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The New Incubators

from the Fall 2011 Innovation issue

Innovation is often perceived as a solitary affair—a single engineer or scientist laboring late into the night in desperate search for the next new idea. But increasingly, in this world where innovation carries big gambles and even bigger rewards, invention has become a group effort, requiring an incubation machine that brings together a diverse group of individuals with often vast resources.

There’s California’s Silicon Valley and its New York counterpart Silicon Alley. But, in exploring innovation, World Policy Journal set out to identify the next loci of scientific and technological creativity—the new incubators. 

We’ve settled on three locations—Finland, especially its Otaniemi forest, Singapore, and Israel’s Silicon Wadi. We asked writers in each of these nations to profile the pioneers, probe its DNA, and help us understand the origins of the peculiar flair that each spot brings to the creative process.

*****
*****

OTANIEMI, FINLAND
By Pekka Himanen

Arriving at this Finnish innovation center, you find yourself in the middle of a forest. Dense stands of birch, pine, and spruce trees grow down to the shores of the Gulf of Finland. The name Otaniemi comes from the Finnish words oka (spike) and niemi (point or peninsula), and as the name suggests, the area is located at the point of a peninsula. But it is also aptly named for another reason: On any chart mapping innovation, Otaniemi is a spike of creativity.

Contrary to common misconception, this summer day is very warm indeed—90 degrees Fahrenheit. Some people have chosen to go and bask in the sun on beaches and piers. Some dip in the sea for a swim, while students heat up the seaside sauna, ready for Friday night partying. Although Otaniemi is part of metropolitan Helsinki, nature reigns. This is part of the larger vision of being not only a center of learning, but also at the center of a new, more sustainable way of life.

Yet this is also a hub of innovation—the engine that drives growth in the Finnish economy. The premier technology university in Finland is here as well as its leading companies, from mobile giant Nokia to IT start-ups and leaders in the fields of energy and biotechnology. Otaniemi is the modern sampo of Finland—the mythical source of growth described in Kalevala, Finland’s national epic. So today, Kalevala Road turns into Technology Road, which continues as Knowledge Road.

TECH CENTRAL

The compact innovation center is just a few miles in diameter. The technology shore, a mile-long stretch, is located on the south side of the area and serves as home to many of the most influential Finnish companies in three key sectors.

In information technology, the area houses both Nokia and start-ups such as Rovio, creator of the hit Angry Birds iPhone game. Yes, Finns are to blame for the iconic songs of the information age. Nokia has sold a third of the world’s four billion cell phones, and each plays the “Nokia tune,” based on a clip from Francisco Tárrega’s “Gran Vals.” Finland is also responsible for a catchy Ari Pulkkinen jingle that resembles the bolero in Georges Bizet’s Carmen. While few people may know the Finnish composer, with over 300 million downloads, many would recognize the unforgettable theme song from Angry Birds.

Keeping Finland on the cutting edge of energy technology, utility firm Fortum and Nokia are working together on an electric car that would integrate Fortum’s charging systems with a Nokia technology that allows smartphones to exchange information with the vehicle, letting the car’s “infotainment” system access mobile phone apps.

Research and development in biotechnology at Otaniemi is also helping Finland’s traditional forestry sector—quite literally—grow in new ways. Researchers are creating new, more efficient ways of turning foresty products into energy. These bio materials are being developed under such slogans as “wood is the new oil,” or “wood is the new black.” The end goal is that everything now made from oil can be made renewably from wood in the future.

RIDING THE AALTO WAVE

The three fields of IT, energy, and biotechnology are at the center of Finland’s innovation strategy. Companies work in close contact with Finland’s leading Aalto University, a new union of Helsinki University of Technology, Helsinki School of Economics, and University of Art and Design Helsinki. The goal is to unite the technological, economic, and design innovations needed to compete globally under the motto “where science and the arts meet technology and business.”

