Last year in October, I attended the DLD conference in Israel with the 212 team. DLD (Digital Life Design) is held every year in Munich and Tel Aviv. We missed the one in Munich. But, the DLD in Israel and in Munich are quite different. The one in Israel is very far from the German-style seriousness; panelists wearing shorts, participants which are 'networking' during the meetings are customary parts of the events.

The atmosphere in DLD reflects the entrepreneurship eco-system of Israel successfully. Yosi Vardi, Chairman of Conference, is 71 years old and is a prominent name concerning the socialization of my generation. Yosi was the first investor of Mirabilis ICQ in 1996. ICQ is one of the most popular representatives of technology entrepreneurship eco-system in Israel which speeded up in the 1990s.  The transformation that ICQ enabled globally paved the way for today’s popular products MSN Messenger, Skype, Whatsup, etc.  Israel, who celebrated its 65^th anniversary last week, is one of the most successful countries in upbringing global entrepreneurs. It has the highest venture fund investment per capita in throughout the world. Startup Genome, among all global entrepreneurship eco-systems, ranked Tel Aviv second one after Silicon Valley. Among the number of the quoted companies in NASDAQ, after USA, Israel with 7 million people is competing with China’s billions of people.

I thought about what we can learn from the success of Israel in enhancing entrepreneurship:

(1) Small countries like Israel have the upper hand in launching global products. Entrepreneurs are targeting global markets instead of small domestic markets.  I can tell that during the DLD events, hardly any sentence of Israeli market was spoken. In fast growing countries with big domestic markets like Turkey, an overwhelming majority of entrepreneurs launch products for domestic markets. It would be more difficult to globalize if the business model is set up for the domestic market than for the global market from the start.  Another problem of Turkey is that its domestic market is not small, but also not as big as those of China, India or Brazil. Our entrepreneurs are between a rock and a hard place concerning the target market size.

(2) One of the most important elements that support entrepreneurship is a networked society, that is, the presence of strong formal and informal relations.  In Israel, you can reach everyone whether entrepreneurs, investors, public officials through a single intermediary and mostly by mobile phone. In Turkey and almost in the rest of the world, you need secretaries, influential people and you need to deal with unanswered e-mails for contact.

Obligatory military service after high school is one key reason for the strength of networks in Israel. Military service in Israel is designed not only for the security of the country but also for improving the skills and relations for the life after military service. Are there any people in Turkey who set up a business with his army friend in technology entrepreneurship?

(3) It was public policies not only tailored for entrepreneurship but also had “entrepreneurial” elements per se which played probably the most important role in the development of entrepreneurship in Israel. The public sector has actively supported ecosystem elements like business incubators, and venture capital funds via tailor-made programs. The most well known is the YOZMA program implemented in the 1990s. The Office of the Chief Scientist of the Ministry of Industry, Trade and Labor (OCS-MOITAL) invested in 10 venture capital funds under the condition that there shall be one foreign and one local shareholder and the executive office shall be in Israel. As I mentioned before, the ecosystem started with YOZMA and is standing on its own feet today, realizing the highest venture capital investment per capita.

When I was in Israel for the first time in 2009, I met with Yigal Erlich, founder of YOZMA fund. Yigal said, “You might be thinking that Israel rules the world. However, when I first started to work as a public official in 1992, no international fund was recognizing Israel. I slept in front of Advent in Boston for 6 months and I finally convinced them to invest in Israel. After one fund invested in Israel, others started to follow via YOZMA.” Yigal Erlich set up his own fund after leaving his public post when YOZMA program terminated. The person at the post today is one of the shareholders of the funds to which YOZMA primarily allocated funds.

I wonder whether any venture funder would be assigned to TUBITAK, The Scientific and Technological Research Council of Turkey. There is need for a mentality change in order to design pro-active, risky, flawed but then corrected entrepreneurship support programs. This can be an important lesson learned from the Israeli experience.

By the way, the TUBITAK’s law has been changed last June; TUBITAK was supposed to support venture capital funds and incubators. What happened to those programs? Have you heard anything about it?

*This article was posed on 212Ltd blog on 30.4.2013.

Ussal Sahbaz, Economic Policy Studies, Analyst