Israel is a small country of 22,000 square kilometers (the size of Sergipe, the smallest state in Brazil) and 9 million inhabitants (less than the city of São Paulo). Over half of its territory is occupied by desert, and water scarcity was a chronic problem until recently. To make matters even more complicated, the country experiences political instability at its borders — some neighbors still do not recognize the existence of the Israeli state.

 

Despite those geographic and political constraints — and perhaps for that very reason — the country has developed a vibrant economy as well as one of the most dynamic innovation and entrepreneurship ecosystems in the world with unique attributes. For one thing, the high concentration of startups and technology-based companies that offer innovative products or services with scalability potential.

 

Data from StartupBlink, a research center that maps innovation ecosystems in the world, show that Israel currently has 1,748 startups, an average of one startup for every 5,000 inhabitants. No wonder the country has become known as the “Startup Nation”, an expression made popular in a book released by Dan Senor and Saul Singer in 2011.

 

In the StartupBlink survey, Brazil shows up with 1,199 startups, which represent an average of one startup per 180,000 inhabitants. A survey from the Crunchbase website shows that Israel has 25 unicorns – startups with a market value above 1 billion dollars – whereas Brazil has 19 unicorns.

 

In the StartupBlink ranking, the Israeli innovation ecosystem appears as the third best in the world, following the United States and the United Kingdom. The ranking takes into account a series of quantity indicators (such as the number of startups, accelerators and coworking spaces), quality (presence of R&D centers, multinational branches and amount of private investments in startups, among others) as well as the business environment (infrastructure, internet speed and presence of good universities, etc.). Brazil is in 26th place in that ranking.

 

To get a closer look at the secrets for Israel’s success, the Paulo Cunha Innovation Hub held its first learning expedition in early July. The Insper team led a group of students, alumni and executives from partner companies to immerse themselves for five days in key places of Israel’s innovation ecosystem, in cities such as Tel Aviv, Jerusalem, Haifa and Beersheba. The goal was to bring in ideas and best practices to improve the Brazilian innovation and entrepreneurship ecosystem.

 

Among other places, the expedition members were able to visit Afeka College (a public Engineering college in Tel Aviv), The Bridge Coca-Cola (an innovation platform that aims to connect startups and corporations), the Peres Center for Peace and Innovation (organization created by Nobel Peace Prize winner and former Israeli president Shimon Peres), Tel Aviv University (often named the #1 institution outside the United States for fostering entrepreneurship), the Weizmann Institute of Science (one of the leading multidisciplinary research institutions in Natural and Exact Sciences in the world), the Ben-Gurion University of the Negev (one of Israel’s leading research universities), the Technion (the oldest university in Israel, responsible for educating around 70% of the founders and managers of the country’s high-tech industry), the University of Haifa (the country’s leader in the fields of Humanities, Social Sciences, Marine Research and Education) and The Hebrew University of Jerusalem (among the 100 best in the world).

 

Rite of passage

 

With a history marked by conflicts with neighboring countries, Israel has developed a culture of military readiness. Therefore, every Israeli citizen over the age of 18, with some exceptions, must serve in the country’s military for a minimum of 24 months (women) to 32 months (men).

 

For Insper’s professor Rodrigo Amantea, this mandatory military service works as a rite of passage for young people to grow. “When young Israelis finish high school, they go to the Army, where they will live with people from different backgrounds and ethnicities and develop important skills, such as discipline, leadership and self-management”, he says. “After that, many of them go on a gap year and travel the world as a backpacker. So, when they get to university, they have had some life experience that young people in Brazil haven’t had.”

 

During their mandatory military service, young Israelis are exposed to a variety of cutting-edge military technologies that prompt ideas for research and product development to meet market demands — this is where Unit 8200 stands out. Belonging to the Army Intelligence Corps, this unit is responsible for capturing information and deciphering military codes, through the interception of signals, telephone conversations, electronic mails and other types of messages. It is known for recruiting young people with the brightest minds in the country, while introducing them to the world of technology.

 

It was at Unit 8200 that young Uri Levine began working as a program developer. In 2008, after leaving the Army, Levine and other partners created Waze, the most used transit app in the world. Five years later, Waze was sold to Google for over 1 billion dollars.

 

It is worth noting that, in Israel, technologies developed for military purposes have a great impact on entrepreneurship in related areas. The Israeli cybersecurity industry — the second largest in the world after the United States — is largely a by-product of the defense industry.

 

Production belt

 

In addition to the important role of the Army, another interesting aspect of the Israeli innovation ecosystem is the solid connection between academia and business. “In Israel, there is a conveyor belt to transform the technology developed in university research institutes into a product”, Amantea explains. “This proximity between universities and companies is vital because the researcher is not essentially an entrepreneur. Researchers will not transform the patent into a product or a company. For that, they need the support of people in business.”

 

An example of how things actually work is the Israel Institute of Technology, the Technion, which has a book called “The Book of Good Ideas” where it lists the patents on technologies developed by its researchers that are available for licensing. It was there that Brazilian journalist Michelle Heymann and her French friend Diane Abensur sought inspiration to create a startup. Michelle and Diane met on an MBA program at Technion and were looking for a healthcare technology that would meet two requirements: to be already at an advanced stage of research and to have the potential to save the lives of a large number of people.

 

That’s how they discovered a technology developed by a renowned researcher in stem cells at the Technion, Professor Shulamit Levenberg, who created a method to detect exactly which antibiotic an infection is most sensitive to.

 

After negotiating with Technion and obtaining a license to develop a commercial product from that technology, Michelle and Diane founded the Nanosynex company in 2017.

 

The aim of the company is to use the method created by Professor Shulamit to develop a diagnostic test capable of checking the resistance of bacteria to antibiotics in record time. The test enables doctors to more quickly determine the most appropriate antibiotic treatment for their patients, while helping them recover in less time. Diagnostic tests available on the market today have a 48-hour turnaround time for results. The method that Nanosynex is developing aims to reduce that waiting time to 4 to 5 hours — in the future, the goal is to reduce it to 2 hours.

 

Why is it so important to reduce diagnosis time? Because the use of ineffective antibiotics encourages bacterial resistance. In 2019, more than 1.2 million people died worldwide from infections caused by antibiotic-resistant bacteria. Some projections indicate that this number could reach 10 million deaths in 2050 and become one of the biggest health problems of our time.

 

Nanosynex is conducting clinical trials on its product and expects to launch it in 2022. The company estimates that its product has the potential to generate revenue of 4 billion dollars a year. About a third of the revenue is expected to come from the European market, where the diagnostic test will initially be distributed. As the local market in Israel is small, Nanosynex was born with the ambition to sell its product globally, much like other Israeli startups.

 

In 2020, Michelle Heymann and Diane Abensur were featured in the Israeli edition of “30 Under 30 Tech” of Forbes magazine, which listed the 30 most promising under-30 entrepreneurs in the Israeli high-tech ecosystem.

 

Venture capital and role of the government

 

It must be noted that startups such as Nanosynex were only able to move forward with their project thanks to the venture capital market, an important addition to the startup industry. Israel has around 70 active venture capital funds, of which 14 are international ones. In 2021, Israeli startups raised over 25 billion dollars. As a result, Israel far surpasses any other country in terms of the volume of venture capital per capita (28,000 dollars per inhabitant).

 

In the Israeli innovation ecosystem, the role of the government also stands out. “In Israel, there is a positive interference by the government to foster innovation, which is part of the strategic agenda of the State”, Amantea points out. Other than being the country with the highest average spending on innovation (5.4% of the GDP), Israel has several scholarship programs and tax incentives to promote research and development.

 

The Israel Innovation Authority is the support arm of the government in charge of drawing up policies to promote R&D development in the country. The agency currently has an annual budget equivalent to more than 3 billion Brazilian Reais to invest in around 1,600 innovative projects by startups and other companies.

 

Additionally, the Israel Innovation Authority offers a number of programs to foster innovation. Chief among them is a fund that covers up to 40% of the cost of the approved R&D program.

 

According to Amantea, Brazil lacks a coordinated strategy in the area of innovation similar to the one existing in Israel. “We have several technology parks here, such as Porto Digital, in Recife, Fundação Certi, in Florianópolis, and IPT, in São Paulo, as well as many public universities that have done some interesting work,” Amantea adds. “But there is a lack of coordination at the national level to better align things and transform all this knowledge produced by institutions into actual innovation.”