Just as companies strive to be exceptional in their own fields, Aalto University wants to be the creative leader in select areas of research. Its strengths can be summed up in four M’s. The first is Method—Aalto is one of the world’s top universities in the methodological sciences (from computational modeling to the methods behind art and creativity). The university’s strength in Media, such as information and communication technology and audiovisual expression, builds on this. Another specialty is Materials, which ranges from nanotechnology to materials for art and design. Finally, there is Modeling, which includes various forms of design.

The university has located each of these activities close to technology companies in the spirit of “where science and arts meet technology and business.” These include the Design Factory, a space for multidisciplinary innovation (named after Andy Warhol’s Factory, which transcended traditional borders) and Aalto Venture Garage, dedicated to start-up entrepreneurs (named in honor of the garage where Apple’s founders Steve Jobs and Steve Wozniak developed their first computers). Nokia is relocating its entire research center to the middle of the Aalto campus, in a new Open Innovation House, where university researchers and students can collaborate with companies.

Nokia alone has invested €43 billion in research and development during the last 20 years. Public and private construction investments of €10 billion are continually transforming the area, and funding for Aalto University has just been increased by €700 million. If you want to be an innovator in these three fields right now, this is the place to be.

The area brings professionals and producer-managers (from risk investment to marketing) into a culture of creativity—inspiring people to realize their full potential.

A LONG ARC

This is a new phase in a long arc of innovation policy. In the early 1950s, when most of the population made a living from agriculture and forestry, Finland was still a poor country. Otaniemi was farmland belonging to the local manor, and the shores, where the technology companies led by Nokia are located, were covered by bushy forest. It’s easy to forget that the Japanese-sounding name “Nokia” originates from a paper mill founded in 1868 along the river Nokia, which in turn got its name from a furry mammal, the noki, that would nest there.

Two earlier waves of innovation policy paved the way. First came systematic investment in a public education system from elementary school through university. The government bought the lands from Otaniemi manor and hired Alvar Aalto, the great Finnish modernist architect who became the father of functionalism, to design the main building of Aalto University.

Next came a corresponding investment in research and development. Finland was by no means a leading country in technological innovation in the 1980s. Barely 1 percent of GDP was invested in research. Then, Finland became the first (and, for a long time, only) country where the government formed a Science and Technology Policy Council to create strategic guidelines. It is still headed by the Prime Minister and includes key ministers as well as industry and university representatives. In the first decade of the council, investment in research and development doubled to 2 percent of GDP. Indeed, Finland continued to increase investment even during the deep banking crisis and depression of the 1990s, reaching 3.5 percent by the year 2000. Finland has the largest percentage of GDP devoted to research in the world, double the average of developed countries. These investments were critical to Nokia’s development of new mobile technology starting in the 1990s.

These earlier phases paved the way for the current third wave of innovation policy—the systematic investment in creative centers that aim to form a mass of researchers in selected fields, attracting talent from around the world.

In the end, what separates Finland from other innovation centers is its social dimension: As I have argued together with Manuel Castells in The Information Society and the Welfare State (Oxford University Press), the aim of the “Finnish model” is to combine innovation-based competitiveness with socially inclusive development. There are many dynamic economic models for innovation, such as Silicon Valley where, at the turn of the millennium, it produced 60 new millionaires a day while a fifth of the population lived below the poverty line.

In the Finnish model, there is a will to combine innovation-based competitiveness with social inclusion. On one hand, Finland has led the rankings in competitiveness and innovation for years—producing such IT success stories as Nokia, Rovio, or the Linux operating system (which a third of the Web runs on and also lies behind Google’s Android cell phones).

At the same time, Finland is at the top in terms of all traditional measures of social inclusion. It has one of the lowest degrees of poverty and income inequality and an excellent public health care system that serves everyone. The OECD has judged the public education system as the world’s best—Finnish students have the top scores in literacy, mathematics, natural science, and general problem solving. Results are evenly spread across the country, so nobody chooses a place to live based on schools. Even the best universities are free, and public day care is a universal right. Next to the free Aalto University in Otaniemi, there is a public elementary school and a day care center where innovators bring their children.

