Start-up Nation

by Dan Senor, Saul Singer

  One example of this avid internationalism is Netafim, an Israeli company that has become the largest provider of drip irrigation systems in the world. Founded in 1965, Netafim is a rare example of a company that bridges Israel’s low-tech, agricultural past to the current boom in cleantech.

  Netafim was created by Simcha Blass, the architect of one of the largest infrastructure projects undertaken in the early years of the state. Born in Poland, he was active in the Jewish self-defense units organized in Warsaw during World War I. Soon after arriving in Israel in the 1930s, he became chief engineer for Mekorot, the national water company, and planned the pipeline and canal that would bring water from the Jordan River and Sea of Galilee to the arid Negev.

  Blass got the idea for drip irrigation from a tree growing in a neighbor’s backyard, seemingly “without water.” The giant tree, it turns out, was being nourished by a slow leak in an underground water pipe. When modern plastics became available in the 1950s, Blass realized that drip irrigation was technically feasible. He patented his invention and made a deal with a cooperative settlement located in the Negev Desert, Kibbutz Hatzerim, to produce the new technology.

  Netafim was pioneering not just because it developed an innovative way to increase crop yields by up to 50 percent while using 40 percent less water, but because it was one of the first kibbutz-based industries. Until then the kibbutzim—collective communities—were agriculture-based. The idea of a kibbutz factory that exported to the world was a novelty.

  But Netafim’s real advantage was having no inhibition about traveling to far-flung places in pursuit of markets that desperately needed its products—places where, in the 1960s and ’70s, entrepreneurs from the West simply did not visit. As a result, Netafim now operates in 110 countries over five continents. In Asia it has offices in Vietnam, Taiwan, New Zealand, China (two offices), India, Thailand, Japan, Philippines, Korea, and Indonesia. In South America it has a presence in Argentina, Brazil, Mexico, Chile, Colombia, Ecuador, and Peru. Netafim also has eleven offices in Europe and the former Soviet Union, one in Australia, and one in North America.

  And because Netafim’s technology became so indispensable, a number of foreign governments that historically had been hostile to Israel began to open diplomatic channels. Netafim is active in former Soviet bloc Muslim states like Azerbaijan, Kazakhstan, and Uzbekistan, which led to warmer relations with Israel’s government after the dissolution of the Soviet Union. In 2004, then trade minister Ehud Olmert tagged along on a Netafim trip to South Africa in the hope of forming new strategic alliances there. The trip resulted in $30 million in contracts for Netafim, plus a memorandum of understanding between the two governments on agriculture and arid lands development.

  Israeli entrepreneurs and executives, though, have themselves been known to engage in self-appointed diplomatic missions on behalf of the state. Many of Israel’s globe-trotting businesspeople are not just technology evangelists but endeavor to “sell” the entire Israeli economy. Jon Medved—the inventor of the “nickname barometer” to measure informality—is one such example.

  Raised in California, Medved was trained in political activism, not engineering. His first career was as a Zionist organizer. He moved to Israel in 1981 and made a small living by going on speaking tours to preach about the future of Israel to Israelis. But a conversation he had in 1982 with an executive at Rafael, one of Israel’s largest defense contractors, burst Medved’s bubble. He was told, unceremoniously, that what he was doing was a waste of time and energy. Israel didn’t need more professional Zionists or politicians, the executive stated flatly; Israel needed businesspeople. Medved’s father had started a small company in California that built optical transmitters and receivers. So Medved began pitching his father’s product in Israel. Instead of going from kibbutz to kibbutz to sell the future of Zionism, he went from company to company to sell optical technology.

  Later, he got into the investment business and founded Israel Seed Partners, a venture capital firm, in his Jerusalem garage. His fund grew to over $260 million and he invested in sixty Israeli companies, including Shopping.com, which was bought by eBay, and Compugen and Answers.com, both of which went public on the NASDAQ. In 2006, Medved left Israel Seed to launch and manage a start-up himself—Vringo, a company that pioneered video ringtones for cell phones, which has quickly penetrated the European and Turkish markets.

  But his own company is less important. Regardless of what Medved is doing for his enterprises, he spends a lot of time—too much time, his investors complain—preaching about the Israeli economy. On every trip abroad, Medved lugs a portable projector and laptop loaded with a memorable slide presentation chronicling the accomplishments of the Israeli tech scene. In speeches—and in conversations with anyone who will listen—Medved celebrates all the Israeli landmark “exits” in which companies were bought or went public, and catalogs dozens of “made in Israel” technologies.

  In his presentations he says only half-jokingly that if Israel followed the lead of “Intel Inside”—Intel’s marketing campaign to highlight the ubiquity of its chips—with similar “Israel Inside” stickers, they would show up on almost everything people around the world touch, and he ticks off a litany of examples: from computers, to cell phones, to medical devices and miracle drugs, to Internet-based social networks, to cutting-edge sources of clean energy, to the food we eat, to the registers in the supermarkets in which we shop.

