Start-up Nation

by Dan Senor, Saul Singer

  De Gaulle’s successor, Georges Pompidou, continued the new policy after his own election in 1969. The two hundred AMX tanks France had originally committed to Israel were to be rerouted to Libya, and France even sent fifty Mirage jet fighters Israel had already paid for to Syria, one of Israel’s fiercest enemies.

  The Israelis quickly pursued stopgap measures. Israeli Air Force founder Al Schwimmer personally recruited a sympathetic Swiss engineer to give him the blueprints to the Mirage engine, so Israel could copy the French fighter. Israel also returned to its pre-state smuggling exploits. In one mission in 1969, five Israeli-manned gunboats battled twenty-foot waves on a three-thousand-mile race from France to Israel; these naval vessels, worth millions of dollars, had been promised to Israel before the new embargo. As Time magazine colorfully described it in 1970: “Not since Bismarck has there been such a sea hunt. . . . At various points, [the Israelis] were tracked by French reconnaissance planes, an R.A.F. Canberra from Malta, Soviet tankers, the radar forests of the U.S. Sixth Fleet, television cameramen and even Italian fishermen.”6

  These shenanigans, however, could not compensate for the hard truth: the Middle East arms race was accelerating just at the moment that Israel had lost its most indispensable arms and aircraft supplier. The 1967 French embargo put Israel in an extremely vulnerable position.

  Prior to the 1967 war, the United States had already begun to sell weapons systems to Israel, starting with the transfer of Hawk surface-to-air missiles by the Kennedy administration in 1962. Jerusalem’s first choice, then, was for the United States to take France’s place as Israel’s main arms supplier. But the French betrayal had built a consensus in Israel that it could no longer rely so heavily on foreign arms suppliers. Israel decided that it must move quickly to produce major weapons systems, such as tanks and fighter aircraft, even though no other small country had successfully done so.

  This drive for independence produced the Merkava tank, first released in 1978 and now in its fourth generation. It also led to the Nesher—Israel’s version of the Mirage aircraft—and then to the Kfir, first flown in 1973.7

  The most ambitious project of all, however, was to produce the Lavi fighter jet, using American-made engines. The program was jointly funded by Israel and the United States. The Lavi was designed not only to replace the Kfir but to become one of the top-line fighters in the world.

  The Lavi went into full-scale development in 1982; on the last day of 1986, the first plane took its inaugural test flight. But in August 1987, after billions of dollars had been spent to build five planes, mounting pressure in both Israel and the United States led to the program’s cancellation, first by the U.S. Congress and then by a 12–11 vote in the Israeli cabinet.

  Many years later, the project and its cancellation still remain controversial: some people believe that it was an impossibly ambitious boondoggle from the beginning, while others claim that it was a great opportunity missed. In a 1991 article in Flight International magazine, published during Operation Desert Storm, an editor wrote about his experience flying the Lavi back in 1989: “Now when the coalition forces fight in the Gulf they miss the aircraft they really need. It’s a real shame that I had to fly the world’s best fighter knowing it would never get into service.”8

  Even though the program was canceled, the Lavi’s development had significant military reverberations. First, the Israelis had made an important psychological breakthrough: they had demonstrated to themselves, their allies, and their adversaries that they were not dependent on anyone else to provide one of the most basic elements for national survival—an advanced fighter aircraft program. Second, in 1988 Israel joined a club of only about a dozen nations that had launched satellites into space—an achievement that would have been unlikely without the technological know-how accumulated during the Lavi’s development. And third, although the Lavi was canceled, the billions invested in the program brought Israel to a new level in avionic systems and, in some ways, helped jump-start the high-tech boom to come. When the program shut down, its fifteen hundred engineers were suddenly out of jobs. Some of them left the country, but most did not, resulting in a large infusion of engineering talent from the military industries into the private sector. The tremendous technological talent that had been concentrated on one aircraft was suddenly unleashed into the economy.9

  Yossi Gross, one of the Lavi’s engineers, was born in Israel. His mother, who’d survived Auschwitz, emigrated from Europe after the Holocaust. As a student in Israel, Gross trained in aeronautical engineering at the Technion and then worked at Israel Aircraft Industries (IAI) for seven years.