The core idea of the Finnish model is to create a virtuous circle where success in the innovation economy allows for continued public investments in education and health care, which in turn produces new highly educated people to continue the economic success.

NOKIAPLEX

How well Finland will do in these endeavors is ultimately dependent on how bravely it can drive its innovation policy into practice. Moreover, reforms are urgently needed. Nokia is facing an enormous challenge, as its competitive environment has changed from engineering mobile devices to the Internet world, where the competition is about designing software and the user experience. And the appeal of Finland to international talent is still modest. Foreigners account for barely 3 percent of the population, a rate among the lowest in Europe.

Open-minded solutions are needed for what I call the “architecture for enriching interaction.” Key questions need to be asked. How does Otaniemi create forums for enriching interaction, from coffee shops and restaurants to activities that bring people together?

We need to open up our way of thinking. The Nokia shore in front of the marina is called Keilaterassi (Keila Terrace). Why don’t they build a real terrace or deck there for gatherings and special events? This would make the restaurants in California’s Googleplex campus that are closed to outsiders feel old-fashioned. While we’re at it, why not ban personal cars and have transport in the compact area provided by electric shuttles, and—since it is on the seafront—solar water taxis. (Here I am drawing inspiration from the Stanford campus shuttle buses, but taking it further.) These types of changes, which bring together innovators from different fields and give them opportunities to meet and inspire each other, will be key to ensuring Otaniemi remains one of the world’s most successful creative hubs.

We stand before global challenges of a new scale, and we need to release our full creative potential in order to address them. Ultimately, the new Finnish model is a vision of innovation addressing the biggest global challenges of our time. It’s the idea that we need to make innovations that lead to a new, more socially and environmentally sustainable way of life. But in order for such a bold vision to succeed, decision-makers need to reform their thinking radically. The ultimate question is, “How can we create an enriching environment for innovation, where everyone’s opportunity for a life with dignity is fulfilled without diminishing one’s neighbor’s welfare or depleting our common, global resources?” Sometimes it is at these moments when we need to rise up to the challenge that we prove our greatness.

In the Finnish epic Kalevala, a researcher and an engineer join their creative forces to help the hero. Together, these early innovators created the sun and the moon. Today, the task of researchers and engineers—along Kalevala Road and elsewhere—is only slightly less daunting. They will have to work with decision-makers to forge a new, sustainable way of life. It’s clear that Finland, especially Otaniemi, will need to take a leading role in this effort.

Pekka Himanen, a Finnish philosopher, professor, and computer scientist, divides his time between Aalto and Oxford universities. He is the author of The Hacker Ethic (Random House) and, with Manuel Castells, The Information Society and the Welfare State (Oxford University Press).

*****
*****

SINGAPORE
By Alex Au

Half a century ago, Clifford Pier was filled with a polyglot crew of seamen, traders, and money-changers. It was a chaotic scene with boats jostling for space and boatswains haggling over ferry prices with drunk sailors. With the construction of the Marina Barrage in 2004, Singapore dammed the estuary, cutting the pier off from both the sea and its maritime past. Today, the surrounding water—now flat and calm—is a reservoir, the island nation’s 15th. The pier is quiet, having been transformed into a swanky, air-conditioned dining hall—one that has failed to attract the crowds that had once been routine.

The government’s bold, high-tech water schemes are indeed innovative and impressive, but the heft of the government has crowded out private initiatives, leaving the once bustling Clifford Pier a tony monument to its tempestuous past.

Singapore has failed to create a homegrown entrepreneurial culture, looking instead to the state and foreign talent for much of its creativity. Having never shied away from guiding economic development, the government has taken the leadership role in innovation. Perhaps this is one reason why it works so well, at least for the public sector, which has transformed Singapore from a backwater to one of the most advanced countries on Earth.

