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Jan 8, 2018 | 4 min read

Ecosystems

The Secret Sauce Behind Innovation Ecosystems

Part 2 Tel-Aviv with Valerie Zarka

Pierre Letoublon

Director of PARISOMA


PARISOMA
FABERNOVEL and PARISOMA are publishing a series on global innovation ecosystems, as part of a research project. We are interviewing entrepreneurs, venture capitalists, and academics, from the world’s most influential ecosystems to understand what they have in common.

By discussing regulation, investments streams, universities’ influence, and entrepreneurial mindsets with these experts we are trying to identify what really nurtures organic innovations. In our research, one of our assumptions is that innovation ecosystems are structured around three main pillars: Money, Talents, and Culture. In this interview with Valerie Zarka (MORE THAN DIGITAL), we discuss the specificities of Tel-Aviv related to these three pillars.

Coming from a world of digital communication agencies, Valerie started her career in companies such as BBDO, Ogilvy, and Carat (Dentsu) where she learned the challenges to innovate in large organizations. After many trips between France and Israel, she decided 3 years ago to spend most of her time bridging the gap between Europe and the Tel-Aviv innovation ecosystem, both in terms of acculturation and partnerships.

Together, we discussed the key role of the army in the creation of top-notch engineers, how the government invests in tech companies and how military conscription has an impact in networking.

1.The rise of a new innovation wave influenced by public policies

  • 1990-91: A tipping point

Between 1990 and 1991, the Tel-Aviv ecosystem experienced the convergence of several factors. First, the country was in the middle of a conflict who left many skilled workers without a job. Secondly, after the collapse of the USSR, Israel saw an intense wave of immigration. Approximately 37% of 900,000 immigrants, had a graduate degree. And finally, many R&D centers from foreign companies such as Motorola and IBM had already started to set up shop in the area to benefit from a large pool of talents. In order to leverage this dynamic, the government decided to structure the ecosystem with new infrastructures and ambitious investment plans.

  • Public infrastructures and public funding

On the infrastructure side, they created 24 public incubators, managed by the Office of the Chief Scientist, a public entity part of the ministry of economy. On the investment side, the government created a $100M fund of funds called YOZMA to irrigate public money into the ecosystem. To create this new generation of Israeli VCs, investments were required to involve YOZMA, Israeli private funds, and foreign venture capital funds, especially many American ones.

  • A successful impact 20 years later

These actions created a fertile ground for the rise of successful tech companies. Tel-Aviv went from an ecosystem with 500 startups in the early 90’s to more than 5,000 startups in 2017. In addition, most of the global tech companies now have an office with a strong willingness to be part of the ecosystem. Google, Facebook, and Amazon have followed a first generation of American companies such as Cisco, Microsoft and Qualcomm who have an office in the region. There are now more than 300 local R&D centers. For example, Apple has now 1,000 employees in its R&D centers around Tel-Aviv and they were used to work on the development of the iPhone 8.

2. A unique ecosystem influenced by the army

  • The Israeli army, a “school” for entrepreneurs

“The army plays an important role in the innovation ecosystem, both in terms of culture and talents.”. At 18, everyone has to spend between 2 to 3 years of military service. There, they “quickly” work on concrete projects where they get trained on the job. Promising students in mathematics and science are affected to departments where they will learn about computer science.

Then, at 20, some of these “kids” are able to manage teams, sometimes of over 100 people. For these reasons, they are immersed in a culture built around peer-to-peer learning, critical thinking, and reactivity. In addition – and contrary to what we can think, they have the liberty to not respect orders as long as they can bring solutions to the table. This environment creates generations of « autonomous » minds who are encouraged to take initiatives.

  • Importance of networks

“The army is the place where everyone creates its network.” Each year, each adult under their 40’s needs to give two weeks to the army. As a result, it strengthens connections between people who are often then in the private sector. Valerie told us that these networks of army “alumni” make it easier to get introduced to tech executives.

  • Business-driven universities

She also highlighted the importance of universities and their connection to the army and the local network of startups. Researchers are encouraged to do applied research and are incentivized through patents registrations. Each university has technology transfer centers to connect with external players and commercialize their IPs. For researchers, the bridge to join the private sector is also important and valued by companies.

If we look at Tel-Aviv through the lenses of Talents, Culture and Money, the Israeli ecosystem can be considered as Silicon Valley’s little sister. It’s a complete ecosystem with only its size as its limitation. Its talents are trained on top-notch skills early on in their careers. They grow in a military environment encouraging autonomy and entrepreneurial values. And the government has always been supporting the ecosystem to connect to local or external investment pipes. Nevertheless, the Israeli ecosystem is currently reinventing itself. Initially known to be the startup nation, Israel is aiming to become the scale-up nation. There is a strong desire to go bigger and not necessarily to see its startups acquired by large tech companies but instead target American or other large markets from Tel-Aviv.

More about Valerie Zarka:

After 14 years in digital agencies in France (B2L BBDO, Ogilvy One, Dentsu Aegis Media…) serving key accounts and French public authorities to design, manufacture and manage their digital ecosystems, Valerie Zarka is now assisting the same companies towards innovation through her company, More Than Digital. She lives between Paris and Tel Aviv.

 

 

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