  Gross, a test-flight engineer at IAI, began in the design department. When he came up with a new idea for the landing gear, he was told by his supervisors to not bother them with innovations but to simply copy the American F-16. “I was working in a large company with twenty-three thousand employees, where you can’t be creative,” he recalled.10

  Shortly before the Lavi’s cancellation, Gross decided to leave not only IAI but the whole aeronautics field. “In aerospace, you can’t be an entrepreneur,” he explained. “The government owns the industry, and the projects are huge. But I learned a lot of technical things there that helped me immensely later on.”

  This former flight engineer went on to found seventeen start-ups and develop over three hundred patents. So, in a sense, Yossi Gross should thank France. Charles de Gaulle hardly intended to help jump-start the Israeli technology scene. Yet by convincing Israelis that they could not rely on foreign weapons systems, de Gaulle’s decision made a pivotal contribution to Israel’s economy. The major increase in military R&D that followed France’s boycott of Israel gave a generation of Israeli engineers remarkable experience. But it would not have catalyzed Israel’s start-up hothouse if it had not been combined with something else: a profound interdisciplinary approach and a willingness to try anything, no matter how destabilizing to societal norms.

  CHAPTER 12

  From Nose Cones to Geysers

  If most air forces are designed like a Formula One race car, the Israeli Air Force is a beat-up jeep with a lot of tools in it. . . . Here, you’re going off-road from day one.

  The race car is just not going to work in our environment.

  —YUVAL DOTAN

  DOUG WOOD IS A NEW AND UNLIKELY RECRUIT to Israel. With his calm and reflective demeanor, he stands out among his more brash Israeli colleagues. He was hired from Hollywood to do something that’s never before been tried in Jerusalem: Wood is the director of the first feature-length animated movie to be produced by Animation Lab, the start-up founded by Israeli venture capitalist Erel Margalit.

  Wood worked as vice president of feature animation development and production at Turner, Warner Brothers, and Universal. When Margalit asked him to relocate to Jerusalem to create an animated feature, Wood said he would first have to see if Jerusalem had a real creative community. After spending some time in Jerusalem at Bezalel—Israel’s leading academy of art and design—he was convinced. “I met with the faculty there. I met with some TV writers and [author] Meir Shalev, and some other big storytellers,” he told us. “They were as good if not better than the people you would meet at the world’s top arts schools.”

  But he also identified something different about Israel. “There’s a multitask mentality here. We’ve consulted with a lot of the Israeli technical people and they come up with innovative ways to improve our pipeline and do things more directly. And then there was this time I was working on a creative project with an art graduate from Bezalel. He looked the part—long hair, an earring, in shorts and flip-flops. Suddenly a technological problem erupted. I was ready to call the techies in to fix it. But the Bezalel student dropped his graphic work and began solving the problem like he was a trained engineer. I asked him where he learned to do this. It turns out he was also a fighter pilot in the air force. This art student? A fighter pilot? It’s like all these worlds come colliding here—or collaborating—dependin
g how you look at it.”1

  It’s not surprising that multitasking, like many other advantages Israeli technologists seem to have, is fostered by the IDF. Fighter pilot Yuval Dotan told us that there is a distinct bias against specialization in the Israeli military. “If most air forces are designed like a Formula One race car, the Israeli Air Force is a beat-up jeep with a lot of tools in it. On a closed track, the Formula One’s going to win,” Dotan said. But, he noted, in the IAF, “you’re going off-road from day one. . . . The race car is just not going to work in our environment.”2

  The difference between the Formula One and the jeep strategies is not just about numbers; each produces divergent tactics and modes of thinking. This can be seen in the different “strike packages” that each air force constructs for its missions. For most Western air forces, a strike package is built from a series of waves of aircraft whose end goal is to deliver bombs on targets.

  The United States typically uses four waves of specialized aircraft to accomplish a specific component of the mission: for example, a combat air patrol, designed to clear a corridor of enemy aircraft; a second wave that knocks out any enemy antiaircraft systems that are firing missiles; a third wave of electronic warfare aircraft, tankers for refueling, and radar aircraft to provide a complete battle picture; and, finally, the strikers themselves—planes with bombs. These are guarded by close air-support fighters “to make sure nothing happens,” Dotan explained.

  “It’s overwhelming and it’s very well coordinated,” Dotan said of the U.S. system. “It’s very challenging logistically. You’ve got to meet the tanker at the right place. You’ve got to rendezvous with the electronic warfare—if one guy’s off by a few seconds, it all falls apart. The IAF could not pull off a system like this even if it had the resources; it would just be a big mess. We’re not disciplined enough.”

  In the Israeli system, almost every aircraft is a jack-of-all-trades. “You don’t go into combat without air-to-air missiles, no matter what the mission is,” said Dotan. “You could be going to hit a target in southern Lebanon, with zero chance of meeting another aircraft, and if you do, the home base is two minutes’ flying time away and someone else can come and help you. Still, there’s no such thing as going into hostile territory without air-to-air missiles.”

  Similarly, nearly every aircraft in the IAF has its own onboard electronic warfare system. Unlike the U.S. Air Force, the IAF does not send up a special formation to defeat enemy radars. “You do it yourself,” Dotan noted. “It’s not as effective, but it’s a hell of a lot more flexible.” Finally, in a typical Israeli strike package, about 90 percent of the aircraft are carrying bombs and are assigned targets. In a U.S. strike package, only the strikers in the final wave are carrying bombs.

  In the Israeli system, each pilot learns not only his own target but also other targets in separate formations. “If an aircraft gets hit, for example, and two aircraft split off to go after a downed pilot or to engage in air-to-air combat . . . the other pilots have to take over those targets,” Dotan explained. “You’re expected to do that—it’s actually a normal outcome. About half the time you’re hitting somebody else’s target.”

  The differences in the two countries’ systems are most obvious when Israelis and Americans fly together in joint exercises. Dotan was surprised to find, in one such exercise, that American pilots were given a “dance card” that diagrammed the maneuvers the pilot was supposed to use in the fight. “We see that and say, What the hell is that? How many times do you know what the other guy is going to do?” For Dotan, who now is an investor, the American system seems “like going into a trading day saying, ‘Whatever the market does, I’m buying.’ ”

  The multitasking mentality produces an environment in which job titles—and the compartmentalization that goes along with them—don’t mean much. This is something that Doug Wood noticed in making the transition from Hollywood to Jerusalem: “This is great because conventional Hollywood studios say you need a ‘projection major’ and you need a ‘production coordinator’ or you need a ‘layout head.’ But in Israel the titles are kind of arbitrary, really, because they are interchangeable in some ways and people do work on more than one thing.

  “For example,” he told us, “we have a guy who is in the CG team, the computer-generated-image team, but he also works on clay 3-D models of the characters. And then we’re doing a sequence, and he came up with a funny line for the end of this thirty-second sequence that we’re producing. And I actually liked the line so much I rewrote the script and put it in there. So the CG guy crossed the disciplinary walls and ventured into modeling and into scriptwriting.”

  The term in the United States for this kind of crossover is a mashup. And the term itself has been rapidly morphing and acquiring new meanings. Originally referring to the merging of two or more songs into one, it has also come to designate digital and video combinations, as well as a Web application that meshes data from other sites—such as HousingMaps.com, which graphically displays craigslist rentals postings on Google Maps. An even more powerful mashup, in our view, is when innovation is born from the combination of radically different technologies and disciplines.

