Jenny Southan reports on how Tel Aviv has become a world leader in high-tech innovation.
Just beyond the glass doors of a gallery in Tel Aviv’s Florentin District sits a 19-year-old girl in army fatigues. She has tumbling auburn hair and a machine gun on her lap, and slouches as she talks to her friends.
A little further away, not far from the seafront, a group of young entrepreneurs drink Goldstar beer on the 11th-floor rooftop of their residential block. The moon is full, and weathered sofas and packing cases furnish the al fresco hangout.
Think of Israel and you will probably associate it with Judaism, the ongoing conflict with its Palestinian and Arab neighbours, and the threat of nuclear attack from Iran. But spend any time at all here – at least in Tel Aviv – and you will soon discover people are more preoccupied with where they are going to have brunch, where the hottest new bar is or how to generate money for their new start-up. “We have a microcosm of peaceful coexistence here – we are closed off in our euphoria,” says tour guide Michal Granot, with a smile.
Just off the seaside Shlomo Lahat Promenade, which is popular with cyclists who can pedal all the way down to Old Jaffa at the far end, is the Hilton Tel Aviv. One of the first business hotels to open, in 1965, it is coming to the end of an extensive revamp that has seen US$60,000 spent on each of its 600 bedrooms.
Ronnie Fortis, its general manager, says: “Visitors are always pleasantly surprised that Tel Aviv is not like how Israel is portrayed in the media.” He also asserts that the city is incredibly safe: “There are no areas where you would not feel safe at 2am walking alone.” While this may be overly bold, street crime and hassle is indeed low.
Against a backdrop of windswept palm trees and pockets of Bauhaus architecture, the city is abuzz with innovation and creativity. And whether it’s with a leaning towards the arts or the digital, it is Generation Y that is the driving force behind the city’s successes. About a third of the population is under 35 and with more start-ups per capita than anywhere outside the US, Israel has recognised where its strengths lie.
Secular Tel Aviv has become a hotbed for fresh talent, lured in by liberal attitudes, great nightlife and government support for new business. In fact, it is doing so well that the UK is fast making links with Israel’s burgeoning high-tech sector – responsible for 45 per cent of the country’s exports, amounting to an annual value of almost US$30 billion.
The UK-Israel Technologies Hub (ukinisrael.fco.gov.uk) was created in October as a team within the British Embassy working to enable a “strategic business partnership” between the two countries. Focused on digital, clean tech and life sciences, the UKITH has strong ties with Tech City in East London (the UK’s answer to Silicon Valley) and is helping to facilitate everything from introductions to pitches.
Director Naomi Krieger says: “There is a lot of room for companies in Britain to find new technologies that make their business models more efficient, and help Israeli start-ups to get a foot into the market at the same time.”
What’s it like to do business in Tel Aviv? Krieger says: “People are blown away when they come here – they expect a war zone and they see Tel Aviv, which is ranked as one of the top tourist destinations in the world, and it is calm and peaceful. If you look at the ups and downs of doing business in the Middle East, doing business with Israel has remained a very stable proposition. There are many British investors who have set up office here and they have access to a great pool of local talent. English is spoken widely and the legal and tax systems are easy to navigate.”
Visa requirements are also simple – you don’t need one for tourism or business of up to 90 days, and if you don’t want a stamp in your passport on arrival at immigration (countries such as Syria and Saudi Arabia will not let you in if you have an Israeli stamp), they will usually oblige.
Israel’s innovation boom began in the 1990s, many of the reasons for which are explained by Dan Senor and Saul Singer in their book Start-Up Nation: The Story of Israel’s Economic Miracle. It’s essential reading for anyone interested in why Israel has more companies listed on the NASDAQ than the UK, Japan and Singapore combined, for example, and Krieger echoes some of its key points.
“One of the factors is the tough neighbourhood we are in – not having a lot of natural resources and having to be creative in the face of adversity,” she says. “Then there is the culture, which is not wedded to formality and appreciates a maverick kind of style – Israelis are very informal; everyone goes by first names.”
Yosi Turkaspa, director of the UK Trade and Investment for Israel, says the entrepreneurial vigour found locally is partly down to cultural chutzpah. “Israelis are educated to see boundaries as flexible, not absolute – a limit is only a limit until we break it, and we like to push the limits all the time, “ he says. “People are willing to take risks and, what’s more, they don’t treat entrepreneurs who don’t succeed on their first or second attempt as failures.”
Turkaspa adds that another of the reasons Israel’s high-tech scene is doing so well despite its population of only 7.2 million – fewer people than in London – is that there is little money to be made from the domestic market, so start-ups have to think globally. “If you have a new idea for a venture fund or are talking to an angel [investor], they will always ask how you see yourself competing with the world. They will not ask you how you will compete in the Israeli market,” he says.
Stop by the Tel Aviv Museum of Art – a typical example of 1970s Brutalist architecture, which opened a new wing last November – and you will find an eclectic mix of lesser-known European Impressionist paintings, along with floors of contemporary Israeli art reflecting the various facets of modern living. The “Glocalism” collection from 1990 to 2011 stands out in its attempt to deal with the concept of an Israeli identity that is at once local and global.
The fall of the USSR in 1991 and the subsequent wave of immigration to Israel, known as the Soviet aliyah, not only contributed to the country’s “glocal” identity but its economy, too. As Gidi Grinstein, president and founder of government advisory group the Reut Institute, was quoted as saying in Start-up Nation: “Immigrants are not averse to starting over. They are, by definition, risk-takers. And a nation of immigrants is a nation of entrepreneurs.”
