How has Israel, a country of barely 9 million people, managed to establish itself as one of the foremost Startup Nations? An elaborate network of VC firms and the elusive chutzpah of the Jewish people have everything to do with it.
While the previously mentioned ingredients no doubt have their role to play, Israel would not have transformed into the Startup Nation it is today without the massive venture capital industry that supports it.
“You can have great ideas, you can have a lot of innovation, you can have great partnerships with corporates, but if you don’t have enough money to fuel this innovation, then then it’s going to be a challenge,” as Manuel Sussholz, co-founder and Managing Director and of Sweetwood Capital.
Today, Israel’s venture capitalist industry comprises around 200 active VC firms, 70 of which are foreign firms. To put this in perspective, the United States has around 1000 active VC firms. While this sounds like a lot more, Israel’s high number of VC funds really stands out when you realise that the United States has a GDP that is more than 50 times higher than Israel’s.
VC firms continue to be the driving motor behind the Israeli tech sector. In 2020, nearly 90% of all investments flowing into the sector came from VC firms. Although their continued success looks all but guaranteed, it is important to mention that the government played an important role in the rise of VC firms. Indeed, as already mentioned in the first article of this series, the Yozma Initiative launched by the government was instrumental in attracting VC firms to Israel.
Chutzpah And The “Entrepreneurial Spirit”
To be a successful country of entrepreneurs it takes more than money, incubator schemes and government initiatives. At the end of the day, you do not only need people who have the right financial support and skills, you need people with the right kind of attitude. Most of all, you need people to have an entrepreneurial spirit.
“The way that failure is looked upon, in western countries is very different than in Israel where failure is seen as a way to only improve one’s journey and make certain experiences. That attitude towards failure is really very much accepted in the Israeli society,” says Manuel.
“I think their entrepreneurial attitude is key to their success. As something that’s very ingrained in their mindset, it is also very hard to replicate elsewhere.”
Manuel Sussholz
It is a well-documented fact that the people of Israel embody this attitude more than perhaps any other people. They even have a word for it in Hebrew: chutzpah. Loosely translated, chutzpah means guts or audacity. The Jewish Language Lexicon also calls it the “quality of overstepping boundaries with no shame.”
While Manuel admits that this attitude does have some drawbacks, he thinks that overall its positives outweigh its negatives.
“This attitude does create more friction on a daily basis. But I would say it’s more like, you know, creative chaos, which is good and disruptive,” says Manuel. “I think it’s quite healthy and it ties into their entrepreneurial spirit where the people are always going to try and find a solution that works better and faster and is more efficient.”
Replicating Success
To conclude this series on the Startup Nation of Israel, let’s do a quick recap of the main ingredients of Israel’s ‘Secret Sauce of Success’.
This series suggests that Israel became a Startup Nation through a combination of risk-taking government initiatives (Yozma, generous accelerator schemes and high R&D funding), a military which acted both as a university, bootcamp and HR agency, a dense network of national and international VC firms and, most importantly, because of their people’s chutzpah.
While this very short (and very simplified) blueprint is merely a rough sketch, it confirms what most entrepreneurs deep down already know: the right attitude is the foundation of everything.
As Manuel Sussholz puts it: “I think their entrepreneurial attitude is key to their success. As something that’s very ingrained in their mindset, it is also very hard to replicate elsewhere.”
To find out about the last, and most important, three ingredients of Israel’s ‘secret sauce’ click here:
