Herzliya, Israel – Entrepreneurship wasn’t invented here, but it is flourishing in a nation with fewer people than the state of Michigan.
Israeli universities teach it. The news media covers it. The government supports it. And venture capital and private equity firms in Israel and abroad want to invest in it, hoping to score the next big hit in an entrepreneurial eco-system that is unique and fairly common at the same time.
Everyone in Israel is not an entrepreneur, says Jon Polin, a 45-year-old American-born Israeli now deep into his fourth start-up in the Start-Up Nation. “Everybody here knows somebody who could be the next Steve Jobs. It’s gone beyond the tipping point. So many people are thinking about starting businesses. It’s so much a part of the culture here. They see all this stuff and they want to be part of it.”
More than 20 Michigan CEOs, some of them accomplished entrepreneurs in their own right, spent a week in Israel this month trying to better understand the environment that enables Israel to produce so many new businesses like Polin’s StorePower.com, new jobs and a bracing enthusiasm that offers Michigan and its largest city a path to the next stage of growth and dynamism.
It’s needed. For all the good that comes from near-record profits for Detroit automakers, their re-energized supply base and a declining state unemployment rate, to name three, sustainable economic growth and new jobs are more likely to come from new businesses powered by new ideas — supported, where possible, by private capital and business-friendly government policies.
What the Michigan CEOs learned is revealing: New ideas to satisfy existing needs, be they in the United States or Israel, are universal; appetites for risk are shaped by historic forces individuals cannot control; cultures developed over generations of experience and hardship cannot easily be exported or mimicked.
More, Michigan possesses entrepreneurial assets in academia and successes in business that deserve more attention. The shadow of Big Company Michigan — forged from start-ups with names like Ford and Dow, Kellogg and Gerber, Meijer and Amway, Quicken Loans and Little Caesar’s — still looms large. That entrepreneurship of decades, even a century, ago shaped a comparatively staid culture back home still tending to prize stability and certainty over risk-taking that could end in failure.
“It’s very discouraged” in Michigan, says Andra Rush, a serial entrepreneur who is CEO of Rush Trucking, Dakota Integrated Systems and Detroit Manufacturing. “I remember going to U of M business school and them gearing you up to work in General Motors, Pepsi, JPMorganChase.
“In Israel, they don’t talk about barriers to entry and all the obstacles you’ll face. Our education system promotes compliance, conformity and less risk-taking,” to land a job with a big company, build a career and work for someone else.
Adds Mark Murray, co-CEO of Meijer Inc. and co-chair of the Michigan CEO Mission to Israel: “It was eye-opening to see the depth of the entrepreneurial eco-system. The risk taking. The venture capital. The variety of ways companies have grown. There’s a perpetual renewal of business and innovation. Kellogg wasn’t always big, and Dow wasn’t always big, and Meijer wasn’t always big.”
Or successful. Before the Walker-based superstore chain flourished selling groceries, it was a failed dairy business. It took Henry Ford multiple attempts to successfully launch his eponymous auto company. Mike and Marian Ilitch built an empire of pizza, entertainment and big-league sports from a single shop in Garden City.
The success of each of them, and so many more, helped shape a world view in Michigan that still skews to bigness and away from its entrepreneurial roots — just as Israel’s relative isolation in a tough neighborhood, coupled with deep technical competence in physics and math, computer science and Big Data analytics, forced nascent business interests to look to global markets and assume the risks to get there.
It’s not always easy for entrepreneurs in Israel, however, an ethnic and religious melting pot partly defined by who serves in the military and knows the right people and who doesn’t. Just ask Jamil Mazzawi, CEO of Optima Design Automation in Nazareth, a predominantly Christian-Muslim Arab city in the northern part of the country.
He says “it’s hard to get investors to invest in Arabs,” many of whom have no connections to the elite units in the Israeli Defense Forces that produce waves of entrepreneurs and the buzz around the country’s high-tech space. “It could be lack of trust. I don’t know. Very few Arab entrepreneurs are getting funding.”
The observation doesn’t surprise Rush, a longtime board member of the Michigan Minority Supplier Development Council: “The entrepreneurs in Nazareth (are) very similar to start-ups in under-served communities” in the United States. “You don’t get much access to capital. You don’t get much access to talent. You don’t know what you don’t know.”
One ally for entrepreneurs like Mazzawi is the federal Office of the Chief Scientist, which uses independent outside consultants to evaluate 1,000 business plans annually before investing roughly $500 million each year in start-ups. It uses aggressive tax policy — including 100-percent write-offs against taxable income for investments in start-ups — to encourage investors.
The bottom line: The Israeli government effectively is the nation’s largest “angel investor” in early-stage companies because the tech sector accounts for 50 percent of Israel’s exports, because it’s strategic to the country’s economic future, and because new companies create jobs and new taxpayers.
“The key of everything we do is public-private partnership,” says Avi Hasson, chief scientist in Israel’s Ministry of Economy. “You get more credit in this country for trying and failing than you do for not trying. In this country, entrepreneurs are like rock stars — very much like Silicon Valley.”
Culture helps, as Polin and other Israelis point out. A diminished sense of hierarchy and a greater sense of empowerment, learned in the military, emboldens folks here to say “why not me?” when it comes to taking risks and starting a business. More, a strain of fatalism tied to Israel’s geopolitical vulnerability drives an increasingly pervasive entrepreneurial spirit.
Take Matan Gidnian and Eyal Ben Ezra, team partners in IDC Herzliya’s Zell Entrepreneurship Program. They’re angling to be the next Mobileye or the next Waze, start-ups that burnished Israel’s high-tech cred by hitting the jackpot with investors from around the world.
“All of us were combat soldiers,” says Ben Ezra, 26, nodding to Gidnian and their third partner, Roy Goldschmidt, 27, of Tel Aviv. “The thing they teach you the most is nothing is impossible. You suffer a lot. Stress. Not sleeping.”
“Here, people are not afraid to lose something,” adds Gidnian, 25, of Ra’nana. “Either you succeed or you learn. If you expect it, then you are not afraid of it. After you risk your life in the army, risking other things is OK.”
Daniel Howes is a Detroit News columnist and associate business editor. Watch for his columns through November on the Michigan CEO mission to Israel. His column runs Tuesdays, Thursdays and Fridays and can be found here. Catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.