Inside The Start-Up Nation

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Part 4: Saul Singer, Co-Author Of ‘Start-Up Nation’

By Max Fruchter

When I reflect on my time spent interning in Tel-Aviv, a multitude of highlights fill my mind. Each one is indicative of the uniqueness embedded within Israel; a uniqueness that provides context, and gives meaning to, the global nickname “start-up nation.”

My deep appreciation and enjoyment of this summer is in many ways a product of having read the worldwide bestseller Start-up Nation: The Story of Israel’s Economic Miracle, by Saul Singer and Dan Senor. In addition to being co-author of Start-up Nation, Mr. Singer is an American-Israeli journalist and author, as well as former editorial-page editor for the Jerusalem Post. I was aware that Mr. Singer lived in Israel and decided to pursue every avenue this summer that might successfully establish a connection. Despite the demanding, consistently packed schedule an individual like Mr. Singer has, he graciously made time to speak with me and remained in contact over the entirety of my time in Israel.

The following is a conversation I had with Mr. Singer several weeks ago, as my summer in Tel-Aviv came to a close.

Max Fruchter: I think many aspiring entrepreneurs would appreciate any advice you may have to offer as far as what, in your mind, makes a successful entrepreneur.

Saul Singer: I think one thing that new entrepreneurs need to learn quickly is that at the end of the day it’s all about the kind of people, the kind of team they put together. Because a start-up is basically an experiment, it’s a form of experiment where you have the theory about the right problem to solve and the right kind of solution. But often you’re wrong about your initial idea, and so often the key is not so much starting with the right idea but starting with the right team that you can give to the right idea.

MF: In your opinion, what are some key characteristics of the “right team”?

SS: First and foremost, a team of people should be compatible with each other. You’ve got to have a team of people who have different skills, different talents, and complement each other with their strengths. Basically the whole idea of the team is there is nobody that is good at everything. And the best entrepreneurs not only have a great idea but they are also able to attract the best team because they bring leadership and vision and all these things to the table. Most importantly, they are able to get people excited about the company they are building—not everybody can do that.

MF: As the news continuously develops, this question consistently takes on new meaning: I’m wondering what you would say is the greatest challenge facing Israeli innovation today, and how you think we can best jump those hurdles?

SS: I actually think that Israel is in good shape going forward as it is today. Our system is getting deeper and more experienced over time and, if anything, the world is moving in our direction. So my concern is not so much about going down, my concern is that we [might not] take the opportunity to go from good to great. I would say we are good right now. I think we can be great.

MF: How do you mean exactly? Because as the book explains, the numbers and statistics are perplexing. Wouldn’t you say they indicate Israel’s greatness?

SS: You know there is this famous business book called Good to Great by Jim Collins. In the book, he compares good companies with great companies. And good companies are growing steadily, maybe they are growing even faster than the stock market. But great companies are growing much faster than that. So what I am saying is that we are good. We are even good in comparison with most other countries. But we can become great, I think, by engaging with the innovation sectors that are coming up around the world.

Basically almost every country in the world now is trying to do what Israel already did: They’re trying to build an innovation sector, meaning lots of start-ups, venture-capital firms, you know the whole ecosystem that we have. And we have an opportunity to engage with those new systems that are coming up around the world in Europe, and Asia and Africa, South America. We are already very engaged with the U.S., though we are not that much engaged with the rest of the world. And I think we have an opportunity to innovate with these other countries, in a way that will help accelerate their development and their innovation systems while also allowing us to grow ours.

MF: On a similar note, many people question how sustainable Israel is as the “start-up nation.” They point to things such as the low labor-participation rate, which I think is now close to 55%, and the high concentration within the high-tech sector but not most other fields. Do you see these concerns as a potential threat to Israel’s sustainability as the start-up nation?

SS: Yeah. Basically you could say that Israel has two economies. We have the start-up nation and then we have the rest of the economy. You know the start-up nation is basically the high-tech sector. The high-tech sector is doing very well. The rest of the economy is not doing so well, so that’s a problem. And I think that we talked about that problem in the book, and I think it’s still a problem and it’s important to address for two reasons. One is if the rest of our economy were doing as well as high-tech, that would be amazing for our economy as a whole. But the other reason is that it’s not healthy to have huge social gaps. So we need to address this and I believe we can.

It’s a big asset that we have this part of the economy that’s doing very well, and we need to take those strengths and apply it to the rest of the economy. And I think there are a number of ways to do that. One is to kind of help these other industries, since basically all industries these days are moving towards technology and a kind of “start-up,” high-tech methodology. So we need to kind of spread all that to the rest of the economy—that’s part of it.

But part of it I think is to also treat the rest of the economy as well as we do the high-tech sector. Because right now the high-tech sector basically is enjoying low taxes, low regulation, and high competition while the rest of the economy is basically operating under high taxes, high regulation, and low competition. And so it’s not very surprising that the rest of the economy is not performing as well as high-tech. So if we are able to apply the conditions of high-tech to the rest of the economy, that alone I think will greatly improve the situation and reduce these social gaps.

