Israel Beyond the Headlines

I recently had the opportunity to visit Israel for a business trip. I discovered a modern, vibrant country and met some of the most innovative and welcoming people. While instability in the Middle East gets the bulk of the media’s attention in North America, this trip opened my eyes to the amazing things happening in the region.

Startup Nation

I discovered firsthand why Israel is called the startup nation. It is impressive how Israelis have built a prosperous country in a short amount of time (founded in 1948). While relatively similar to Quebec in terms of population (~8 million), Israel is a small country geographically. Its landmass is roughly 75x smaller than Quebec’s and water source is over 800x less abundant. To put things into perspective, the entire country is slightly larger than the state of New Jersey! Natural resources are notoriously scarce in Israel. However, instead of being defined by its natural resource limitations, Israeli entrepreneurs have found ingenious ways to create solutions that are being exported throughout the world. The country’s economic strength is largely attributable to its advanced high-tech sector, rather than raw material production.

Innovation and entrepreneurship are prized in Israel. Technology contributes to more than 50% of exports and exports represent about 33% of the nation’s GDP. Israel is a leading country in solar energy, agricultural technology, water conservation and exports cutting-edge technologies in software, communications technology, medical equipment, and life sciences.

While relatively poor in physical commodities, Israel is rich in intellectual capital and is investing heavily in order to maintain its position. Israel is currently ranked 1st in the world in research and development investment and startup creation per capita. Research and development investment, as % of GDP, totals 4.4% in Israel versus a meager 1.7% in Canada.

An Entrepreneurial Culture

So how did Israel become a prosperous oasis amid such an unstable neighborhood? The emphasis placed on education and self-sufficiency is well documented, and Israel benefited from successive waves of immigration. Some of the brightest minds from Europe, Africa and Asia contributed their talents to the construction and emergence of Israel. I sensed that Israeli entrepreneurs are fueled by a passion to create and by a collective sense of purpose to contribute to the well-being of their nation. Israeli entrepreneurs are a force to be reckoned with. They believe in the pushing the boundaries of what is possible and they have no fear in taking head-on some of the biggest multinationals in the world at an early stage. With a small domestic market and limited trade with bordering countries, entrepreneurs have to think globally almost from day one. Adaptation, resilience, and rapid decision-making under pressure are valued qualities that are tested during their mandatory military service, and probably play a role in the success of Israeli entrepreneurs. I was fascinated by the stories of the founders of companies like Waze and Mobileye that are both challenging giants like Google.

A Bright Future

The country known as the Startup Nation, from a fascinating book of the same title published in 2009, has a bright future.  Entrepreneurs are waiting longer to exit and are building bigger businesses. Many of those that decide to sell remain actively involved and are contributing to strengthening the startup ecosystem –which is already ranked 2nd in the world after Silicon Valley. There is also additional upside on the macroeconomic front. The national workforce participation rate is only 57%, while it is at 66% in Canada. Moreover, Israel’s population is younger and growing faster. The annual population growth rate stood at 1.9% in 2013, three times faster than the OECD average of around 0.6%. Israel has progressed at an impressive pace despite being in a relatively constant state of upheaval with its neighbors since its founding. Let’s hope the region finds a path towards geopolitical stability – it would be a major push for the entire region and an example for the world to follow.

Tourism

Israel is a small country, but it is incredibly rich in history and there is much too see. After my business trip, I spent slightly over a week visiting Tel Aviv, Jerusalem, the Dead Sea, as well as Petra and Wadi Rum in Jordan. Tel Aviv is a modern, dynamic city on Mediterranean Sea with great restaurants and nightlife. Jerusalem is literally at the crossroads of the three large monotheistic religions. It is quite a fascinating city. We also drove through the West Bank to Bethlehem to visit the birthplace of Jesus and the Church of the Nativity, supposedly the first church. I came back home with a slightly better understanding of the highly complex geopolitical situation in this divided region. After Jerusalem, we drove along the Dead Sea to Eilat. We stopped a few times to appreciate the fantastic landscape of the area and climbed the famous Masada fortress. We capped our trip visiting the ancient city of Petra – a marvelous open-air museum – and exploring the Wadi Rum desert. It was a bit of a trek getting there, but the detour was worthwhile.

Interview with Dan Senor, co-author of “Start-up Nation: The Story of Israel’s Economic Miracle”

 

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About Ludovic Dumas

Ludovic transforms innovative companies into world-class organizations. He is an investment professional at an investment firm representing the interests of one of the most successful families in Canadian business. Before joining the private equity world, Ludovic was an investment banker at CIBC and with ING Group’s investment banking team in Frankfurt, Germany. Mr. Dumas was also a management consultant with Deloitte where he worked on corporate strategy, restructuring, market analysis, due diligence, and economic development mandates. Specialties Mergers & acquisitions, capital raise, corporate strategy, entrepreneurship.
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