Israel trade mission offers lessons in start-up culture

Recently I was privileged to be included in Governor Haslam’s trade mission to Israel, along with other business leaders from across the state. It was a remarkable trip for many reasons, and the country has certainly earned its moniker, Start-up Nation, as coined in the 2010 book of the same title by authors Saul Singer and Dan Senor.

I'd like to offer some takeaways from the week that might be constructive to entrepreneurs in Tennessee. For starters, I might note that there are several parallels between the Volunteer State and Israel, including relatively similar populations (Tennessee's is 6.5 million, Israel's 8 million) and annual gross domestic products of approximately $300 billion. One distinct difference, though, as it relates to early stage capital formation -- whereas 2014 was a record year in Tennessee for venture capital investment with a total of $262 million (includes deals under $25 million), Israel had a record year of $3 billion invested, along with 19 initial public offerings that accounted for $2.1 billion. Needless to say, they have set the bar very high!

Some of the key takeaways from my trip include:

Military service: Every Israeli, male or female, has to sign up for military service with the Israel Defense Forces upon graduation from high school. Following a minimum of two to three  (female/male) years of service, young Israelis start their university experience. There are numerous examples of some of Israel’s top start-ups being founded by young men and women who achieved high marks in the military first. Regardless, every young person enters university at a more mature level and has learned key attributes of leadership, discipline and resourcefulness. In addition, many of them are exposed to the incredible innovation found throughout the IDF. There is no doubt that prior military experience informs much of the Israeli entrepreneurial scene.

Turning limitations into advantages: Several speakers throughout the week alluded to this as a key attribute of the Israeli psyche. Again, this speaks to resourcefulness honed in the military and is reflective of the fact that Israel is situated in a dangerous part of the world with intense enemies in close proximity. As Israeli entrepreneurs have limited options in terms of regional distribution of business products and services, they think globally from day one. Their product development and marketing strategies are by necessity geared to distribution strategies for North or South America, Asia or Europe.

Lack of hierarchy: While respectful of hierarchy, the Israeli culture is one that embraces debate, not only horizontally but also vertically through organizations. They are searching for the best ideas or solutions, not necessarily picking one just because “the boss” proposed it. This open culture enables Israeli entrepreneurs to cut through the noise to get to real answers quickly and keep focused on the primary issues at hand.

Failure: Related to culture, we often talk to our entrepreneurs about “fast failure” so they can move quickly to find a better product, market or business model. In fact, our accelerator programs throughout the state are supposed to help entrepreneurs through this process. We are striving to create a culture in Tennessee where entrepreneurs who may have failed in one venture are not ostracized or limited in their desire to pursue another venture. In fact, one sign of a more mature entrepreneurial ecosystem is the acknowledgement that entrepreneurs who fail once have a much better chance of success the next time. Once again, we can learn much from the Israelis in this regard. They are quick to admit mistakes, discuss and debate key takeaways and then move quickly to the next option(s) -- another business model, another customer acquisition strategy or perhaps a whole new start-up.

Finally, the public-private partnerships to support entrepreneurship that have been prevalent in Tennessee the past few years is certainly alive and well in Israel. The government is extremely supportive financially of start-ups throughout the land. Much as we have a statewide network of entrepreneur centers trying to get more high-growth start-ups, Israel has a network of about 20 incubators and these have been the breeding ground of many a successful start-up. Over the coming weeks and months, many of us from the trade mission will be following up with the contacts we met over there, as we continue about our collective work to make Tennessee the “Start-up State.”

Charlie Brock is CEO of Launch Tennessee (www.launchtn.org), a public-private partnership focused on supporting the development of high-growth companies in Tennessee with the ultimate goal of making Tennessee the No. 1 state in the Southeast for entrepreneurs to start and grow a company.