6 Crucial Lessons From The Rise Of THE Startup Nation, Part 1 of 3

So who’s the real Startup Nation?

Nope, it’s not who you think.

The country we are talking about received more venture capital per capita than any nation in the world – 2x as much as the United States. They have more companies listed in the NASDAQ than Korea, Japan, Singapore, China, India and all of Europe combined. They’ve done this despite their small populace (just 7 million people), having relatively little natural resources, and being in a perpetual state of war (it is surrounded by its enemies).

israelflagIt is Israel.

In their amazing book, Start-up Nation: The Story of Israel’s Economic Miracle, authors Dan Senor and Saul Singer tells the story of how Israel has recently achieved tremendous economic growth through the development of startups.

As someone whose passion lies in the development of Filipino startups precisely for economic growth and poverty alleviation, the book simply enthralled me and made my imagination run wild.

The book talks about innovation, about “battlefield entrepreneurs”, about the importance of survival mentality, nationalism through enterprise, about the critical role of diaspora, and naturally, about chutzpah.

The book talks about how a powerfully entrepreneurial culture made all the difference in their transformation into Startup Nation.

We HAVE to emulate their example.

Here are some the most compelling arguments and ideas which crossed my mind while reading the book:

1) We have to destroy hierarchical thinking

Precisely because they are surrounded by enemies from all sides, Israel requires all young men and women mandatory service in the IDF – the Israeli Defense Forces. Now, you might be thinking “joining an army?! this is the absolute LAST thing you want to do to challenge hierarchical thinking!

But this is where it gets interesting.

The IDF employs a curious bottom-up culture where hierarchy is thrown out the door. Subordinates are actually encouraged to challenge their superiors. In fact, subordinates can oust superior officers through vote (!).

miss israel

Miss Israel 2009, IDF soldier

Consequently, from a very young age, Israelis are trained to challenge the status quo and assert themselves – in extremely high-pressure environments.

Is there a better way to train would-be entrepreneurs?

With the combined experience of University AND a 2-3 year, one-of-a-kind stint in IDF (which the book explains through a greatly-named chapter, Battlefield Entrepreneurs), the Israeli 25-year old would-be entrepreneur has no global peer.

So…how can we start changing our culture here?

Our schools, by and large, teach our children to follow rules and singular ways to solve problems (multiple choice, fact-based learning, etc). Our companies, by and large, teach our workers to follow very defined job descriptions and kowtow to the boss.

This needs to change. We have to find a way to reward risk-taking and encourage doing things different, especially with our younger generations.

(Note – this school thing really worries me. My 5-year old was recently accepted in a big university, and when we were given the official introduction of what happens in school – I really second guessed this decision. I think our schools still produce graduates built for the industrial age – and the industrial age is dying fast. 

Startup dreamers take note – the education system is just waiting to be disrupted – it is now starting in the US. Why not here?) 

2) We need to embrace and use technology, regardless of our “field”

I talk to a lot of entrepreneurs who say “technology isn’t for me,” and that’s that. I think a quick dismissal of using technology is huge mistake. Technology is precisely what has made this world flat. Technology is what leveled the playing field for any entrepreneur in any part of the world to compete on a global scale. Why not use it? It is precisely what can take us to the next level.

Technology can be applied to ANY field, with wondrous results.

A budding social entrepreneur can say “I just want to help the farmers, I don’t want to be involved with tech.” Guess what? Hi-tech in Israel started with agriculture. Without much land (and most of it infertile) and much water, Israel was able to turn itself into an agricultural force, increasing its agricultural yield a whopping 17 times!

How did they do this?

Technology.

Are you a doctor who wants to build a startup? A musician? A publisher? An events organizer? A marine biologist?

Look hard at technology. Embrace it. It isn’t your enemy, and it can become your bestest friend.

How can technology allow you to do something different and new and innovative in my field?

(In Israel for example, you’ve got doctors working with engineers on a startup which aims to build a credit-card like device which aims on making the injection obsolete. The book lists so many of these “mashup” startups which combined expertise and technologies from different fields. Amazing.)

3) We Need More Venture Capital, Much More (and the government needs to get into the game)

The book is very very clear on the role of venture capital in Israel’s startup-powered economic transformation. They call it “Innovation Finance.”

I always try to encourage bootstrapping, and essentially, this was also how Israel started – with an awful lot of bootstrapped firms fighting for survival. But in order for us to scale our businesses on a global level? Venture capital is a crucial key.

fundingSeeing the strategic role venture capital had in its development, the Israeli government started a program called Yozma (Hebrew word for initiative) in the 1990’s. The government investment $100 million in forming ten venture capital funds. A key part of the strategy was to have each fund represented by 3 parties: a young Israeli venture capital company (in training), a foreign venture capital firm, and an Israeli investment company of bank. To attract foreign VC’s,  the Israeli government offered that its shares can be bought out cheaply after 5 years, if the fund was successful. This essentially meant that while the government shared the risk, it offered the investors all the reward – an unusually great deal.

The government did this not only to attract foreign capital, but to have the young Israeli VC;s learn about successfully managing venture capital from their successful foreign counterparts.

In a few years, this same fund has grown to around $3 Billion, all to support hundreds of Israeli startups and ventures. The Yozma program has resulted in copycat programs all over the world.

Is there any innovative Philippine politician, lawmaker, or national leader listening?

(and if you know anyone, please forward this to him or her)  

If there are, let me tell you personally, startups are the key. We Filipinos LOVE technology. We are naturally innovative. We speak great English, the startup language. We can build great, globally-relevant startups.

Over the past year, we’ve seen fund sources sprout up from the business sector, all aiming to help startups. This is great news and has to continue. We have also seen startup-related initiatives by DOST, and a few other government sectors, but you know what, I think we might just need MORE help.

Game-changing, Yozma-type help.

(Jump to Part 2 here!) 

PS: If you know anyone who would resonate with this post or to whom this post would be pretty useful for, do practice some yozma and share! Who knows what could happen if you do?

Comments

  1. Great Stuff Peter! Can I feature this at Enzamada.com?

  2. Hi Peter, regarding no. 3, Rep. Sonny Angara (LDP, Aurora) is interested in creating a regulatory framework for venture capital and private equity in the Philippines. Sen. Manny Villar and former Rep. Cynthia Villar (NP, Las Piñas) are also instrumental in introducing the innovative REIT law. Sen. Ed Angara (LDP) on the other hand helped shepherd the PERA law to reality.

  3. Reblogged this on Nors Codes and commented:
    A post every Filipino must read (especially for the Filipino entrepreneur)
    (from Peter Cauton of Juan Great Leap)

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