Graphics by Nina Tagliabue
BRB Bottomline: Though startups are typically synonymous with Silicon Valley, they are so prevalent in Israel that the country has earned the moniker “the Startup Nation.” But how does a nation of fewer than 10 million people spur such entrepreneurship? The answer: the Israeli Defense Forces. Through interviews with startup executive Mike Hershkovitz and UC Berkeley Economics professor Shachar Kariv, both of whom served in the IDF, we investigate how the IDF fosters entrepreneurship.
Israel, a small nation of less than 10 million people tucked in the western corner of the Middle East, has both the most venture capital per capita and the most startups per capita out of any other country in the world, thus being dubbed “the Startup Nation.” Their culture of ingenuity, adeptness at recognizing and developing talent, and emphasis on tech can all be attributed to their success in startups. However, these traits did not emerge in a vacuum. Much of Israel’s culture of entrepreneurship and the associated traits are honed through service in their impressive military, the Israeli Defense Forces (IDF). Compulsory service ensures that nearly all citizens, male and female, are taught the importance of fortitude and are trained to develop their unique skills, all of which translates well to the turbulent world of startups.
A History Lesson
With nearly 60 countries having some form of required military enlistment ranging from compulsory service to selective conscription, Israel is but one of many examples of forced military service. However, what distinguishes Israel’s military from the rest of the world is how the Israeli Defense Forces, both intentionally and unintentionally, fosters entrepreneurship and fortitude.
The history of the IDF highlights Israel’s and the military’s culture of ingenuity. Israel’s military emerged out of necessity. After Israel’s independence was recognized in 1948, its neighbors ‒ Egypt, Jordan, Iraq, Syria, and Lebanon‒invaded the newly-created country. In a bid to protect the fledgling nation, the Israeli Defense Forces were established on May 31, 1948 with the mission of defending Israel’s sovereignty from neighboring countries. A ceasefire was reached in 1949, but that war would be far from Israel’s last. In Israel’s short 72-year history, it has been caught in a state of perpetual conflict. Even today, skirmishes between Palestinians and Israeli forces as well as operations against militant organizations like Hezbollah have encouraged Israel to heavily invest in its defense forces. Given the prevalence of violence in the region, maintaining not only a strong military but a populace of well-trained civilians in reserve is crucial for the very survival of Israel.
Certainly, Israel is not the only country that enforces mandatory military service. However, no other country has replicated the same correlation between military service and entrepreneurial intent that Israel has. So what about the military can we attribute to Israel’s success as a startup incubator?
Israel as a Startup Nation
To better understand the experience of IDF veterans who have since gravitated to the startup industry, I interviewed former soldier Mike Hershkovitz. He served from 1995 to 1998 as a sergeant in the infantry. Following his service, he worked for startups in both Israel and the United States and is currently the VP of Global Sales at ActivBody, a San Diego-based health startup. Much of his work consists of helping startups make the transition from small companies to bigger corporations.
“I do think there is a correlation between serving in the military and being in Israel specifically when you are surrounded with enemies and you need to survive,” Mr. Hershkovitz said. Similarly, “startups are very small, you need to survive, you need to raise money, and you just need to live until you get your next paycheck or your next investor.” In short, the IDF is successful at encouraging former soldiers to found startups because it instills within them the mindset that any problem can be solved, even with limited resources and when the odds seem stacked against them.
There Is Always a Solution
Soldiers begin training at 18 until the ages of 20 or 21, unless they choose to serve longer. Whether duties consist of fortifying security or tapping into the communications of a terrorist group, they are expected to deliver results. When a soldier always has to deliver results, he or she learns that there are no limits, which translates perfectly to the startup environment. In our interview, Mr. Hershkovitz explained that “One of the advantages we have coming from the IDF is … first of all, you’re not afraid to try new things, and if it’s not working, shift to the next option.” He also noted how in his experience “the number of no’s I got is much higher than the number of yes’s.”
In exploring this topic, I also interviewed Professor Shachar Kariv. After serving in the IDF from 1988 to 1994, he attended Tel Aviv University and received his doctorate from NYU. He now teaches Advanced Microeconomics and Game Theory in the Social Sciences at UC Berkeley. When describing his experience in the military, he also described how the military impressed upon soldiers that “Everything has a solution. We have to find a solution. We must.” Further, he explained how the motto of his unit, roughly translated from Hebrew, was “No mission is too hard, no place too far.”
Talent Acquisition and Development
Beyond imbuing fortitude, the IDF is also very adept at finding talent and honing it. One of the most unique elements about the IDF is its recruitment process. The IDF monitors young Israelis with the potential to excel in various specialized units. In evaluating talent, the IDF looks beyond typical metrics like grades, allowing it to find hidden potential and hone soft skills. By the time they leave the military, many IDF soldiers have developed technical skills like data analysis, as well as soft skills such as the ability to act calmly under pressure. As an example, Unit 9900 recruits Israelis on the autism spectrum with an aptitude for visual pattern recognition, engaging them in sifting through visual data and photos essential for the unit’s operations.
