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Israel's startup guru spills secrets

Oct 03. 2016
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Yossi Vardi explains the importance of having the right ecosystem

ISRAELI HI-TECH guru and serial entrepreneur Yossi Vardi believes his country's ecosystem is the secret behind the success of its startups.

"The special thing we have here is the ecosystem.

"We have people who are eager to explore and take chances," Vardi, dubbed the "father" of Israel's entrepreneurship ecosystem, told a group of foreign journalists during the opening of the DLD (Digital-Life Design) Innovation Festival here last week.

Israel is known as the "Startup Nation" and attracts more venture capital per capita than any other country.

The secret was not the government budget nor the army nor education nor technology. It was in the people.

People are encouraged to take risks and all are supportive.

"All of us are paranoid. We are a small country. We have a lot of people around us. We are, kind of, like sheep so we get together and do things together.

"This is another part of the secret," he said.

"Everyone here knows each other. Everybody here sticks his nose into the affairs of each other.

"They know how much they earn, with whom they sleep. It is a very transparent country," he said.

"In the ecosystem, you need people to support each other and Israel also has a partnership among the government, industry and civil society.

Vardi, who is a co-chair of DLD, gave an example of Israel's startup ecosystem by mentioning Rothschild Boulevard, which is the Startup City's main hub.

During the DLD event, the street was turned into an open-air exhibition of digital media, tech exhibitions and interactive digital games.

Those events were arranged voluntarily by community leaders in different areas.

"This is quite amazing. It's the bottom-up ecosystem. We organise 100 events and festivals and anybody can come, people or startups, without paying for anything," he said.

Israel is a tiny country with a huge impact on tech. Half of its exports are hi-tech products, said Avi Hasson, chief scientist at the Israeli Ministry of Economy and Industry.

The Israeli government provides startup funding as well as the innovation infrastructure, he said.

In March, Hasson was appointed as the chairman of the Israel Innovation Authority, a new unit that developed and offered a variety of support programmes.

It plays a major role in enabling Israel to be a notable hub of innova

tion and tech entrepreneurship.

Regardless of political changes, stability was important in terms |of government policy assisting innovation and startups, said Hasson, who is serving a six-year term.

Ingredients not the only secret

While many other countries want to apply Israel's secret to boost their startups, Hasson said you may know the ingredients but it's the hands of the chef to make it different.

Israel is a small country and its society is highly connected, so startups here can easily get or find co-founders, the right professors, investors, manufacturers or government officials.

"Also, our young entrepreneurs or investors like to solve problems and see them as challenging. They are willing to take risks and fail. That's in our DNA," he said.

Like Vardi. The Israeli startup guru has invested in 86 companies since 1996, sold 30 and closed 30. However, the 73-year-old investor never minded about success.

"We are successful even when we are failing. I also regard the companies where I lost money as successes. That's a mindset," he said.

Vardi, along with his son, sold the instant messaging program ICQ to AOL in 1998 for US$400 million (Bt13.8 billion) that they had founded two years before.

Vardi also had advice for those who wanted to become entrepreneurs - it was not only for startups, but for life, too.

"In life, in work [you have to choose] who are your partners. The quality of people you associate with is very important. "About one-third of new startups are falling apart because their founders did not get along with each other," he said.

The risk is minimised in Israel because of what the Army contributes to the startup ecosystem through compulsory military service.

What the army is doing, in fact, is creating a big filter, for people to know who they feel good with or who they do not.

"In the army, you have to create teamwork, under pressure and in very tight circumstances. After a few years of it, you know exactly who you trust or who you can rely on.

"And this is one of the most important contributions of the army to the hi-tech industry and for life," he said.

As one of Israel's early hi-tech entrepreneurs, Vardi said the big difference from the time he started investing in 1996 is access to innovation.

Twenty years ago, there were some large companies and government agencies that controlled the innovation agenda, such as the US, UK, France and Israel.

Large companies such as General Motors or Siemens had a budget for innovation, so they rejected something new when it was shown by small companies.

"They said that we won't need you ... we can do it alone ... you are too small ... and the idea was stupid. But now the paradigm has been replaced by the 'fear of missing out' paradigm," he said.

The FoMO means the uneasy and sometimes all-consuming feeling that you're missing out - that your peers are doing, in the know about, or in possession of more or something better than you.

Hasson said that if people want to understand the future of Israel they need to know three elements of Israeli culture.

They are "tachles" - straight to the point, "chutzpa" - impudent boldness and "balagan" - chaotic or messy.

"Chaos creates a lot of ideas and out-of-box thinking," he said.

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