Israel supplies opportunities for startups in the United States

Published in UT San Diego, November 6, 2012

After the United States and China, which country has produced the most successful startups that are listed on American stock exchanges? The tiny country of Israel.

“The party is just beginning,” contends Israel venture capitalist Jonathan Medved, who was recently in San Diego to talk about how closer San Diego-Israel ties could benefit both partners.

The Israeli data are stunning — more than $16 billion in venture capital under management, $37 billion taken out in initial public offerings and mergers and acquisitions in the last decade, and an unemployment rate of 5.6 percent — a 20-year low. U.S. companies such as Qualcomm, Intel, Apple and Cisco have either acquired Israeli companies and/or established research and development centers in Israel. Major venture capital firms — Kleiner, Benchmark, Accel, etc. — have offices in Israel.

Medved says Israel’s success “starts with our attitude toward risk. We live daily with the extreme existential — Iran threatening to wipe us off the map — so the risk of starting a company is no big deal.” Medved spoke at a program initiated by Stand With Us, the global Israel education project, and the University of California San Diego Rady School of Management’s new U.S.-Israel Center on Innovation and Economic Sustainability. The center is supported in part by the Jewish Community Foundation of San Diego’s Israel Studies Fund.

Medved cited other reasons for Israel’s thriving startup sector, including:

• The small population (7.7 million) “where sometimes people know each other’s business too much,” and there is a very competitive spirit.

• The need to go global from day one because the country is so small. Its companies think bigger.

• Mandatory three-year service for 18-year-olds in the Israel Defense Forces, in which the best and the brightest assemble in the elite units and learn cutting-edge technical skills and develop leadership experience before attending college. So when they start their company, they are more “mature” in their skill sets.

• A flat, anti-hierarchical, social, informal organization that permeates every aspect of Israeli life, including the Israel Defense Forces and business. In Israel, you get 11 opinions from 10 people.

• The celebration of entrepreneurs as the new cultural heroes.

• A welcoming attitude toward immigrants. “We’re a melting pot. This diversity is our strength. Immigrants make good entrepreneurs, which is also true in America,” Medved said.

America can learn a lot from Israel, particularly its positive approach toward immigrants. We’ve written before about our frustration with our country’s immigration policy. The smartest young people from all over the world come to the United States to study, and then we send them home instead of giving them a green card.

We also share some of the challenges that Israel faces, such as the need to improve math and science education in K-12 and bring more minorities into the technology sector.

Israeli-U.S. business partnerships can have a strong economic impact. For example, in 2010, Massachusetts had nearly 100 companies with Israeli founders or Israeli-licensed technologies, according to a study by Stax. In 2009, these companies provided $2.4 billion indirect revenue in Massachusetts and 6,000 direct jobs there. The numbers are likely bigger for California.

So we say l’chaim (to life) to the new U.S.-Israel Center at the Rady School. May it lead to the creation of new partnerships, new jobs and new opportunities for both Israel and San Diego.

Neil Senturia and Barbara Bry, serial entrepreneurs who invest in early-stage technology companies, take turns in writing this weekly column about entrepreneurship in San Diego. Please email ideas to Barbara at bbry@blackbirdv.com

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