MF: One interesting point that you spoke about a little before was the innovation sectors that are emerging throughout the world, trying to mirror what Israel has already done. However, a lot of what’s written in the book explains how Israel is unique and inimitable. What global impact do you think Start-up Nation has had for countries that cannot exactly mirror what Israel has accomplished? If Israel’s situation is one of a kind, what can other countries take from it?

SS: First of all, a lot of other countries feel that they do have something to take from Start-up Nation, which is why the book is being translated into about 30 languages. And what’s been happening is that other countries say to themselves increasingly that they want to have an innovation sector. They say to themselves, “OK, we want Silicon Valley.” That’s really the model, but then they look at Silicon Valley and they say, “Well, that’s America, it’s not really easy for us to do that.” But then they discover Israel, and they discover Start-up Nation. They say, “Well, look, here is this tiny country with no resources in a bad neighborhood and they managed to do it. Maybe we can do it too.”

So just by the fact that Israel has been able to build what it has built has given inspiration to many countries around the world. And there are some strategic aspects of how we did it that are applicable to many other countries, like the way we jump-started the venture-capital system with this program called Yozma that we write about in the book.

When I travel around and speak in different places, I deliver a specific message: Every country has its own story and is going to build its innovation sector based on its own story, its own culture, its own history, and its own strengths. Israel’s story is different than America’s story, for example. Again, our story is about overcoming adversaries, being a small country with no resources in a bad neighborhood and overcoming that with innovation. On the other hand, the U.S. is a huge country with lots of resources in a good neighborhood and yet the United States built Silicon Valley. So, clearly the United States had a different story than Israel, and what this shows is that every country has its own story. And every country is going to build its innovation sector on that story and on its unique strengths.

MF: Thank you, I can certainly relate to that idea and recall some of those points you discuss in the book. As someone who keeps up with the news, I can confidently say that one element of Israel’s economy that critics highlight is the fact that the overwhelming majority of Israeli start-ups are bought out, rather than being transformed into giants like Google or Cisco. These articles claim that this focus on big-name acquisitions rather than the birth of Israeli trademarks is something that is going to slow down the growth of Israel’s success. I’m curious what you think the motivation is behind this tendency of Israeli start-ups and if you see it as something that can be detrimental in the future.

SS: This is also an issue that we kind of dealt with in the book. You know, back then people were complaining, “Where’s our Nokia?” Well, nobody really wants to be Nokia anymore, but the idea is that people claim we need to build big companies. And I would say two things about that. One is it’s already happening—it’s kind of a slow process but over time two things are happening. One is that the exits are getting bigger. That is, companies are hanging on until they get to a higher valuation before they sell, so the average exit size is increasing. Second, just over 2014, there was a whole slew of IPOs where basically instead of selling to another company, companies went public and raised a lot of money. So they remain independent companies and are able to grow bigger.

Now, that said, I don’t think asthat’s really a measure or should be a measure of our success. In other words, we are a small country that doesn’t really need to have this; it wouldn’t be very good for us if we had just a few very big companies and not so many start-ups. I would rather have lots of great start-ups and a few big companies. And not only that. If we are going to build the next Facebook or Google or whatever, it’s going to come from a start-up. So in any case, we have to build more great start-ups if we want big companies.

Many people seem to think that the question of the future of the start-up nation is whether we build big companies. I think it’s nice to have, but it’s not really a must-have. For me the must-have is basically expanding into relationships with new countries, new continents.

MF: As someone active with the TAMID organization, I am eager to hear your thoughts. TAMID is rapidly expanding, and Start-up Nation is, in a sense, the “bible” or inspiration for TAMID. What are your thoughts on the organization, its tremendous success, and rapid expansion across college campuses?

SS: I’ve known about TAMID for a long time, pretty much since the beginning (2008), and as you said I’m excited by the organization acting on the vision of Start-up Nation. So I think it’s a great thing and I think it’s exactly the kind of thing I was talking about in terms of leveraging [the start-up perspective] as a way of connecting between countries.

You know there’s exciting stuff going on in the U.S. There’s exciting stuff going on Israel. And the two sides don’t always know about each other, not just in term of business and investing but in other areas as well. So we have to combine our strengths, and this is particularly important on college campuses. So, yes, I’m extremely supportive of TAMID.

MF: Lastly, as a fan of Start-up Nation, I am wondering if there is something on the horizon that readers across the world can look forward to? Maybe some sort of a sequel?

SS: We are beginning to work on another book. It’s not a sequel but on some level is related to Start-up Nation. But the most immediate follow-up to the book is an organization called Start-up Nation Central. Their headquarters are in Israel and it’s a nonprofit. They’re basically working to connect Start-up Nation with innovation sectors around the world, which is a lot of what we spoke about.

So I am excited that there is an organization that has started to do this, and I am involved with it. I don’t work there, but I am definitely involved with the vision of it. And so that’s one thing that’s been basically building on the idea and success of the book.

Please visit Start-up Nation’s website at http://startupnationbook.com. You can also follow them on Facebook at https://www.facebook.com/startupnationbook. For more information on Start-up Nation Central, please visit their website at https://www.startupnationcentral.org

Max Fruchter is a sophomore at Macaulay Honors College and Queens College studying finance and economics. He is interning with Incentive, Peregrine Ventures this summer.

 

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