Start up companies are the driving force of innovation in all industries across the world. It’s not a surprise that a nation that leads in many of these industries, is also incredibly effective at producing a great number of startups. Second in the entire world by percentage of GDP spent on Research and Development, Israel is called “The Startup Nation” for a reason. Why is this country so successful at making the entire world advance faster? We will give you answers.
Sometimes, complicated questions like the one in our title, have rather simple answers. Israelis can do it, and they can’t seem to find a reason not to. Innovation is literally paving the way into the future, and it has quite a few positive side effects such as making money, bettering everyone’s life, and giving back to other people.
Israel is a tiny country. It makes sense that most of the work that’s done there is geared towards the outside world. When the whole world is at your disposal to do business there are few limitations. As a consequence, the absolute majority of funds Israel’s companies receive are sourced from other countries. Again, that’s much more money than Israel itself could ever fund for its people. Turns out, startups in Israel are very good at turning the received money into a successful product or a service. The question now becomes, why would anyone not invest in Israel?
Return on investment-wise, it’s very hard to beat Israel. Is there anything else to add to get the full picture? As a consequence of wide success in many technological areas such as data security or computer science, the nation gains even more confidence. It’s a self-reinforcing loop, resulting in a go-get-it frame of mind, which in turn inspires even outsiders to invest in these highly successful people. David Kezerashvli, an experienced investor and founder of venture capital firm Infinity VC, has more insight to share through his experience of working with Israel.
More Reasons For Appeal
While confidence is a good trait for entrepreneurs, it can’t be the only marker for future success. Luckily, Israel has more to offer than simple confidence. Few other nations can boast such a high number of highly trained professional workers fluent in more than two or even three languages. Apart from Hebrew, many Israelis are native English, German, Russian, Spanish and French speakers. Kezerashvilli would also highlight its highly stable economy. The regulatory market makes it one of the freest capitalist markets in the region. Important factors not found elsewhere in the Middle East.
While today many governments are thinking about how to tax their business more, Israel has a different philosophy towards its own economy. The government understands that it can create critical support that gives rise to even more startups. While taxes here aren’t as high as in European nations or the United States, they aren’t as low as in the Third World. This middle ground allows for both good tax revenue for the government and economic freedom for the local businesses.
Even thirty years ago, Israel knew what it was aiming for. Somehow, they managed to think for what’s best for the nation in both the short-term and long-term. Starting in the early 1990s, the government ran many funding programs to help startups from seed-to-early revenue level. This, in turn, allowed much more foreign investments to flow in the country’s economy. This makes sense because investors are much more willing to put money into a product or a service that’s already made, selling well, and has a great business plan.
Low Bureaucracy And Transparent Regulations
Another essential factor for the high success of Israeli startups is how easy it is to get funded by foreign investors. Kezerashvili notes that the country’s rules are incredibly easy to follow, and they are made with the people in mind. The process is far more simple than other countries’ regulations on foreign investment.
Israel does have its fair share of bureaucrats and forms but many of these headaches do not apply to receiving foreign investment. Anyone can get funded legally, with just a few industries with limitations, such as the arms industry and cybersecurity. Those industries can still receive investment but the regulation is more strict. To be fair, Israel itself allocated a tremendous budget towards these two for domestic investment.
Along with that, Israel has fewer frameworks for foriegn corporations. Foreign companies don’t receive special treatment under Israeli law. Anything Israeli citizens can do, they can too, business-wise. There aren’t many blanks to fill in, authorities to report to, or traps to avoid.
It is fair to say that we could all learn a bit from each other. We could all learn a lot from Israel, at least in regards to their policies surrounding start-ups and entrepreneurs. Kezerashvili is but one example of a successful businessman who’s got good things to say about Israel’s policy. If you need any more evidence, feel free to find it! The internet doesn’t hide any of it, so a quick Google search will land itself quite handy.