  The companies where mashups are most common in Israel are in the medical-device and biotech sectors, where you find wind tunnel engineers and doctors collaborating on a credit card–sized device that may make injections obsolete. Or you find a company (home to beta cells, fiber optics, and algae from Yellowstone National Park) that has created an implantable artificial pancreas to treat diabetes. And then there’s a start-up that’s built around a pill that can transmit images from inside your intestines using optics technology taken from a missile’s nose cone.

  Gavriel Iddan used to be a rocket scientist for Rafael, a company that is one of the principal weapons developers for the IDF. He specialized in the sophisticated electro-optical devices that allow missiles to “see” their target. Rockets might not be the first place one would look for medical technology, but Iddan had a novel idea: he would adapt the newest miniaturization technology used in missiles to develop a camera within a pill that could transmit pictures from inside the human body.

  Many people told him it would be impossible to cram a camera, a transmitter, and light and energy sources into a pill that anyone could swallow. Iddan persisted, at one point going to the supermarket to buy chickens so he could test whether the prototype pill could transmit through animal tissues. He started a business around these pill cameras, or PillCams, and named his company Given Imaging.

  In 2001, Given Imaging became the first company in the world to go public on Wall Street after the 9/11 attacks. By 2004, six years after its founding, Given Imaging had sold 100,000 PillCams. In early 2007, the company hit the 500,000 PillCams mark, and by the end of 2007 it had sold almost 700,000.

  Today, the latest generation of PillCams painlessly transmit eighteen photographs per second, for hours, from deep within the intestines of a patient. The video produced can be viewed by a doctor in real time, in the same room or across the globe. The market remains large and has attracted major competitors; the camera giant Olympus now makes its own camera in a pill. That other companies would get into the act is not surprising, since ailments of the gastrointestinal tract are responsible for more than thirty million visits to doctors’ offices in the United States alone.

  The story of Given Imaging is not just one of technology transfer from the military to the civilian sectors, or of an entrepreneur emerging from a major defense technology company. It is an example of a technology mashup, of someone combining not only the disparate fields of missiles and medicine but integrating a staggering array of technologies—from optics, to electronics, to batteries, to wireless data transmission, to software, in order to help doctors analyze what they are seeing. These types of mashups are the holy grail of technological innovation. In fact, a recent study by Tel Aviv University revealed that patents originating from Israel are distinguished globally for citing the highest nu
mber and most diverse set of precedent patents.3

  One such mashup, a company that has bridged the divide between the military and medicine, is Compugen, whose three founders—president Eli Mintz, chief technology officer Simchon Faigler, and software chief Amir Natan—met in the IDF’s elite Talpiot program. Another Talpiot alumnus at Compugen, Lior Ma’ayan, said that twenty-five of the sixty mathematicians in the company joined through their network of army contacts.

  In the IDF, Mintz created algorithms for sifting through reams of intelligence data to find the nuggets that have been so critical to Israel’s successes in hunting terrorist networks. When his wife, a geneticist, described the problems they had in sifting through enormous collections of genetic data, Mintz thought he might have a better way to do it.

  Mintz and his partners were about to revolutionize the process of genetic sequencing. Merck bought Compugen’s first sequencer in 1994, a year after the start-up was founded and long before the human genome had been successfully mapped. But this was just the beginning. In 2005, Compugen transformed its business model and moved into the drug discovery and development arena, and did so using techniques different from those that dominate the pharmaceutical industry.

  Combining mathematics, biology, computer science, and organic chemistry, Compugen has been pioneering what it calls “predictive” drug development. Rather than testing thousands of compounds, hoping to hit upon something that “works,” Compugen’s strategy is to begin at the genetic level and develop drugs based on how genes express themselves through the production of proteins.

  A major aspect of Compugen’s approach is its unusual combination of “dry” (theoretical) and “wet” (biological) labs. “Imagine working with Big Pharma overseas or in another part of the country,” Alon Amit, Compugen’s VP for technology, explained. “The back and forth that you can expect is a lot slower than if you have the biologists and mathematicians literally on the same floor discussing what to test, how to test, and inform the models.”4