No, we have not just discovered listicles. But sometimes they actually make sense and you will see them more throughout this site. And when it comes to ranking global hotspots for start-up ecosystems, there is only one city that can claim the number two spot behind Silicon Valley: Tel Aviv.
According to the Global Startup Ecosystem Report 2018, this Mediterranean metropolis currently has more newly-founded businesses per resident than any other city in the world … and it’s only half the size of Frankfurt am Main. Tel Aviv has carved out its position by capitalising on its strengths in cybersecurity, artificial intelligence and computer vision, and its number of new startups has stayed consistently high over the years. But that’s not all. The city is producing more and more successful startups with an international standing, including several ‘Unicorns’ – businesses valued at over a million dollars.
So, what can we learn from the enduring – and flourishing – entrepreneurial culture in Tel-Aviv? TechObserver has seven lessons from Tel Aviv that Frankfurt am Main can learn from.
- Even geniuses went to school. Rethink your entrepreneur’s education!
Even in Tel Aviv, talent doesn’t just fall from the sky. Entrepreneurial education has been consistently supported throughout the region for the last two decades. One example is the IDC Herzliya University, which started offering the Zell Entrepreneurship Programme in 2000. The programme’s 25 students use their final semester to turn their business models into actual startups. A multitude of successful startups and scale-ups have come out of the programme over the years, including FeeX, Ironsource, Roomer, Wibbitz, Bizzabo und Argus. IDC Herzliya also began offering bachelor programmes that specialise in entrepreneurialism in 2017.
- Competition is nice … but being successful together is even better!
Germans tout competition as THE motor for innovation. However, evidence shows that Germans fall short when it comes to building sustainable, functional, interdisciplinary networks. Not only does that need to be learned, it must be firmly anchored in the startup culture – just like in Tel Aviv. “In Hebrew there’s a word – chutzpah – that means ‘positive rudeness’: Approaching people you don’t know and asking them to connect you to someone you need. This is important to deliver ideas, perspectives and criticism,” explains Yossi Maaravi, vice dean of the IDC Herzliya University, in an interview with the British newspaper “The Guardian”. The openness of individual founders is further supported by numerous professional networking platforms, such as the tech-hub SOSA. SOSA builds bridges between entrepreneurs and the more conventional business world, connecting startups and digital innovators to big businesses from the insurance, financial, energy and production industries
- Don‘t be afraid to take risks. Big risks
No pain, no gain! Entrepreneurs in Tel Aviv embrace this golden rule for successful startups, just like their colleagues in Silicon Valley. In a country like Israel, which has endured decades of political instability, society doesn’t automatically brand the head of a failed business as a loser. This creates space and freedom for a spirit of entrepreneurialism that is largely missing in Germany – be it in Frankfurt or Berlin – with its security-centered mindset when it comes to the economy. “The conditions necessary for an efficient cooperation with startups is a business culture that is imbued with openness to new ideas and different opinions,” states Martin Babilas of Altana. The chemical company backed a study called “Cooperating with Startups and Attitudes Around Risk in Germany”. The report draws the conclusion that the acceptance of unconventional thinking and trading, as well as the targeted use of external knowledge in the German economy, continues to be far too low.
- The more accelerators, the better!
With the first accelerator in Tel Aviv popping up in 2011, promising ideas have been tested and financed in the more than 200 incubators that have opened up since then. “All accelerators in Israel measure themselves on their portfolio’s performance, which is gauged in follow-up funding as well as exits. Not all of the accelerators are actual shareholders in the startups, but this is still the metric they use to gauge success,” explains Chaim Meir Tessler, Deal Flow Manager for the crowdfunding investment platform OurCrowd. With the establishment of the Accelerator Frankfurt GmbH and the FinTech Europe programme, Frankfurt has shown that it understands the value of accelerators in speeding up innovation. However, for a city that’s twice as large as Tel Aviv, not only the number, but the diversity of accelerators and incubators would need to greatly increase.
- Think out of the box. Work and live out of the box. Seriously!
In Tel Aviv, the sun shines an average of 300 days per year. The city also has 200 kilometers of Mediterranean coastline right outside its door. Considering these natural advantages, finding alternatives to working in a classic office isn’t difficult. Working on laptops in cafes is as much a part of the culture as casual work attire. A final talk with an investor in a polo shirt with sunglasses in your hair? For a CEO startup in Tel Aviv, that’s no problem at all. After the hoodie-revolution took Silicon Valley, anyone who thinks that innovation can only come from generic gray suits at fixed wooden desks is way behind the times. Plus, think about when we come up with the best ideas. It’s not when we’re under pressure in the glow of a screen, but when we’re relaxed (hot shower anyone?). So, take off your tie, kick off your heels and go outside!
- Make new friends!
Tel Aviv recognised early on that close cooperations with networks in other cities pays off. This has lead to a vibrant exchange with the startup scene in Berlin, which is only a four-hour flight from the Mediterranean metropolis. The Israeli-born Eran Davidson was one of the first to see the business potential in these city partnerships. With his venture capital fund, Davidson Technology Growth Debt, he has invested in European high-tech companies such as Soundcloud, the Berlin-based, music-streaming platform. Davidson sees the cultural differences between Berlin and Tel Aviv as a major opportunity: while the disruptive technology developed by the Israelis is more “innovative, original and risky”, the Germans put a lot of value on “perfect implementation”. In order to capitalise on the synergies between the two cities and identify high-potential startups early on, Deutsche Telekom even opened an office in Tel Aviv. “For me, the pairing of Germany and Tel Aviv is like a union made in heaven,” says Axel Menneking, investment manager at the Telekom’s accelerator Hub:Raum.
Where could Frankfurt look to make new friends? London also has a strong focus on fintechs, but Helsinki is one to watch out for. Not only is the capital of Finland similar in population size to the Main region, it also has one of the fastest growing startup scenes in Europe.
- Use your unique selling point!
For many, Israel is seen as a never-ending crisis area that’s always on alert. Practically all Israeli citizens are required to serve in the military – and the start-up scene is taking full advantage of that. Many tech entrepreneurs served as engineers in Unit 8200, which specialises in remote and electronic intelligence gathering and code decryption. Even for those who didn’t specialise in these fields still came into close contact with high-level technology as befits a well-endowed military such as Israel’s.
So, what can we learn from this? Frankfurt am Main has the unique reputation of being the financial capital of Europe, and it should integrate this intellectual and institutional capital into every aspect of the burgeoning startup scene.