What makes Israel with just eight million people, an innovation hubNov. 11, 2013
The presence of thousands of startups, and more engineers per capita than anywhere else in the world, makes Israel a natural hub for innovation.
Best known for defence- and - military-inspired technologies, entrepreneurs across the nation are now focussed on building the next generation of healthcare applications. Helped by government support, societal acceptance and the presence of large numbers of multinationals eager to buy innovative technology from startups, Israeli companies are building a wide range of products and services.
"For us the issue of innovation is not a hobby. It is basically about who we are and what our economy is built on," said Avi Hasson, chief scientist at the ministry of economy. "This was a country selling oranges to the world and not high tech. We have now decided to build our economy around the knowledge industries." Currently half of all Israeli exports come from the technology industry.
Israel's research and development expenditure account for approximately 5% of the country's $260 billion (Rs16 lakh crore) GDP, higher than any other western country. This excludes the spending on defence R&D. The office of the chief scientist has a budget of $450 million (Rs2,800 crore)annually and always co-invests along with the private sector. "We do not try to replace the private sector, but rather complement it; we like risky projects," said Hasson, who worked as general partner at Gemini Israel Funds. Typical grants are in the range of $30,000 to $6 million.
There are also around 300 multinational companies in the country which are a big part of the ecosystem. Many of them, including Apple, Google, Intel, Microsoft, General Motors, and GE, have set up research and development facilities to use the local talent and come up with breakthroughs.
"You have 20-year-old kids here; their education is not to follow instructions, but to lead and solve problems," said Yossi Matias, managing director of Google's Israel R&D centre and a top computer scientist. In June, Google bought Israeli mapping startup Waze for over $1 billion.
In 2012, M&A deals involving Israeli and Israel-related companies were valued at $9.74 billion, an 88% increase from $5.2 billion in 2011, according to Israel's IVC Research Center database. Besides acquisitions, many of these multinationals provide space for entrepreneurs to meet and help them to bootstrap their ideas. In 2012, six of the 10 largest acquisitions involved venturebacked targets.
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