Typically, when we imagine a soldier reporting to his or her commanding officer, we expect salutes, shouts of “Yes, sir!,” and other formal means of address. In Israel, this formality is not to be found. Soldiers do not salute their officers but instead address them by their first names. The IDF attempts to strike a balance between discipline and independent thought so that soldiers as well as individual units can learn how to adapt and solve problems themselves. Because of the combined emphasis on independence and cohesion, units can effectively manage themselves on their own, similar to a startup which is rarely able to rely on outside resources.
Secret Soldiers and Startups
Within the IDF, high-tech units of highly trained soldiers have proven to be some of the most successful at fostering entrepreneurship. The two most infamous of these units: Unit 8200 and Unit 9900. These soldiers cannot share the missions they undertook; they cannot share the sizes of their units; they cannot share the information they collected. What is known about these units is that they are the preeminent source of tech talent in Israel, with well over a thousand tech startups being founded by the alumni of these units.
Researchers have gathered that Unit 8200, which is responsible for collecting signal intelligence and decrypting codes, predates Israel’s War of Independence in 1948. Following the Yom Kippur War in 1973, Israel was invaded by neighboring Egypt and Syria by surprise. Even though military officials had the information right in front of them that indicated an imminent attack, they missed all of the signs. Worse still, an intelligence officer from the unit was captured by the Syrians and released significant information to his captors. This intelligence failure inspired a reboot of Unit 8200: the unit was departmentalized into teams, almost as if each team were acting as a single startup within the unit. Further, in order to end its dependence on foreign technology, Unit 8200 became the country’s de facto R&D hub. Former 8200 alum Yair Cohen claims that “90% of the intelligence material in Israel is coming from 8200,” especially in the realm of cybersecurity.
This unit specifically screens students from a young age to detect skills in foreign language, math, and computer science, as well as softer skills like the ability to adapt to change and learn quickly. Though the soldiers assigned to Unit 8200 have existing technical expertise, that alone does not account for their entrepreneurial spirit; training and missions further hone their innate skills in entrepreneurship. The high stakes of life-or-death decisions in the IDF, for instance, brace soldiers for the stress they will inevitably encounter in the startup world while remaining motivated. In the startup world, what is the fear of bankruptcy compared to the possibility of failing a critical intelligence mission that could lead to death?
Unit 8200 also has an emerging complement: Unit 9900. Smaller than Unit 8200, Unit 9900 focuses on location-based technology, machine vision, photo analysis, cybersecurity, augmented reality, and virtual reality with the primary emphasis of fine-tuning algorithms to analyze millions of surveillance photos. While Unit 8200 was the primary startup producer in earlier years, given the growing demand for machine vision for inventions like autonomous cars, Unit 9900 veteran-founded startups are on the rise. Having graduated an estimated 25,000 alum, Unit 9900 is linked to over one hundred Israeli startups.
So What Should We Learn from Israel?
Since Israel is not only a military powerhouse but is also extremely successful at inspiring soldiers to found companies, some, hoping to emulate those results, might suggest that other countries copy their lead in mandating military service. However, that suggestion fails to recognize the dozens of countries around the world that already enforce mandatory military service but do not yield the same results. Rather, the IDF’s ability to promote entrepreneurship stems not from the fact that it’s mandatory but that it encourages soldiers to have the mindset that any problem can be solved.
Because the Israeli military is smaller than those of its adversaries, it had to learn to be smarter and use unconventional methods to succeed. The highest barrier to entry for any future founder isn’t securing funding or finding a strong consumer base; it’s making the jump from having an idea to actually making it a reality. Once someone can learn to overcome that hurdle, the next step is to develop that potential.
The IDF has learned how to find talent in overlooked places and develop it. If we can look beyond the typical metrics of success, we can find ideas and entrepreneurs in places where we never thought we would find them. Through that method, any country can become the next startup nation.
As Professor Kariv puts it, “It’s not the fact that the military is mandatory. It’s a combination of features, of highly educated people, very motivated people, that are going into the right units [for them]. They don’t have to be technology units. My unit was very innovative, and they basically asked us to come up with innovative ideas all the time. How can we do this, how can we do that? This experience is taking these people whose hearts and minds are in the right place, and you give them an experience that you don’t get in a graduate education.”
With the most venture capital per capita and the most startups per capita despite a population of less than 10 million people, Israel is a promised land of entrepreneurial spirit. Israeli veterans have developed impressive entrepreneurial ability, in large part because of the IDF’s unique ability to cultivate talent and its emphasis on the mindset that any problem can be solved. The IDF’s ability to hone entrepreneurial intent is something to be emulated—by militaries, universities, and industries around the world.
Katherine is a sophomore in the Global Management Program and intends to minor in History. Her interests in international business and markets inspired her to join BRB’s economics column to explore more about economics around the world. Beyond international relations, she also enjoys understanding how the political landscape affects markets and is excited to pursue these passions in BRB. As a San Diego native, she loves nice, sunny days and can be caught reading in the park; otherwise, you’ll find her binging some movies or shows.