Imported From Israel: 4 Key Start-up Lessons
Israel has about 7 million citizens. One hundred of its start-ups are listed on the NASDAQ. On a per capita basis, it leads the world in start-up success.
The reasons for this high rate of success are hotly debated. They probably include a sense of fearlessness and camaraderie flowing from universal military service, a huge influx of brilliant scientists and mathematicians from Russia in the 1990s, great educational institutions, and a small local market for its start-ups’ products to which they adapt by being “born global.”
On May 5, I attended a Combined Jewish Philanthropies-sponsored presentation by three Israeli entrepreneurs that highlighted how individual start-ups beat the odds. The speakers included Yosef Abramowitz, president of the solar energy producer, Arava Power Company; Eyal Gura, a venture partner at Israeli venture capital firm Pitango Venture Capital; and Karen Tal, whose work leading a public school for poor children from 50 countries was featured in an award-winning film Strangers No More.
Based on my interpretation of their stories, four general principles for venture success emerged that could help start-ups anywhere.
1. Don’t be afraid of a big opponent.
Entrepreneurs face very daunting odds of achieving success. Moreover, my interviews with venture capitalists suggest that they meet with about 1,000 entrepreneurs a year and invest in only one or two of them.
And once funded, they have very long odds of success. One Silicon Valley venture capitalist told me earlier this year that for every 10,000 ventures that get funded, only one becomes a significant company--e.g., a valuation of greater than $1 billion.
This means that entrepreneurs must not be afraid of a big opponent. Abramowitz, a Massachusetts native who moved to Israel in 2007, takes great pride in his ability to prevail in fights against long odds.
He bragged about his success in the passage of Proposition 2 1/2, which capped property tax increases in the state and of winning a court challenge to then-Boston University president, John Silber, who wanted to kick Abramowitz out of the college for his vocal campaign for BU to divest its holdings in South Africa to oppose Apartheid.
When Abramowitz moved to Israel, his citizenship ceremony was held in the Israeli desert last August and the heat there was oppressive. The powerful sunlight there led Abramowitz to conclude that someone in Israel must have figured out a way to harness the sun to help meet its needs for energy.
When he asked about this, he was surprised to learn that Israel had no solar energy industry. He decided to start Arava Power to kickstart that industry. Abramowitz originally thought it would take six months. But then he learned that he would face at least 100 regulatory challenges to his vision. It took him six years but he prevailed in each battle and Arava succeeded.
2. Listen to your spouse.
Thomas Edison was famous for many things including his comment that genius is 1 percent inspiration and 99 percent perspiration. For the inspiration, Gura has consistently relied on his wife.
For example, Gura’s wife suggested that many people on the Internet were using copyrighted photos from Getty Images without paying for them. This gave Gura the idea to build PicScout, a company that would scan all of Getty’s images, search the Internet for duplicates, and send notices to those who were using the images to either take them down or pay.
After two years of trying to persuade Getty to allow him to load those images into his company’s database, Gura got a thumbs-down. So he contacted 10,000 of the people who took those photos who were not getting paid for them, and got their permission to put those images in his database.
His company was so successful at generating revenue from people using the photos that Getty ended up agreeing to license its images to Gura. And later, Getty bought the company.
Another one of Gura’s wife’s ideas? A company that would make it easier to pool money to buy a big gift for a mutual friend. Gura was the founding investor of The Gifts Project that implemented his wife’s idea. EBay acquired the company in September 2011.
3. When your back’s against the wall, improvise.
Sometimes life throws big challenges at entrepreneurs. The question is what to do about them.
In the case of Tal--who ran a Tel Aviv public school that was being pressured to close unless it improved its graduation rate--that surprise came in the form of a telephone call from the mayor of Tel Aviv.
The mayor asked her the day before classes started in the fall to take on 21 refugee children from Darfur. Tal learned that the children and over 100 of their family members were sitting in a church in Tel Aviv.
When she went there, she could not communicate with them because they spoke a unique Arabic dialect. Fortunately, one of Tal’s teachers also spoke Arabic but that teacher would not able to handle all the individual interviews that Tal needed.
So Tal called the teacher and asked her to invite her Arabic-speaking friends and family to join her in interviewing the Darfur refugees and their families. Tal successfully took in the Darfur children and got help for their families.
4. No matter how much you’ve achieved, you could do more.
Gura jokes that Israel’s start-up success can be attributed to one factor: Jewish mothers. For example, if a child brings home a report card with four 100s and one 98, the Jewish mother will ask what happened to the other two points.
Gura pointed out that this mindset is not limited to Jewish mothers--it is an essential element of entrepreneurial success anywhere. And the general idea is that the start-up CEO should maintain the attitude that no matter what the venture has achieved, it could always improve.
Without this nagging voice, successful companies become complacent. And that makes them vulnerable to more aggressive start-ups.
If you’re trying to beat the odds against start-up success, follow these four tips.
Strategy consultant, start-up investor, teacher, corporate speaker, pundit and author of 11 books, Peter Cohan has invested in six start-ups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru, Michael E. Porter.