Silicon Valley Isn't Waiting Around for Startup Nation

Israel is a wonderful source of innovation, creativity and development. But it needs to get over itself.

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Israelis tend to take Israel’s hi-tech industry for granted. Tell them that investors are daunted by security risks and they shrug, confident that tiny Israel is at the center of the technological universe and has no match in knowledge, innovation and creativity.

The question of government support for Intel goes right to the heart of the problem.

Intel Israel is the largest Israeli high-tech employer. It is responsible for 10% of Israeli industrial export and 20% of high-tech export. And it is being taken for granted, as is the expectation that it will continue to work in Israel and invest in building new plants.

Some Israelis would prefer not to be confused with the facts. They shrug at Intel's decision to build a new plant in Ireland rather than in Israel (the Irish offered sweeter terms). They figure Intel and some 300 multinational companies also working in Israel are here to stay.

Feeling secure in the multinationals' affection, they feel free to fixate on the imploding IDB conglomerate and to bewail the losses they suspect they'll suffer. But they forget that the multinationals doing R&D in Israel affect their financial future just as much. Without them, they’d wish IDB was their worst problem.

From Silicon Valley, where I live, I can offer a different perspective.

Yes, Israel is a remarkable source of innovation, technology, creativity and development. For all the nation's tiny dimensions, it is No. 2 in the world when it comes to innovation, according to Startup Genome, which ranks "startup ecosystems", which the business environment for startups.

But we mustn’t lose proportion. Anyone familiar with the hi-tech scene in Silicon Valley knows that in terms of absolute numbers, Israel is still a minnow. The great technology companies aren't waiting for Israelis to do them a favor and come work for them.

Again for the sake of proportion – the largest "foreign group" in Silicon Valley isn't Israeli expats, it's Indians. Almost 44% of the startups in Silicon Valley have at least one non-American born founder.

Among startups founded by immigrants to America, 33% were started by Indians, up from 7% in 2005, according to the Kauffman Foundation of Entrepreneurship. How many were founded by ex-Israelis? 3.5%.

"Indians have founded more such companies than immigrants born in the next top seven immigrant-founder-sending countries combined," reported the Kauffman Foundation.

High-ranking Indians in the large companies could be understood for aspiring to open their company’s next development center in India. And Indians are only one example of foreign influence on American companies. While quite a few Israelis work in companies in Silicon Valley and do influence decisions, there are a lot more Koreans, Taiwanese, Germans and British, among others. In the war of demographics, Israel loses.

The new world we live in has no historical sentiment. It searches for the cheapest and highest-quality places for development and manufacture, and is very much affected by the demographic change in the corporations.

Israeli managers fight this battle in multinational companies every day. There are several unknown heroes (to bring some into the light: Gil Goren and Orna Berry of EMC; Yoram Yaacovi and Tzahi Weisfeld of Microsoft; Professor Yossi Matias of Google; Gil Golan of General Motors; Dor Skuler of Alcatel-Lucent; Mickey Steiner of SAP Labs and Mooly Eden, Maxine Fassberg and Dedi Perlmutter of Intel, among dozens of others fighting in the trenches).

Life isn't easy for any of them. They must serve the interests of the foreign company employing them while at the same time persuade them that Israel, and no other country, is the right place for the next R&D center or manufacturing plant, and never mind the perennial shadow of war.

Nor can it be said that they get much support. On the contrary: they feel they have to wheedle Israel into supporting their endeavors. Sometimes it seems that they’re the only ones who realize that in today’s world, it’s a privilege for Israel to have 300 multinational development centers. It’s an even greater privilege to have a multinational company’s microchip-manufacturing center, such as Intel’s, in Israel.

The evolution of the global technology scene, influenced by demographics, could easily reduce or end those companies’ activity in Israel. Intel’s story is a microcosm with crucial implications.

High-tech is a key growth engine for Israel. People love to talk about it but the ones stoking that engine, as it huffs and puffs up the steep slope, are standing very alone.

It’s time for more people in Israel to realize how important this battle is, lend a hand and help stoke those engines instead of draining away their power.

The author, who lives in Silicon Valley, works for Rhodium Investments and is the former CEO of the High Tech Industry Association in Israel.

Israelis tend to view their startup sector as a sacred cow, but if anybody's big in Silicon Valley, it's India.Credit: AP