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  • Start-up Ecosystem: Let’s learn from tiny Israel

    Ms. Divya Juneja, Assistant Professor, IIMR

    Start-up is no new word in country, a lot of policies have framed, incubation centers are open, institutions supporting them financially and non-financially, universities are running various programs to promote it on different level, many investors are showing stack in it, big companies talking about it, research centers are working to finding innovative goods and services, and many more. All this combines to form what we call a Start-up Ecosystem. Government of India under the leadership of honourable Prime Minister Mr. Narendra Modi has launched 50+ policies to support Start-ups like Start-up India Stand- Up India, Make in India, Digital India, MGS, STP, Venture Capital Assistance Scheme etc. which has made tremendous growth in numbers of Start-ups and development of Entrepreneurship. 

    According to NASSCOM report 2019, in the last decade 19 Unicorn Start-ups (Valued over $1 billion) have emerged in India, 8700-9300 total tech Start-ups and 1300 of new start-up additions in India in the same year. The figures given by NASSCOM about Indian Start-up Ecosystem are mind-blowing in the history of India. But still Indian Start-ups are facing ground level problems, such as skimpy infrastructure, Ineffective R&D, problem in raising funds, unorganized and fragmented market, and knowledge and exposure in doing business. Seeing these problems we can accept that there are few things which we are missing, these few things can be government policy framing, may be funding procedure or motivation factors of the Entrepreneurs. Israel is known as a cyber security hub, the United Kingdom like Singapore is emerging as a financial services hub- these hubs are attracting start-ups, corporate, investors and ecosystem enablers from all over the world to set-up their presence. India, in spite of its market size and talent, is not known as a specialist for any industry

    So, the question is how we can overcome these problems? Can we learn something from countries which are far ahead from India in terms of Start-up Ecosystem? Why is the success rate of Start-ups higher than ours? What can we change to create the Best Ecosystem of the world for our Start-ups?

    Israel Start-up Ecosystem

    The tiny country of Israel mushrooms almost two new Start-up companies every day and today houses some 6000 Start-ups. Israel is a country with a population of only ~8.6 million people. This is less than 1% of India’s population, lesser than even the population of Bangalore City, the start-up hub of India. Israel has the most number of start-ups per capita and is one of the largest start-up bases in the world. The country is widely acclaimed as the “Start-up Nation” and also has 250+ corporate R&D centers. Most MNCs, upsetting their industries, have a home/office in Israel as the country now accommodates a lot of the world’s innovation.

    Key highlights of Israel ecosystem:

    1. According to ‘Start-up Genome’s 2019 Global Start-up Ecosystem Report (GSER)’, one of the world’s most comprehensive reports on start-up ecosystems, the “success factor” of any ecosystem is measured on 9 factors; these: performance, funding, market reach, talent, experience, connectedness, knowledge, infrastructure, and policy. Based on these factors, the Start-up ecosystem is categorized into four basic types: leaders, major hubs, momentum, and challengers.
    2. The report says that Tel Aviv (Israeli City, Start-up hub of Israel) and other cities in the top seven as “leaders”. They have “strong performance across many ecosystem success factors, each of them creating at least $30 billion in ecosystem value, with a median of $56 billion.”
    3. Not only this but Tel Aviv has also scored high including in funding access (nine out of 10) and quality (seven out of 10), global reach (eight out of 10), start-up output (eight out of 10), and start-up success (seven out of 10).
    4. The comprehensive report also notes that Israel has sub-sector strengths in AI, Big Data, and analytics, as well as cyber security. In the latter field, Israel ranks second, with exports of some $6.5 billion in cyber security products per year, according to the report and exits of $2.81 billion in 2018. Israel is also the first country in the world to offer a PhD in cyber security and is home to six university cyber security research centers.

    How do they do it?

    1. Education system in Israel: Most schools are government-funded and hence, education is free until the age of 18 for all students. In fact, school attendance is mandatory from nursery school years all the way till age 16. There is a national curriculum and hence, uniform subject material is covered in all of the schools. It is very different to the Indian education system, where syllabus and content vary significantly not only across states/regions but even within a single locality.
    2. Give responsibility to youth: Army service is an undeniable cultural factor in Israel. But the most common explanation for its significance for entrepreneurship is not related to defense, but rather being disciplined and giving responsibility to youth regarding their budget and lead teams and projects. Other countries should also push young leaders to take on responsibility earlier and empower them to lead their countries into a digital future.
    3. Incubators: The Israel government has set incubators that are funding $600,000 that are too risk free. If a Start-up fails they don’t need to pay back their funded amount, they pay 3% of royalty if they succeed only. Compared to the US, Israel has attracted per capita over twice as much venture capital investment and 30 times more than all the members of the European Union combined. Israel comes in top 10 most innovative nations in the world, according to the World Economic Forum’s Global Competitiveness Report 2019.
    4. Innovation Hub: In Israel 25 leading investors and high-tech entrepreneurs joined hands to set up a unique tech innovation hub called SOSA (South of Salame) in 2013. SOSA has created an exclusive global network that bridges the gap between supply and demand of corporate innovation. Innovation Labs Program, under Israel Innovation Authority (IIA), encourages open innovation by providing financial and nonfinancial support to corporations to build business aligned programs, IIA provides direct funding support to start-ups.
    5. Reverse innovation model: The IIA approaches innovation by understanding the challenge first, and then working backwards to source solutions. This is the reverse innovation model. For example, established corporations are invited to pitch their challenges to start-ups. This promotes the formation of joint ventures (sometimes between competing firms) to address them.
    6. Excellence along with persistence: Israeli scientists made 3D-print heart structures. The new 3D-printed heart contains cells, blood vessels, chambers and other structures a heart needs to function normally. Just days after the public announcement of the first 3D-printed human heart, Professor Tal Dvir gave a wonderful message, his message was focused not only on success, but also on the need to do more and go further. A similar message came from SpaceIL, which attempted the first Israeli moon landing. After nine years of work and millions in investment, however, the company failed to complete the mission as their unmanned spacecraft successfully achieved orbit but crashed upon landing. SpaceIL immediately announced a second attempt to become the fourth nation on the moon, emphasizing understanding the cause of failure meant there was no reason not to try one more time.
    7. Government Support: Govt. of Israel provides additional funding support to accelerators and incubators after a competitive bidding process with proposal being measured on output metrics (like exits, follow-on funding, export revenue enabled) than input metrics (like number of events)
    8. Local support with global ambition: Google, Apple and Facebook have their biggest R&D centers in Israel outside of the US. There is a close-knit world of Israeli tech, even global companies supporting local markets. For example, the new Amazon Web Services headquarters in Tel Aviv has an entire floor available to the public for organizing community events, while Intel, the largest employer in Israel, actively supports diversity programmes. Start-ups like Moovit, an Israeli mobility-as-a-service company, immediately consider global expansion.
    9. Directness and transparency go a long way: Israelis are as brutally honest as possible, take off the face mask and be true.
    10. Fearless: Being a war prone country, they never get afraid of taking risks. On being asked if Modi ji’s call for a ‘start-up India’ can succeed, Israel Prime Minister Benjamin Netanyahu said “As far as the ‘start-up nation’ is concerned, I think this has a lot to do with entrepreneurial spirit.

    Key Takeaway

    Undoubtedly the Israeli is excelling in creating Start-up ecosystem, but we at India, with more than 34.5% of youth population, with our persistence, passionate attitude and provided government support can reach to the top of the world and can create world’s best innovations anywhere, being at world-class laboratories of the country or at college labs.

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