Minority Report: Israel won’t transition from Start-Up Nation to Scale-Up Nation

Tech execs must realize their faults and start to correct them or else Israelis will continue to be labeled as brilliant technologists without the ability to build category-defining companies.

By MATTHEW KRIEGER
July 18, 2017 09:18
4 minute read.
 Night falls over Beersheba’s city center, which is quickly becoming a hi-tech hub for Israel

Night falls over Beersheba’s city center, which is quickly becoming a hi-tech hub for Israel. (photo credit: BEERSHEBA MUNICIPALITY)

 
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 Israel has created a one-of-a-kind start-up community that is unmatched on many levels. From the energy, creativity and enthusiasm of Israeli entrepreneurs, to the boldness and fearless nature of taking on tremendous challenges, Start-Up Nation has built something truly unique. Yet, there is another side to this story, and while it may be difficult for some to read, I believe this is something important that needs to be said.

There has been a lot of discussion over the last couple of years about the Israeli hi-tech industry transitioning from “Start- Up Nation” to “Scale-Up Nation.” While Start-Up Nation is focused on building innovative startups that can be quickly acquired, Scale-Up Nation is focused on building large, successful multinational companies that are headquartered in Israel and operate on a truly global scale, with thousands of employees and significant revenues.

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But despite the will to make it so, this move to Scale-Up Nation is not happening. And I am confident that it won’t, at least for the foreseeable future. And the reason it won’t is because the overwhelming majority of Israeli hi-tech companies – especially start-ups – have leadership that is fundamentally immature, specifically when it comes to two areas: process and personnel. Until these are fixed, Israel and its tech ecosystem will not be able to make the transition to Scale-Up Nation.

Process

Assigning degrees of importance to activities and giving each one a corresponding time frame in which to complete it should be a given for any company to properly function. However, you would be shocked to see how little basic processes matter to most Israeli executives. (I am not suggesting Israel has a monopoly on not respecting “process,” but it is quite rampant here.)

While many point to the chutzpah (maybe best translated as audacity or gall) of Israelis as one of the sources of success for Start-Up Nation, the other side of this trait is that entrepreneurs expect everyone they work with to be able to deliver according to what they (the entrepreneur) wants, no matter how last minute the notice is they have given or how over the top the request.

A company with leadership that operates on its own rules, without regard for process, will not succeed, no matter how good an idea it has put forward. You need to look no further than the rise and fall of Shai Agassi and Project Better Place, which leaped to incredible fame and almost $1 billion in funding on little more than a vision. Ultimately, Better Place failed to properly execute, mostly due to the fact that Agassi continued to insist on doing things his way, even when it was quite obvious to everyone around him it was not working.

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Many of the same characteristics of the failure of Better Place were also repeated by another dynamic entrepreneur named Moshe Hogeg, whose series of start-ups and consumer products, including a $15,000 smartphone, raised vast amounts of money, made a lot of noise, but ultimately ended in failure, never being able to capitalize on the initial hype.

While possessing large amounts of chutzpah is almost essential to becoming a CEO, the ones who succeed are able to temper this trait with a healthy dose of reality, allowing them to propel their companies forward on an aggressive agenda while ensuring they plan properly and leave enough time to complete tasks, both from their own employees, as well as from external vendors.

Personnel

Even when an Israeli company is “successful” enough to go public, it is challenged to sustain or demonstrate consistent business value. Of the almost 100 Israeli companies publicly traded on Nasdaq (the majority of which are technology firms), only a handful have successfully grown valuation year over year, allowing them to deliver significant return on investment for their investors. One reason for this, I believe, is that the company does not possess the vision to set forth a clear mission as well as the know-how to execute that vision.

One clear demonstration of the value that true leadership can deliver is Mobileye, the Jerusalem-based autonomous-vehicle technology company acquired by Intel for more than $15b. earlier this year. The founding team, Prof. Amnon Shashua and Ziv Aviram, are the perfect combination of vision (Shashua) and business experience (Aviram), allowing the company to become one of the world leaders in the development of autonomous- vehicle technology, while generating tremendous value for the company’s investors, partners and employees.

Mobileye, however, is definitely the exception to the rule. The overwhelming majority of technology entrepreneurs fail to grasp that to build a successful, thriving company, they must either possess both the vision and business acumen to guide the ship, or surround themselves with those who do. Leaders of Israeli tech companies must understand that surrounding themselves with the right people – confident, bold, but also practical – is not an admission of failure, but rather a sign of maturity.

While I would be thrilled to see Israel make the transition from Start-Up Nation to Scale-Up Nation, until the executives inside Israel’s collective tech community are able to look in the mirror, realize their faults and shortcomings, and start to correct them, Israelis will continue to be labeled as brilliant technologists without the ability to build category-defining companies.

Matthew Krieger is the founder and managing director of Tel Avivbased GKPR, an international public-relations and communications firm.

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