Israel raised 28x more VC money than the US
Not in absolute $ terms, but per capita
This is a great example how long-term strategy backed by excellent execution creates a solid foundation.
Tel Aviv, the most vibrant start-up city in Israel.
It was not built overnight, here were some of the key challenges they overcame to get to this point.
1/ Lack of local VCs
‘Yozma’ was a program initiated by the government in 1983. It was simple, any outside VC investment into Israeli start-up would be matched by the program. In return, if the VC gets an exit the principle had to be returned to the government. So, VCs could enjoy 2x more return.
The program also encouraged the founders to relocate HQs to Boston, New York and Silicon Valley to attract more funding.
2/ Exit markets for investors
We all know that VCs love exit, to ensure that they stay attractive, Israeli start-ups aimed to get listed on Nasdaq or got acquired by US tech companies.
3/ Lack of experience to run public companies
Israeli entrepreneurs were champions in turning ideas into an investable company and scale it until the point of IPO to get acquired by a listed company.
Eventually entrepreneurs began to stay with the acquirer and picked up the trick of the trade. Post which they were back to the drawing board with a new idea and taking a crack at running the company and this time they were the ones taking it public.
4/ Security threat
Israel does not have friendly neighbours, right from sourcing water to producing food locally to finding a large enough market to make businesses viable.
+ They mastered drip irrigation and hydro-ponics
+ Invested time in building network & offices for the export market, so much so that their start-ups are always born Global.
+ More interestingly, they classified cybersecurity as an option for military service, this channelized over 8000 STEM-talent to build the world-class cybersecurity founders that we know Israel for today.
Israel is a great example on how policymakers support and the grit to turn weaknesses into strengths can create a force to reckon with.
In 2021, 57 Israeli companies went public, raising an accumulated $4 billion, that is 3x growth in a year.