Israel's high-tech 'addiction'

An exceptional turnover of technology-based start-ups is driving Israel’s economy, says industry expert Ed Mlavsky.


Backing new entrepreneurs: Ed Mlavsky, chairman of venture capital fund Gemini

Backing new entrepreneurs: Ed Mlavsky, chairman of venture capital fund Gemini

Israel is becoming addicted to start-ups, says Dr Ed Mlavsky, the founder of venture capital fund Gemini and credited as one of the five most influential people in the Israeli high-tech industry. He argues that Israel is home to an increasing number of "repeat entrepreneurs" - those who sell their original business but go on to inherit, establish and/or buy other ones.

"We are seeing a lot more of this - the 'start-up addict'," says Dr Mlavsky, 80. "There are tecchies in Israel who refuse to accept that there are problems that can't be solved. The tenacity of tecchies and the way they approach problems is remarkable. Israel has more patents per capita than anywhere else in the world. This is what we are good at, and we are getting better." He is seeing a pattern whereby founders of start-ups repeatedly rebound from successful exits and, with money in their pocket, build new businesses.

In the past 12 months or so, there have been around 1,400 high-tech Israeli start-ups. The country is second only to California for the highest number of start-ups in the world.

"We are much too small to have more repeat entrepreneurs than the US does, but we do have a much higher percentage of repeaters," says Dr Mlavsky.

Out of 12,000 US entrepreneurs who studied at the Harvard Business School, 600 - just five per cent - created more than one start-up. In Israel, the number of "repeat offenders" is estimated at between 25 and 35 per cent.

It is because of this phenomenon, he says, that Israel's high-tech sector has managed to weather the global crisis better than other countries. According to a survey of 250 high-tech companies, 92 per cent of them said they had hired people in the second half of 2009, with 75 per cent of the companies intending to hire new people in the first half of this year.

"Apart from China, Israel was the least affected country in the recession. It was badly affected in terms of exports but it didn't have the bank crisis and all the rubbish that England had," adds Dr Mlavsky, who has been living in Israel for 30 years but cannot speak Hebrew.

"There are only so many Jaffa oranges you can sell. The only way Israel can survive is by being cutting edge in what it does." And Dr Mlavsky should know. London-born, the former research scientist was recently awarded the Israeli Management Centre lifetime achievement award in recognition of his work in high-tech.

And Israel reportedly attracts as much venture capital as France and Germany combined. "For tecchies like me, Israel is the equivalent of Hamleys toy shop at Christmas time - there's so much of it and so much energy."

It is all a far cry from when Dr Mlavsky, who "had never even heard of the word 'entrepreneur'", started out. "I was a tecchie at heart from early on. I was 10 when I decided I wanted to be a
scientist."

He gained a PhD in chemistry from Queen Mary, University of London, before moving to the US where he became the first employee of US-based Tyco, now a multi-billion dollar multi-national. He moved to Israel in 1979 and was appointed the director of Bird, the Israel-US Binational Industrial Research & Development Foundation. He left Bird after 13 years and in 1993 founded Gemini, a $36m venture capital fund and the first of its kind in Israel. He is now chairman. Gemini, which manages more than $700 million worth of funds, invests in Israeli high-tech firms. Its backers include MIT and Morgan Stanley.

Among the Gemini success stories is RadNet, a national network of monitoring stations which was bought by a Siemens-Newbridge consortium in November 1997, a year after Gemini initially invested.

He acknowledges that last year was tough for start-ups as venture capitalists would not part with money, but he says the picture is changing. "Investment is coming back and high-tech companies are hiring again. There has been a turnaround."

He says the high-tech sector will always be attractive to venture capitalists. "I don't know what the main areas will be; water, air or where the hell it will be, but there will always be investment. I can't see it going anywhere. Israel is a hotbed of innovation."

    Last updated: 3:37pm, February 25 2010