As a city-state with virtually no hinterland, Singapore is extremely short of freshwater resources. No longer able to rely on buying water from Malaysia, its neighbor to the north, Singapore’s five million people are increasingly dependent on recycled and desalinated water.
Nearly all river mouths have been dammed, and an entire industry has emerged to treat dirty water from drains, canals, and even sewers.

The city-state is justifiably proud of its water industry that is on the forefront of membrane osmosis and desalination technology. Several heavily guarded plants across the island hum 24/7, converting brown water to a clear drinkable liquid that meets World Health Organization standards. However, because many people remain queasy about drinking old sewer water, the output is not pumped directly into water distribution pipes, but mixed into freshwater reservoirs in the hilly catchment areas.

Despite having a host of new innovations in the pipeline, the main water company, Hyflux, is tight-lipped about its plans. The company can afford to be quiet. It—like many of Singapore’s innovators—relies on the government and not the open market for its domestic business.

“The success stories are mostly state-led,” says investment and insurance consultant Tan Kin Lian, “They depend on the state as a buyer, and much of their marketing focus is on the Singapore government or other governments. Those businesses that depend on the rough and tumble of the free market don’t do as well.”

CATCHING THE FLU

Loyang Industrial Park is a grid of modern, aluminum-clad buildings. Semi-trucks travel the otherwise quiet streets, bringing components to the factories or shipping finished goods out. It’s a district for electronics, avionics, and oil exploration support industries. Inside Trek 2000 International’s headquarters, a small sales team demonstrates their latest gadget, hoping it might equal the device that made Trek 2000’s name—the USB memory stick. Invented over a decade ago, they branded it the “Thumbdrive.”

“After we filed our patent” for the memory stick, says their chief financial officer Gurcharan Singh, “we exhibited the product at various technology shows abroad. We thought that being able to say ‘patent pending’ gave us rights to the invention, but we later discovered that we could be wrong. By then, others had copied the product and were selling it widely.” Added Singh, ruefully, “It’s a lesson we will never forget.”

But the company has by no means stood still. Today’s demonstration is showcasing Trek 2000’s latest innovation, the “FluCard.” Still, just hearing the name suggests a remark by Tan Kin Lian weeks earlier: “We can innovate, but marketing is a problem.”

It’s called a FluCard, explains an eager young sales manager, because “we want it to spread like the flu.” It’s a variant of the SD Card, a common storage medium in cameras. The FluCard contains a few extra chips, giving it Wi-Fi capability. As soon as a picture has been taken with the camera, it can be uploaded to the Internet or to a nearby laptop or tablet. The FluCard can be inserted into any existing SD Card slot. “We’ve teamed up with Kaga, one of Japan’s top five distributors of consumer electronics for a nationwide launch in Japan,” says Henn Tan, Trek 2000’s CEO. He is bullish about the product, but given Singapore’s small domestic market, the company will need to market the product to the rest of the world.

THINKING BIG

A “small market is not an issue,” says Desai Arcot Narasimhalu, who heads a center on innovation at the Singapore Management University. “Look at Israel. They have been successful in leveraging their contacts in the U.S. for moving their business innovations into the U.S., the primary high-tech market.”

Indeed, like many companies in Singapore, the research and development team at Trek 2000 is an equal mix of Singaporeans and foreigners. Over the last decade, Singapore has also revved up its universities, offering a host of scholarships to students from around the region to compensate for the small size of the indigenous labor pool. The goal is that a small percentage of the foreign students will stay and work in Singapore after graduation. If they do return home, the government hopes they will provide connections for Singaporean businesses to expand into foreign markets. Singapore has been extremely successful in attracting international talent. Right now, one in three people in Singapore is a foreigner.

Australian-born Doug Watson is one of them. In his early 30s, dressed for the beach even in the middle of a workday, he is not convinced the universities are producing what he needs for his digital animation start-up. “It may be a while before Singapore sees the fruits of these investments,” he says. His new hires, “are bright and technically very good—and hardworking, prepared to put in long hours—but coming up with original storylines and a ‘wow’ factor is something else.” He pauses, adding, “Is there anybody teaching imagination?”

