STARTUP

6 Start-up Lessons Southeast Asia Can Learn From Israel

3 Israeli entrepreneurs share what makes start-ups thrive in their country

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BY Marishka Cabrera and Lian Kyla Dyogi - 01 Mar 2017

startup lessons israel

PHOTO CREDIT: Getty Images

Ever wonder how a small country with some 8 million people can breed some of the most successful tech companies, as in the likes of Waze?

For Adi Shemesh, founder and CEO of fashion swapping platform Trench, Israeli innovation was borne out of the need to survive economically. “From a very sad situation of an area without peace,” where a big chunk of people’s salaries go to security and defense, Israelis had to find ways to support themselves financially.

“I think that even though it’s surrounded with countries, it’s like an island. It’s very unfortunate, but it is the way it is,” she says.

This “island” has become a fertile breeding ground for start-ups, many of which get acquired by global tech firms like Google and Apple. In a report by Israel21c, in the first half of 2016 alone, there were 45 exits by Israeli start-ups worth $3.32 billion, according to the IVC Research Center, which monitors the country’s tech industry.

And in early 2017, Bloomberg ranked Israel (number 10) as one of the world’s most innovative economies together with the U.S., Japan, Sweden, Singapore, and South Korea.

“If I had to build a start-up company from scratch today - I would do it in Tel Aviv. The culture, the talent, and the spirit are all aligned to create amazing products,” says Or Offer, co-founder and CEO of SimilarWeb, a digital market intelligence company.

What makes start-ups thrive in Israel? Here are 6 lessons for Southeast Asia:

 

1. Failing big is better than failing small

In many Southeast Asian cultures, where the concept of saving face is highly valued, the fear of failure is still evident. In Israel, however, failure is seen as a natural process of growing rather than a setback.

Avishai Sharon, CEO of content marketing analytics firm TrenDemon, says acceptance of failure in Israeli culture encourages entrepreneurs to tackle bigger, more relevant problems. For him, even if you fail at solving a big problem, you’re still better off than succeeding in solving an insignificant one.

“And when you realize that when you take on a big problem, there is a very high risk of failure, so that’s part of the game. If you’re playing it safe, you’re never going to make a major breakthrough,” he says.

Even the Israeli market is open to experimentation, which for Shemesh is “an amazing playground for entrepreneurs to chat, check, and validate their ideas.” She says, “It’s a really great forgiving market to just do a lot of tests on, to do a lot of mistakes on, and learn from that.”

A little audacity helps, too. Offer adds, “Israelis have a tendency to dive headfirst into challenges and generally speaking are not afraid of the unknown. What some might call chutzpah, I think of as being fearless.”

 

2. Compulsory military training breeds teamwork

Even military training—a requirement for both Israeli men and women—instills values needed to build and grow start-ups. Sharon explains that everything in the army is about dealing with challenges, being aware of your capabilities, and building trust in the team. “I think one of the big lessons is that nothing is solitary in the army. It’s all about how the unit works,” he says.

The start-up team, which he likens to a brigade, should also have a shared goal. He says that one of the challenges for entrepreneurs is being mindful that they cannot do everything on their own; rather, they need a strong team.

Offer adds, “The values and skills acquired in the army - from tech skills to loyalty and camaraderie - breed amazing talent and make building strong teams so much easier.”

 

3. Exposure to military technology encourages innovation

How else does being exposed to new technologies in the military breed a culture conducive for start-up building? Sharon says because “you basically have a chance to work with very advanced tools, architecture solutions… It opens your mind to what’s capable, what’s possible.”

If you want to solve not only current problems but tomorrow’s problems, it’s important to be open to new technologies, processes, and solutions. In Israel, innovation is embedded in the culture. Shemesh says, “People are very open… they love innovation. So many people here do innovation for their living so the whole culture is very excited about new things.”

 

4. Merit is based on ideas, not rank

In Southeast Asian societies, there are some unspoken lines and rules of authority that may hinder younger employees from giving feedback and generating ideas. In Israel, these lines are not as clearly defined, even in the military.

Sharon says, “In my early days, I could go and talk to very high ranking [officials] and express my opinions, come up with ideas, and take part in discussions. And so you realize that your true merit is based on your ideas, rather than your rank.”

He explains that this kind of culture has a democratizing ability, “to bring new ideas, to nurture them.”

 

5. An entrepreneurial mindset is taught in school

How do you nurture a steady supply of new ideas? By supporting the youth, so they can come up with their own. In Israel, there is a push for educators to integrate entrepreneurship, and its related skills, in school programs.

Shemesh says that there are a number of contests for high school students geared towards entrepreneurship. Sharon adds, “I took part in a program where I teamed up with high school students and helped them build their ideas, their business plan, help them think about how that fits in a commercial sense... So definitely there is a lot of the... entrepreneurial world coming into the education in the later stages.”

This support system, not only from start-up communities but from other sectors too, helps create a strong ecosystem in which start-ups can thrive.

 

6. Look beyond your borders

The ecosystem in Israel is also mature, according to Sharon, which start-ups can benefit from in terms of access to funding and mentorship from founders who have gone through similar journeys.

On the other hand, because the market is saturated and the barriers to entry are low, rising above the noise and differentiating yourself becomes much harder. “So even if it’s a very healthy environment, you have to be very good in order to sustain this for the long term and to really build a company. And take it beyond the start-up stage,” he says.

Scaling is likewise an issue. Many start-ups will have to look to other markets, such as the U.S., and compete with companies that are bigger and better funded. “The thing is that Israel itself is not a market because it’s so small. So any company that wants to scale has to do so internationally—it has to grow beyond its borders,” he adds.