin have all signed up.
But bright minds are needed to work on the products and ideas and implement them. The army plays an important role here. It specifically seeks out young people with potential and trains them in all things computers and cyber security. The military effectively as a tech-incubator – especially the elite unit IDF (Israel Defense Forces ) 8200, which is dedicated to cyber security and digital espionage. Only the best and most talented Israelis get to work here. The admission requirements are strict. Some talented individuals are earmarked for this while they are still in high school. IDF 8200 provides not only technical training, but also focuses on management skills. Anyone who has gone through this will have battle-tested leadership skills coupled with excellent technical expertise, resilience and discipline. A prime starting package for someone to bring to market and lead their own innovative business. Often for the Israelis, it is not about creating a global corporation, but rather the starting up itself. They frequently then sell and move on to new ideas.
And on top of this comes Israeli culture. Challenges are readily taken on and great pleasure is taken in developing things and building them. Failure is tolerated and seen as a motivation for carrying on, and people enjoy working in flat hierarchies. DLD Chairman Yossi Vardi firmly believes that "Israel's creativity, innovation and entrepreneurial spirit… are more than just the product of government policy, education and military experience." These things feed the entrepreneurial spirit. But the decisive factor is the culture and the attitude of the people. Vardi talks about virtues and likes using the metaphor of the "Jewish mother" to emphasize that these virtues "flow" into Israelis almost with their mother's milk.
As I mentioned at the start, international companies have also recognized Israel's potential and its enriching environment. Thus global players like Microsoft, Motorola, Google, Apple, Facebook, Siemens, GE and IBM have made a conscious decision to invest in Israel and to be active there. So have we.
"Win with partners" is an important component of our strategy. The Israeli market offers a multitude of potential partners and products that would innovatively complement Deutsche Telekom's portfolio. To date we have entered into 15 partnerships and investments with Israeli companies. In order to find these partners and products, we have our own employees in Tel Aviv. Of course, the existing technical expertise is also of interest to us. Hence T-Labs has had a site in Israel for about ten years, where we are working together with scientists from the Ben Gurion University on security concepts in the fields of cyber security and big data. Last but not least, we are also supporting young companies. So, of course, we also have a branch of our hub:raum in Tel Aviv and help Israeli companies to get established on the European market and to turn their business ideas into commercial success.