Most parents in Singapore discourage their children from becoming entrepreneurs, says Felicia Chen, who runs a business baking mooncakes, a Chinese pastry traditionally filled with lotus seed paste and egg yolks. “We in Singapore have a culture that leans strongly towards playing safe,” Chen says. “Even when people start a business, their risk-averse nature shows in the way it merely copies another business. Taking a risk with an innovative product or idea is just too scary.”

Chen, whose mooncake flavors include whiskey-kiwifruit and spiced cheese, has plenty of imagination and is not afraid to take chances. But she says small start-ups don’t receive much government support, putting them at a disadvantage compared to bigger companies. Chen, who is trying to automate a process traditionally done by hand,  says, “The government supports innovation only when it comes from large organizations, led by engineers and scientists with plenty of letters after their names. For the small entrepreneur, we struggle every day.”

A NEW HOPE

The government does offer a modicum of support to small and medium-sized entrepreneurs, but it is hardly generous when compared to grants to state-sponsored universities and research centers. Trek 2000, for example, occasionally receives government funding for specific projects, though “it took us almost eight years to get our first grant,” says CEO Henn Tan. Even now, “our R&D is mostly from internal cash flow.”

In the late 1990s, the government razed four blocks of the old downtown along the historic Stamford and Bras Basah Roads and acquired a public park to build the Singapore Management University. Today, its curved, glass-fronted buildings represent Singapore’s hope for a new knowledge economy.

Complementing it will be the new University of Technology and Design, now under construction. It will be Singapore’s fourth major center of higher education. Beyond these institutions, hundreds of millions of dollars have been poured into two research campuses. One-North and Biopolis boast 12 sleek towers (with more under construction), housing state-of-the-art laboratories atop a hill. Inside these new temples of science are the latest facilities including DNA sequencing, nuclear magnetic resonance, x-ray crystallography, and flow cytometry. Big budgets are allocated to snag some of the world’s leading scientists in molecular biology, cancer research, and a host of related disciplines.

A similar open-door immigration policy is maintained to attract talent for private companies. “Singapore has done well in the knowledge generation and technology innovation front,” says Narasimhalu. He says the government has chosen the right fields to support: interactive digital media, life sciences, and clean environment technology. “An open-door policy to such innovators and entrepreneurs is critical in our transition from a manufacturing economy to a knowledge economy,” Narasimhalu says, but adds, “Buildings do not create business innovations.”

Indeed, for all the pride over new cancer discoveries made in the Biopolis labs, scaling up and commercialization are still distant dreams. He reiterates the need for “market-savvy innovators who can create business-relevant innovations.” The government and small business owners, he says, must be willing to let “a serial entrepreneur bring innovations to market.”

Tan Kin Lian is less sanguine: “We tried to set up a venture capital industry. It didn’t work, primarily because there was nothing to fund.”

At the end of the day, Singapore is still among the world’s most innovative locales, but it remains a paradox. The Marina Barrage and the enormous effort needed to turn every drain, canal, river, and estuary into water catchments required investment, imagination, and the development of new technologies. But it’s almost as if the state-sponsored domain operates in a world of its own.

Other entrepreneurs struggle to get grants, attract local talent, and connect with wider markets. Many small enterprises simply struggle to stay afloat. As Watson rushes off, he says, “It’s great fun talking to you about innovation, but I really need to close my next deal.”

Alex Au, a Singapore-based journalist, writes frequently about his country’s political economy, contributing to such books as Voting in Change: Politics of Singapore’s 2011 General Election. He blogs under the name Yawning Bread.

*****
*****

TEL AVIV, ISRAEL
By Paula Margulies

It’s a warm night in June in the Holon industrial zone, a dilapidated hodgepodge of dingy auto-body shops and factories just five miles south of Tel Aviv’s trendy cafes and bars. On a poorly lit street littered with broken chunks of cement, 300 people are crowded into a narrow alley next to a small garage, clutching plastic cups and jostling for space. Amplifiers and two large screens have been set up, and a long table is haphazardly covered with beer and bags of chips.

