From start-up nation to ‘scale-up’ nation

NEW YORK—Most are accustomed to calling Israel a “start-up nation,” following the 2009 book by Dan Senor and Saul Singer titled as such. Jonathan Medved, however, is focused on the possibility of a “scale-up” nation.

“The next step is to scale up from start-ups to big global companies…to grow Israel’s companies is by focusing on solving big global problems,” says Medved, former CEO of mobile software platform provider Vringo, Inc.

Medved—one of Israel’s leading serial entrepreneurs and venture capitalists, who made aliyah in the 1990s and now lives in Jerusalem—spoke to the Israel Business Forum at a gathering high above Times Square in New York City earlier this month.

In Israel, he says, “The culture of risk, of immigrants, of informality, the discipline of the army, even tolerance for failure, creates an unprecedented, unequaled atmosphere. The world is starting to understand that Israel is the place to come to—outside of Silicon Valley—for technical start-ups.” Israel provides a “dense” center for innovation, according to Medved, who called the country “start-up central.”

Medved’s story is iconic in the world of high tech. Starting by working out of a garage in Jerusalem, this entrepreneur has co-founded more than 60 Israeli high-tech firms. He writes about Israeli technological developments and is a member of the board of Israel21c.  He speaks about Israel’s technological and economic contributions to America and the world in venues as diverse as AIPAC (American Israel Public Affairs Committee), CUFI (Christians United For Israel), and numerous industry conferences.

Noting “this bedrock of warmth and support” and “unshakable” alliance between Israel and America, Medved says the two nations are “incredibly productive and dynamic countries that lead the world in innovation and in technology.”

Medved says that when people are asked about how often they touch Israeli technology, some scratch their heads and say, “I don’t do much with Israeli technology.”

Wrong, says Vringo's former CEO.

“Each and every one of us is touching Israeli technology every single day, dozens of times—in computers, instant messages, cell phones, voice mail, flash memory,” Medved says. “Israeli innovation is making the world we live in exciting and dynamic and changing reality… This great alliance between [America and Israel] doesn’t get enough attention. That’s what I am talking about tonight.”

“There is no single major American high tech company—whether it’s Cisco or Broadcom or Microsoft or Google or anybody—who doesn’t do just enormous work in Israel,” he continues. “Samsung, the Korean operation, is now in Israel focused on sourcing Israeli technology.”

Innovation starts early in the lives of Israelis, as the Israel Defense Forces (IDF) instills values of competition and selectivity. “Our kids start competing before the end of high school—not to get into an Ivy League school but to get into, excuse the phrase, an Ivy League unit,” says Medved. After such special programs, “they’re ready for bear,” he says.

“Our army is very entrepreneurial—very much part of our strategic thinking,” Medved says.

Israel is creating jobs in America, Medved explains, citing companies such as Given Imaging in Georgia, Amdocs in Missouri and Netafim and Bright Source in California. Medved says virtually no American high-tech company is without an Israeli component. Microsoft just opened two new Israeli facilities, in Tel Aviv and Ra’anana.

The next step for Israel, Medved reiterates, is to “go from start-up nation to the scale-up nation.”

“Companies of size are being built In Israel,” he says. “I think it’s a great thing that we are selling these companies. [Sales] serve as a conduit for future purchases on the international market. 

Medved notes that Israeli-developed products are appearing in unexpected places. Zoran chips, for example, are in virtually every consumer electronics product, and more Americans are taking medication produced by Teva Pharmaceuticals than that of any other producer in the country. He also highlights “unrivaled” Israeli water technology, including the reverse osmosis process invented at Ben-Gurion University.

“By 2014,” says Medved, “all drinking water in Israel will come from the sea.”

Medved admits, however, that “there are storm clouds” and problems to solve, such as the education dilemma in Israel—increasing numbers of students but no increase in faculty, underfunded universities, and a continuing brain drain among the most crucial.

JointMedia News Service asked Medved about investors’ reactions to political upheaval in the Middle East, as well as the impact of the possibilities of war or terrorist activity in Israel and nearby. He suggests that investors are discounting these risks.

“In technology, most investors are not thinking about it,” he says. “What’s crazy is that Israelis live with this…it’s weird, though Israel is perceived as unsafe, tourism numbers are through the roof. We have to do what we have to do to build the country. Investment builds psychological resilience.”

“It’s a great time in Israel,” he concludes. “Tourism is booming, the economic crisis appears past.”