Israel is a low-trust society which might make it difficult building up big companies.
The Israeli start-up ecosystem is a well-oiled investment machine that has been turning out companies for the better part of two decades.
The country has its own homegrown angels like Gigi Levy-Weiss and Eilon Tirosh, venture capital firms like Carmel, JVP, Pitango and Canaan, equity crowdfunding firms like OurCrowd and iAngels, and Silicon Valley firms with offices on the ground like Battery Ventures and Sequoia (that’s not to mention the new wave of Asian investors betting on Israeli start-ups).
But, for all the “Start-up Nation” fanfare, Google’s acquisition of Waze – Israel’s highest profile start-up exit to date – was valued at just $1.1B. And, while Israel officially has two Unicorn companies on the CrunchBase list (more if you count companies like Taboola and WeWork), only a handful of Israeli companies have actually exited in the billion dollar range. This is, at least in part, by design.
COMMENTS:
* I know you will laugh, but the key missing element is middle management. Israelis want to either be left alone to code or design, or want to be the vice president/CxO of something. We are not being taught at school, the army or university to be the backbone of scaled companies.
What we see in recent years is new forms of management like squads for engineering & product that embrace a more casual or lesser hierarchy style. This is probably better suited to the local culture.
* I would imagine that the Arab-Israeli conflict and an economy in which salaries cannot keep up with living expenses are bigger roadblocks than the lack of middle management.
Second, it seems like an easy problem to solve. There are many people who (like me) moved to Israel from the United States or Europe, places with no shortage of middle managers. Can’t they simply step in and fill those middle management rolls?
* I find that the Arab-Israeli conflict doesn’t negatively impact the building of big companies. If anything, in a similar fashion to how evolution is driven by external stimuli, the big challenge (with its many downsides) that the geo political situation presents actually stimulates innovation. This is driven by both the doubling down on engineering efforts in the intelligence corps (8-200) that are tasked with sustaining security through this complex situation as well as “getting shit done” culture resulting from it. The article you cite about cost of living is true, but it also specifically notes that the “high tech economy” has the income levels to sustain a (very) high standard of living. This is not dissimilar to the issues you see San Francisconians have with Google / Facebook / Twitter and other high tech employees that increase the rent for others. If you are willing to live in parts other than Tel Aviv, cost of living is significantly lower. My biggest complaint is the lack of sufficient development of public transport.
Going back to the issue of building big companies, the issue is one of a transforming industry, and the Israeli culture of dismissing authority.