It may look like an underground band is about to play, but this crowd—Tel Aviv’s young high-tech community—has gathered to listen to rock stars of another kind: Yossi Vardi, the godfather of Israeli venture capital; Stanley Fischer, governor of the Bank of Israel; Jimmy Wales, the founder of Wikipedia; David Fischer, Facebook’s vice president for advertising and global operations; and Martin Warsavsky, founder and CEO of Fon, a global free Wi-Fi community.

A jovial, white-haired man with an infectious sense of humor, Vardi looks a bit like Santa Claus—if Santa wore wrinkled white shirts and sandals and spoke Hebrew. For over 40 years, Vardi has founded and helped to build more than 50 Israeli high-tech companies, including ICQ, an instant messaging computer program that AOL bought in 1998 for $400 million. In recent years, Vardi has focused on promoting a culture of innovation and creativity across Israel.

Tonight’s event, which Vardi is moderating, has been organized by the Garage Geeks, a nonprofit that brings together Israel’s high-tech innovators. The small garage in this alley is their headquarters. With a twinkle in his eye, Vardi turns to Stanley Fischer and notes that there are 1.5 start-ups per 1.5 million people in the entire Spanish-speaking world—a ratio, he notes, that would be “the equivalent of the State of Israel having five start-ups.” Laughter ripples through the crowd. In this alleyway alone, they know, there are easily 10 times that number.

In absolute terms, Israel has the largest number of start-ups in the world outside the United States—3,850, or one for every 1,844 Israelis, according to the Israel Venture Capital Research Center. It has more companies listed on America’s tech-heavy Nasdaq than the entire European continent. It leads the world in research and development spending and venture capital investments as a percentage of GDP, and in the number of researchers per capita. Technology giants including Microsoft, IBM, Intel, Cisco, Google, and HP have built large R&D centers here. Israeli innovators can claim credit for a wide range of technologies, from drip irrigation to voicemail.

"TECH AND MAGIC"

A month after the Garage Geeks event, some of the crowd returns to the garage. This time, they have gathered to brainstorm for Geekcon, a technical innovation conference that will take place during a weekend in September.

Tonight’s event, which has been dubbed PreCon since it comes before Geekcon, is a chance to pitch project ideas and find teammates and equipment. Eden Shochat, a partner at a venture capital firm and one of Geekcon’s founders, explains the reasoning behind the conference.

“Many of these people are corporate technology officers, investors, and venture capitalists in their day jobs. Here, for two or three days, they get to do something useless. Then they become much more creative, because they’re not bound by having to make something useful.”

Seven companies have emerged from collaborations that originated at previous Geekcon conferences, including Face.com, a unique face recognition software maker which Shochat founded with three others.

A predominantly male crowd fills the garage. On the wall by the entryway, Google co-founder Sergey Brin has scrawled, “keep on Googling.” Paypal’s Osama Bedier has written “the Israeli payment revolution started here,” and Arianna Huffington has scribbled, “I love smart and useless, tech and magic.” There are some telltale signs of geekdom—a Star Wars doll, an ancient Pacman machine, and X-Men T-shirts. A poster depicts a fluorescent female alien looming over the ancient city of Jaffa. “Every garage needs a pin-up”
is scrawled next to it.

The crowd begins throwing out ideas. Some—“a fax machine that makes popcorn”—elicit laughter and a round of banter. Others—“a teddy bear that hugs autistic children”—generate appreciative nods. One man proposes an app that combines social networking with strategic problem-solving. Another pitches a machine that can discover the source of noise. “I’ll need microphones and a sound engineer,” he concludes, and quickly finds a volunteer.

NATURE OR NURTURE?

When the brainstorming session winds down, the crowd spills into the adjacent alley to form groups and discuss their projects. When asked by a visitor why Israel has produced such a disproportionate level of innovation, they are quick to offer opinions.

