Next Silicon Valleys: What makes Israel a start-up nation?
- 10 February 2014
- From the section Technology
For more than 70 years, the area now known as Silicon Valley has pumped out one world-changing company after another. Now, other areas are aiming to replicate its success with their own revolutionary technologies. In the first in a new series, Rory Cellan-Jones visits Israel to discover how the so-called "start-up nation" has emerged as one of the front-runners:
In her cramped Tel Aviv apartment Lia Kislev and her team are hard at work on a site they believe can be the latest Israeli start-up to wow the world.
It's a website called Wishi which stands for Wear It Share It, and is designed to be a new social network for choosing clothes.
"It's a social styling platform," says Kislev. She explains that you upload pictures of your entire wardrobe to the site, and then your friends advise you what to wear for a night out or perhaps a business meeting.
This business is just three months old but instead of attacking the small Israeli market, it has immediately gone global, with the majority of its users in the United States. And its founder has big ambitions.
"We want to be the go-to destination for people who want to know what to wear."
At the other end of the scale from Wishi, Wix occupies spacious offices overlooking the beach in Tel Aviv. There are skateboards fixed to the wall, funky furniture, and a roof terrace where the staff can gather for parties or business meetings.
This is a business which enables anyone to create a website which looks professional without much expertise, and it has grown rapidly over the last seven years employing 500 people in offices from San Francisco, to Vilnius, to New York.
Last November it floated on Nasdaq, one of more than 60 Israeli companies which make the country second only to China as an overseas presence on the high-tech stock exchange.
So why would a company like Wix start up in a tiny country like Israel?
The answer, according to co-founder and chief executive Avishai Abrahami, is a highly skilled workforce, particularly in software development: "Israel is number one in engineers per capita - in terms of talent in programming, in product, in marketing it is second only to Silicon Valley.
And the advantage is you don't have to compete with Facebook or Google when you're hiring."
Two examples then of an explosion of innovation in Israel, dubbed The Start Up Nation by Saul Singer and Dan Senor in an influential book about its booming economy.
That was published in 2009, since when growth has accelerated, as a wave of venture capital money comes in search of technology investments.
"Last year $2.2bn [£1.3bn] was invested in 650 Israeli start-ups," says Jonathan Medved, a Jerusalem-based serial entrepreneur who has been putting his money into hi-tech firms here for more than three decades.
"That's more than all the venture capital money invested in European technology companies."
It is not just web firms where Israel is strong, it has plenty of world class technology in sectors ranging from cybersecurity to clean energy.
Eyesight, located in the hi-tech Tel Aviv suburb of Herzliya, is one example.
In an impressive demo, I was shown how to swipe through a presentation or click on a link by waving my hand or crooking my finger.
In the hunt for new ways to interact with computers, its gesture recognition software has won it deals with hardware manufacturers like Toshiba and Lenovo.
Strong universities, combined with the well-funded armed services, also help to fuel innovation.
And at Ben Gurion University of the Negev in Beersheba, I came across the robotics lab of Amir Shapiro.
As he showed me a robot that could cling to the keel of a ship and send back pictures to a mobile phone, he explained that he'd learned a lot during the military service which is compulsory for all Israelis: "I designed armoured vehicles, I learned mechanical engineering."
Many of his students have arrived from elite army units where they've received scientific training, and the army is also a major source of funding for robotics research.
"Warfare is dangerous," he says. "It's better if it's fought by robots, not people."
You might think that Israel's security situation - surrounded by enemies, under threat of boycott from the international community over its treatment of the Palestinians - would make it a risky place to start a new business.
But the venture capitalist Jonathan Medved says it is an advantage: "Here in Israel we live with existential risk, we live with the threat of a madman across the horizon hurling horrible weapons at us. The risk of starting up a company relative to that existential threat doesn't compute. Big deal, get over it."
And when I joined a group of young Israelis from the tech scene for dinner in Tel Aviv, that devil-may-care attitude was in evidence.
We were not in a restaurant but in an apartment, having booked with an Israeli start-up called Eatwith, which enables you to dine in people's homes.
The hosts were three young men, including a former pastry chef at Jerusalem's King David Hotel.
They thought it would be fun to use their skills and interest in food to welcome guests to their apartment - and make some money.
We were joined by Eatwith's founder Guy Michlin, who had returned to Israel after studying and working in Silicon Valley.
The wine flowed, course after course of delicious food arrived, and people swapped stories about the latest dramas in Israel's start-up scene.
Michlin admitted that getting his company off the ground was still very hard work - "I'm working a 27-hour day" - but he believed it would pay off. "In Israel, everything is possible."
And that belief in its own future is what makes this country so confident that it can emulate Silicon Valley.