Krieger agrees. “A country of five million received a million immigrants in less than a decade, and many were highly qualified scientists. While in the beginning it was a big shock to the system and a lot didn’t find work, overall they have been incredibly well absorbed and have played a huge part in the technological leap of the country. It was a huge benefit to the economy, bringing a very educated and skilled workforce that contributed to growth.”
With all this in mind, it is not surprising that registering patents is something this 64-year-old country has become rather good at. According to the World Intellectual Property Organisation, Israel’s businesses and universities filed 1,452 last year, compared with 187 from Egypt, Jordan, Lebanon, Syria and Saudi Arabi combined, and not far behind Australia, which filed 1,740.
It also has the highest amount of venture capital per capita of any country – Jan Muehlfeit, Microsoft’s European chairman, has been reported as saying that if you take the amount of venture capital per capita in Europe it is US$7, in the US it is US$72 and in Israel it is double that. This has largely been made possible by the high number of international investors that provide lifeblood for start-ups.
Many of Tel Aviv’s high-tech firms are located on or around the tree-lined Rothschild Boulevard (also known as Silicon Boulevard), in the centre of the city, but it is also one of the most expensive places to rent, which outsiders may consider a rash choice for emerging enterprises.
However, Krieger thinks otherwise. “It represents the new generation of entrepreneurs who are very urban, who don’t want a long commute, and who know that networking in a bar or café is just as important as the work done in the office,” she says.
Two young companies based on the boulevard include smartphone and web app developer Lab Pixies, acquired by Google for US$25 million in April 2010, and online present-giving platform the Gifts Project, bought by Ebay for US$20 million in September. Other Rothschild residents who are forging a name for themselves independently of US ownership include face.com – creator of facial recognition apps – and Soluto.
With 1,800 high-tech companies based in Tel Aviv alone, Koby Simana, chief executive of the Israel Venture Capitalist Research Centre (ivc-online.com), explains why the sector is doing so well. “Since we are basically an island because we can’t trade with Lebanon or Syria – perhaps Jordan or Egypt on good days – our focus is on the West and the Far East,” he says. “And if you can’t deal with tangible goods you need to think about the technology segment.” This is because software can be designed to be compatible with smartphones and computers worldwide and, as Israelis are discovering, if they also solve commonly shared problems such as traffic jams or water wastage, they can make a fortune.
The fact that military service is mandatory for both men and women also seems to play an important role. Krieger explains: “It is quite common for people to leave the army and start their own companies. When you have worked shoulder-to-shoulder with someone in difficult conditions you know you can rely on them and work together well, and that makes for a great network after.” What’s more, she says there is often a transfer of technologies from the defence space to the civil space.
“When people finish their military service and move into the civilian world, they take all their connections and knowledge with them,” she says. “For example, Given Imaging is now a huge multinational company but what it did was invent the Pill Cam, which is a miniature camera in a pill that you swallow to take pictures of your intestine and diagnose digestive tract problems. This was developed by people using aeronautics and missile navigation technology.” Simana agrees that being in the army can help your career: “Military service helps you to grow up, realise what responsibility is and figure out what you are good at and not good at. It helps you to work in a team and even foster your skills or learn your trade.”
Eric Schmidt, executive chairman of Google, goes one step further in Start-Up Nation by saying that serving in the Israel Defence Forces can not only help you but make you. “The Israeli tank commander who has fought in one of the Syrian wars is the best engineering executive in the world. [They] are operationally the best, and extremely detail orientated.” All the same, the reality is that for most young people military service is, at best, an inconvenience and, at worst, everything that is associated with fighting in a war. Freedom as an adult also comes later, in their twenties.
In the nearby neighbourhood of Neve Tzedek, a trove of interior design shops and trendy bistros, such thoughts seem far away. People queue for sesame bagels, while down on the seafront an old man fishes off the wharf as a tortoiseshell cat basks in the sun. For Tel Avivians, life is about the present – and once military service is out of the way, the world of business is theirs for the taking.
- Visit goisrael.com
TEN ISRAELI HIGH-TECH COMPANIES
ANYDO (ANY.DO)
A free smartphone app that helps to organise your life by creating to-do lists and responding to voice commands. Founded 2010.
BILLGUARD (BILLGUARD.COM)
A free personal finance security service that highlights hidden charges, errors and fraud on your credit card bill. Founded 2010.
ONAVO (ONAVO.COM)
Simple smartphone and tablet apps that reduce travellers’ roaming and data charges when abroad. Founded 2010.
PRIME SENSE (PRIMESENSE.COM)
Designers of 3D motion-sensing chips for hands-free control of computer systems including the Xbox 360. Founded 2005.
SOHO OS (SOHOOS.COM)
An online management platform that helps small businesses and freelancers with invoicing, bill tracking and reporting. Founded 2010.
SOLUTO (SOLUTO.COM)
A web application that helps people overcome problems with PCs by sharing advice and insights. Founded 2007.
TAKADU (TAKADU.COM)
Software that uses state-of-the-art statistical and mathematical algorithms to help water networks identify leaks in underground pipes. Founded 2009.
WAZE (WAZE.COM)
A free mobile navigation smartphone app for drivers that allows them to build and use live maps and traffic data to avoid being stuck in jams. Founded 2008.
WIBIYA BY CONDUIT (WIBIYA.CONDUIT.COM)
An online toolbar platform providing free applications that are easy to customise and install on your website. Founded 2008.
WIX (WIX.COM)
A free, DIY Flash website builder that enables you to create professional-looking platforms in a couple of hours with no coding skills required. Founded 2006.