  Medved then hints to the multinationals in the room that they are likely to be missing something if they have not already set up shop in Israel. He finds out in advance of each presentation which companies’ executives will be in the audience and is then certain to mention which of their competitors are already in Israel. “The reason that Israel is inside almost everything we touch is because almost every company we touch is inside Israel. Are you?” he asks, peering into the audience.

  Medved has taken on a role that, in any other country, would typically belong to the local chamber of commerce, minister of trade, or foreign secretary.

  But the start-ups Medved champions in his presentations are rarely companies in which he has invested. He’s always torn when he prepares for these speeches: “Do I talk up Vringo among the promising new companies coming out of Israel? It’s a no-brainer, right? It’s good exposure for the company.” But he resists the urge. “My pitch is about Israel. My American investors beat me up over this—‘You wind up plugging your competitors but not your own company.’ They’re right. But they’re missing the larger point.”

  Medved is in perpetual motion. He’s given the presentation fifty times a year for the last fifteen years. All told, almost eight hundred times, at technology conferences and universities around the world, in over forty countries, and to scores of international dignitaries visiting Israel.

  Alex Vieux, CEO of Red Herring magazine, told us that he has been to “a million high-tech conferences, on multiple continents. I see Israelis like Medved give presentations all the time, alongside their peers from other countries. The others are always making a pitch for their specific company. The Israelis are always making a pitch for Israel.”9

  CHAPTER 4

  Harvard, Princeton, and Yale

  The social graph is very simple here. Everybody knows everybody.

  —YOSSI VARDI

  DAVID AMIR MET US AT HIS JERUSALEM HOME in his pilot’s uniform, but there was nothing Top Gun about him. Soft-spoken, thoughtful, and self-deprecating, he looked, even in uniform, more like an American liberal arts student than the typical pilot with crisp military bearing. Yet as he explained with pride how the Israeli Air Force trained some of the best pilots in the world—according to numerous international competitions as well as their record in battle—it became easy to see how he fit in.1

  While students in other countries are preoccupied with deciding which college to attend, Israelis are weighing the merits of different military units. And just as students elsewhere are thinking about what they need to do to get
into the best schools, many Israelis are positioning themselves to be recruited by the IDF’s elite units.

  Amir decided when he was just twelve years old that he wanted to learn Arabic, partly because he knew even then that it might help him get accepted into the best intelligence units.

  But the pressure to get into those units really intensifies when Israelis are seventeen years old. Every year, the buzz builds among high school junior and senior classes all across Israel. Who has been asked to try out for the pilot’s course? Who for the different sayarot, the commando units of the navy, the paratroopers, the infantry brigades, and, most selective of all, the Sayeret Matkal, the chief of staff’s commando unit?

  And which students will be asked to try out for the elite intelligence units, such as 8200, where Shvat Shaked and his cofounder of Fraud Sciences served? Who will go to Mamram, the IDF’s computer systems division? And who will be considered for Talpiot, a unit that combines technological training with exposure to all the top commando units’ operations?

  In Israel, about one year before reaching draft age, all seventeen-year-old males and females are called to report to IDF recruiting centers for an initial one-day screening that includes aptitude and psychological exams, interviews, and a medical evaluation. At the end of the day, a health and psychometric classification is determined and service possibilities are presented to the young candidate in a personal interview. Candidates who meet the health, aptitude, and personality requirements are offered an opportunity to take additional qualifying tests for service in one of the IDF’s elite units or divisions.

  Tests for the paratrooper brigade, for example, occur three times each year, often months before candidates’ scheduled draft dates. Young civilians submit themselves to a rigorous two days of physical and mental testing, where an initial group of about four thousand candidates is winnowed down to four hundred future draftees for different units. These four hundred paratroopers can volunteer to participate in the field test and screening process for the special forces, which is an intensive five-day series of eleven repeating drills, each lasting several hours and always conducted under severe time constraints and increasing physical and mental pressure. During the entire time, rest periods are short and sleep almost nonexistent, as is food and the time in which to eat it. Participants describe the five days as one long blur where day and night are indistinguishable. No watches or cell phones are allowed—the screeners want to make the experience as disorienting as possible. At the end of the five days, each soldier is ranked.

  The twenty top-ranking soldiers for each unit immediately begin the twenty-month training period. Those who complete the training together remain as a team throughout their regular and reserve service. Their unit becomes a second family. They remain in the reserves until they are in their mid-forties.

  While it’s difficult to get into the top Israeli universities, the nation’s equivalent of Harvard, Princeton, and Yale are the IDF’s elite units. The unit in which an applicant served tells prospective employers what kind of selection process he or she navigated, and what skills and relevant experience he or she may already possess.

  “In Israel, one’s academic past is somehow less important than the military past. One of the questions asked in every job interview is, Where did you serve in the army?” says Gil Kerbs, an intelligence unit alumnus who—after pursuing the Book—today works in Israel’s venture capital industry, specializing in China’s technology market. “There are job offers on the Internet and want ads that specifically say ‘meant for 8200 alumni.’ The 8200 alumni association now has a national reunion. But instead of using the time together to reflect on past battles and military nostalgia, it is forward-looking. The alumni are focused on business networking. Successful 8200 entrepreneurs give presentations at the reunion about their companies and industries.”2

  As we’ve seen, the air force and Israel’s elite commando units are well known for their selectivity, the sophistication and difficulty of their training, and the quality of their alumni. But the IDF has a unit that takes the process of extreme selectivity and extensive training to an even higher level, especially in the realm of technological innovation. That unit is Talpiot.

