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Israel’s start-up success born of war

THERE were no manuals to deal with the situation, but if there had been, they would not have recommended what Klein did. He used the tail rotor of his helicopter like a flying lawn mower to chop down the foliage. At any point, the rotor could have broken off, sending the helicopter crashing into the ground. But Klein succeeded . . .

AS an anecdote about a 20-year-old chopper pilot struggling to rescue a wounded comrade, the above passage reads as if it came from the pen of a war novelist rather than an economics scribe.

However, it was exactly the kind of story that Start-up Nation, the best-selling account of Israel's success in turning business ideas into NASDAQ blockbusters, needed, said its co-author Saul Singer. Speaking to The Australian yesterday, Singer argued that Israel's knack for turning out successful innovators, entrepreneurs and companies was far better explained by its citizens' early exposure to war and adversity than broadband infrastructure.

"The main thing they try to teach in the military is the concept of the mission. You can't fail but you have to take risks in order to succeed and you have to figure out how to square that, and that's very much the challenge of the start-up," Singer said.

He said Israel had become a tech and innovation superpower on the back of broadband produced by its mix of private operators and that Australia needed to devote more attention to its venture capital conditions than its technology infrastructure.

"Broadband wasn't a huge driver for us. We had decent infrastructure but we weren't cutting edge so it wasn't great infrastructure that led to all this," he said.

Start-up Nation was the result of Singer and his co-author Dan Senor's own mission to understand how Israel's seven million citizens had managed by 2009 to produce the second-largest number of NASDAQ-listed companies after the US.

It has since slipped to fourth behind the US, China and Canada but per capita it is still an outlier in economic history.

To compare, Australia, with a population of 23 million, has approximately seven companies listed on the NASDAQ -- mostly in the biotech field.

While here, Singer has been checking Australia's start-up scene and promoting Israel on behalf of the United Israel Appeal. He said Australia's venture capitalists were similarly positioned to Israel's in the early 1990s: plenty of start-ups but little incentive to invest in them.

In 1992, Israel's government stepped in with a program called Yomza -- initiative in Hebrew -- to share risk with private capital firms. For every two dollars of private capital the government would risk one and take a 40 per cent equity stake in the companies It could could be bought back cheaply to ensure maximum upside for investors. If the investment failed, the government wrote off the debt.

The result, said Singer, was investors "lining up around the corner" and putting the country on its trajectory to become a tech superpower. The policy, said Singer, was the perfect expression for the Jewish state's national experience. "Israel itself is a start-up when you think about it," he said. "They're the product of an idea, a lot of determination and a willingness to take risk."


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Original piece is http://www.theaustralian.com.au/australian-it/israels-start-up-success-born-of-war/story-e6frgakx-1226596746373


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