At the eastern edge of the Mediterranean sits EMEA’s hottest tech hub. It stretches 180 kilometres from Haifa in the north to the outskirts of Jerusalem and is nicknamed Silicon Wadi (the Hebrew name for valley).
This hub is centred on, and largely defined by, the frenetic activity, skills base and can-do attitude of bustling Tel Aviv.
“Tel Aviv is a young city, with a long beach of warm Mediterranean water, from the ancient fishing port of Jaffa up to the modern fusion restaurant/bar site of Tel Aviv port. It is a city that never stops: traffic jams are common every night, and [it’s] tough to imagine how all these crowds at the club go to work the following morning.”
Eytan Stibbe, CEO of Vital Capital (Source)
Silicon Wadi has attracted much interest from international tech giants and is home to research and development departments of IBM, Google, Microsoft, Oracle and Intel.
It is far from reliant on investment and support from overseas; however, Tel Aviv has created and produced many widely adopted high-tech products, such as ICQ instant messaging, wireless-Internet technologies and USB memory sticks, and spawns more successful tech startups than anywhere else in the world, except for its Californian namesake.
Against All Odds?
On the face of it, Tel Aviv makes an unusual spawning ground for a world-beating tech hub: young entrepreneurs in Israel face military conscription, a tiny domestic market makes scalability challenging, an unfavourable time difference with the influential west coast of the States exists and a political situation promises as much disruption as it does economic stability.
“One big challenge for Tel Aviv startups is that there are very few local customers in this small country. As a small country, scalability is not in our DNA, but we are learning!”
Pini Yakuel, CEO of Optimove (Source)
But Tel Aviv has never been a city that balks at a challenge.
The Irresistible Rise of Tel Aviv’s Tech Hub
The roots of high-tech development in Israel can be traced back to the 1960s, with Motorola establishing an overseas department here as early as 1964. Growth was slow, however, until the 1990s and largely tied to military investment.
It was the shift from hardware to software, which relies more heavily on human talent, that saw Tel Aviv begin to come into its own. Significantly again Tel Aviv turned the resources of its military to its high-tech advantage, this time by drawing on the skills of graduates from Mamram, the Israeli computer corps.
“In this part of the world, high-tech entrepreneurs are the local heroes that young people respect, look up to, and emulate.”
Pini Yakuel, CEO of Optimove (Source)
By the 1990s the tech hub had established itself as a significant force, helped along by an influx of skilled immigrants from the Soviet Union and peace agreements that freed up international investment.
When Mirabilis, the developers of ICQ instant messaging, was purchased by AOL in 1998 the floodgates for Israeli tech startups were well and truly opened. In the next few years, thousands of startup companies were established using international venture capital and a heavy dose of domestic capital (to the tune of $3,701 million in 2000 alone).
Tel Aviv Today
Today Silicon Wadi is widely regarded as a base that is second only to California as the best place for tech startups. It is home to a raft of truly exciting startups that includes Fundbox, Playbuzz, 90min, Fiverr and Dynamic Yield, but it also boasts international offices of tech giants and established home-grown companies such as Zoran Corporation, Aladdin Knowledge Systems, RAD Data Communications and Check Point Software Technologies.
Israel proudly refers to itself as the Startup Nation. It has more companies listed on NASDAQ than any other country outside the United States.
Not bad for a population of 8 million living in a country 1/20th the size of California alone.
“It’s a young and cool city, with a diverse and creative population. It’s an inspiring place to live and work, with a talented pool of people to recruit from … Tel Aviv has the perfect atmosphere for startups.”
Nir Zohar, President of Wix.com (Source)
The Forces Driving Tel Aviv’s Success
So, what, beyond sheer force of will, has fostered Tel Aviv’s phenomenal success?
Israel’s emphasis on higher education has played its part, as has military conscription, which has moulded talent rather than diverted it, through elite tech training units such as Talpiot and 8200.
“In the army, a unit will plan an operation together, act on it and then review how it went. I can think of no better description of a startup than that.”
Saul Klein, serial entrepreneur and Partner at Index Ventures (Source)
The military continues to influence high tech funding in Israel, as it always has, although of much greater significance has been governmental initiatives, such as the Yozma programme, offering tax incentives and matched funding for investment.
The Jewish diaspora provides another source of sympathetic investment and Israel’s openness to immigration has enlarged its talent pool on a regular basis.
Technical and infrastructural factors have also helped create conducive conditions: Israel has the most developed mobile system in the Middle East and was an early adopter of investment in high-speed Internet networks and the provision of free Wi-Fi throughout its public spaces.
What truly distinguishes Tel Aviv, though, are networks of another kind. This is a city that loves to talk, to share and to connect: networking is second nature to Israelis.
“The startup business culture is very open and quite transparent – and you can really hear from other entrepreneurs about new things they’ve created and learned, as well as what didn’t work for them. This creates a general feeling of trust and partnership, which leads to very straightforward and easy business collaborations, introductions and makes doing business much easier.”
Gon Ben David, CEO of Roomer (Source)
But it is certainly not all entrepreneurs. Tel Aviv’s tech hub rests on a bedrock of research and development that forms a symbiotic relationship with it. Israel reinvests around 4.5% of its output back into civilian research. This positions it as the number one in the world for its investment as a percentage of its GDP, and it has brought many tech giants to the welcoming embrace of Rothschild Boulevard.
And the Future?
Silicon Wadi’s tech hub goes from strength to strength, and it is more than chutzpah that leads to predictions that the next Facebook or Google could emerge from its energetic and creative scene. Watch this space: Silicon Wadi’s growth may be impressive but its story is still being written.
Come and meet Dyn and Ongage at our first Tel Aviv Road show – “Think Fast, Think Big, Grow Global” on the 19th May. For more information and to register click here.