  The name Talpiot comes from a verse in the Bible’s Song of Songs that refers to a castle’s turrets; the term connotes the pinnacle of achievement. Talpiot has the distinction of being both the most selective unit and the one that subjects its soldiers to the longest training course in the IDF—forty-one months, which is longer than the entire service of most soldiers. Those who enter the program sign on for an extra six years in the military, so their minimum service is a total of nine years.

  The program was the brainchild of Felix Dothan and Shaul Yatziv, both Hebrew University scientists. They came up with the idea following the debacle of the 1973 Yom Kippur War. At that time, the country was still reeling from being caught flat-footed by a surprise attack, and from the casualties it had suffered. The war was a costly reminder that Israel must compensate for its small size and population by maintaining a qualitative and technological edge. The professors approached then IDF chief of staff Rafael “Raful” Eitan with a simple idea: take a handful of Israel’s most talented young people and give them the most intensive technology training that the universities and the military had to offer.

  Started as a one-year experiment, the program has been running continuously for thirty years. Each year, the top 2 percent of Israeli high school students are asked to try out—two thousand students. Of these, only one in ten pass a battery of tests, mainly in physics and mathematics. These two hundred students are then run through two days of intensive personality and aptitude testing.

  Once admitted into the program, Talpiot cadets blaze through an accelerated university degree in math or physics while they are introduced to the technological needs of all IDF branches. The academic training they receive goes beyond what the typical university student would receive in Israel or anywhere else—they study more, in less time. They also go through basic training with the paratroopers. The idea is to give them an overview of all the major IDF branches so that they understand both the technology and military needs—and especially the connection between them.

  Providing the students with such a broad range of knowledge is not, however, the ultimate goal of the course. Rather, it is to transform them into mission-oriented leaders and problem solvers.

  This is achieved by handing them mission after mission, with minimal guidance. Some assignments are as mundane as organizing a conference for their fellow cadets, which requires coordinating the speakers, facilities, transportation, and food. Others are as complicated as penetrating a telecommunications network of a live terrorist cell.

  But more typical is forcing the soldiers to find cross-disciplinary solutions to specific military problems. For example, a team of cadets had to solve the problem of the severe back pain suffered by IDF helicopter pilots from the choppers’ vibrations. The Talpiot cadets first determined how to measure the impact of the choppers’ vibrations on the human vertebrae. They designed a customized seat, installed it in a helicopter simulator, and cut a hole in its backrest. Next they put a pen on a pilot’s back, had him “fly” in the simulator, and used a high-speed camera inserted in the backrest hole to photograph the marks caused by the different vibrations. Finally, after studying the movements by analyzing computerized data generated from the movement information in the photos, they redesigned the chopper seats.

  Assuming they survive the first two or three years of the course, these cadets become “Talpions,” a title that carries prestige in both military and civilian life.

  The Talpiot program as a whole is under Mafat, the IDF’s internal research and development arm, which is parallel to America’s DARPA (the Defense Advanced Research Projects Agency). Mafat has the coveted and sensitive job of assigning each Talpion to a specific unit in the IDF for their next six years of regular service.

  From the beginning, the hyperelitism
of the Talpiot program has attracted critics. The program almost didn’t get off the ground because military leaders did not think it would be worthwhile to invest so much in such a small group. Recently, some detractors have claimed that the program is a failure because most of the graduates do not stay in the military beyond the required nine years and do not end up in the IDF’s senior ranks.

  However, though Talpiot training is optimized to maintain the IDF’s technological edge, the same combination of leadership experience and technical knowledge is ideal for creating new companies. Although the program has produced only about 650 graduates in thirty years, they have become some of Israel’s top academics and founders of the country’s most successful companies. NICE Systems, the global corporation behind call-monitoring systems used by eighty-five of the Forbes 100 companies, was founded by a team of Talpions. So was Compugen, a leader in human-genome decoding and drug development. Many of the Israeli technology companies traded on the NASDAQ were either founded by a Talpion or have alumni situated in key roles.

  So the architects of Talpiot, Dothan and Yatziv, vigorously reject the criticisms. First, they argue that the interservice competition for Talpions within the IDF—which at times has had to be settled by the prime minister—speaks for itself. Second, they claim that the Talpions easily pay back the investment during their required six years of service. Third, and perhaps most importantly, the two-thirds of Talpiot graduates who end up either in academia or in technology companies continue to make a tremendous contribution to the economy and society, thereby strengthening the country in different ways.

  Talpions may represent the elite of the elite in the Israeli military, but the underlying strategy behind the program’s development—to provide broad and deep training in order to produce innovative, adaptive problem solving—is evident throughout much of the military and seems to be part of the Israeli ethos: to teach people how to be very good at a lot of things, rather than excellent at one thing.