Dan Schamir, CEO and founder of Internet intelligence start-up Qleeq, attributes it to “the Jewish brain.” Some 20 percent of all individual Nobel Prize winners are Jewish, he says.

“It’s in our genes,” Joseph Benraz smiles. CEO and founder of Tako Technologies, a provider of virtualization applications, Benraz favors a cultural explanation. “Everyone wants what everyone else has,” he says. “The mentality is, if he can do it, so can I. Everyone wants to be a manager. It’s all about shortcuts—no one has patience. There’s no etiquette.”

Haggai Yedidya nods. “It’s our chutzpah,” he says. Yedidya—who spent years pursuing entrepreneurial ventures in the United States while moonlighting as a performer in Las Vegas—returned to Israel a year and a half ago and promptly founded Secure Erasure, which creates technology for high-security data erasure. He has already raised his first million. “We don’t learn to be polite here,” he notes. “There’s a different state of mind. At age 18, we learn to fight and defend our country. We’re still in the state of mind of threat and survival.”

Israel’s geopolitical position might not be enviable, but it has arguably cultivated cultural traits that are essential to entrepreneurship—creativity, risk-taking, a willingness to fail, and the inclination to question authority. The country’s compulsory two- or three-year military service and its reserve forces actively hone those traits. As the American policy analyst Dan Senor and Jerusalem Post editorial page writer Saul Singer note in Start Up Nation: The Story of Israel’s Economic Miracle, in a military where “taxi drivers can command millionaires and 23-year-olds can train their uncles,” hierarchy naturally shrinks. And in an environment where initiative and improvisation are prized over rote adherence, problem solvers are amply rewarded.

"IMPOSSIBLE BECOMES POSSIBLE"

While it’s difficult to quantify the impact of Israel’s particular blend of cultural traits, the country’s immigrant history has doubtless played an important role in its emergence as a hub of innovation. In the 1990s, Israel opened its doors to over a million immigrants from the former Soviet Union. Around a third of these were scientists. These talented immigrants quickly went to work in the software and defense industries.

The country’s well-funded military-industrial complex has been a tremendous incubator of innovation, with technology spilling over into civilian applications. Alumni of the elite technological intelligence unit 8200—Israel’s equivalent of the National Security Agency, and the suspected originator of the Stuxnet computer worm that attacked Iranian nuclear facilities in 2010—have gone on to found leading high-tech companies like Check Point, ICQ, Nice, AudioCodes, and Gilat.       

“Half the guys here tonight were in 8200,” says Cnaan Aviv, the soft-spoken CEO and founder of a programming company called Underdog Projects. (He, too, is an alumnus.)  Every evening, former members of elite units gather to discuss the day’s activities, analyzing their mistakes in an effort to learn from them. This emphasis on learning from failure has become deeply rooted in Israel’s high-tech culture.

Shai Tsur, business development manager of Microsoft’s Israeli Development Center, says that he is frequently struck by this aspect of Israeli entrepreneurs’ mentality. “It’s a refusal to look reality in the face—it’s believing in what you’re doing to such a degree that the fact that there’s a 95 percent chance that you’ll fail doesn’t deter you.”

Jeff Pulver agrees. The American co-founder of VoIP provider Vonage, Pulver is an angel investor and organizer of high-tech networking events. With his larger-than-life frame and penchant for bright purple glasses, he would be memorable anywhere, but his commitment to funding and connecting Israeli entrepreneurs has given him almost iconic status in the close-knit Tel Aviv high-tech scene. Pulver—who comes to Israel so often that his favorite hotel on Montefiore Street has named a room after him—estimates that he’s funded between 20 and 50 start-ups, about a third of which have gone on to get more formal angel funding or venture rounds.

“There’s a refusal to give up. If someone challenges them, they’ll figure out how to get around it,” he says. “Here, the seemingly impossible becomes possible.”

Paula Margulies is an Israel-based writer specializing in the Middle East and international affairs and business.

[Photo: Mikko Kuhna]

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