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Posted in: News

Nov 9, 2016

What Makes Israel's Startup Culture So Competitive?

During a press conference at Wealthsimple's headquarters in Toronto, Mayor John Tory announced that a convoy of government officials and tech sector luminaries will be heading to Israel from November 12 - 17 for a week-long trade mission.

In addition to Mayor Tory, Montreal mayor Dennis Coderre, OMERS Ventures managing director Jim Orlando, and representatives from SecureKey, INCubes, Plooto and Vuru will join the delegation. They hope to convince Israeli companies, particularly those in the FinTech and cybersecurity sectors, to collaborate with Canadian companies.

This certainly isn't the first major Canadian trade mission to Israel. Local politicians and entrepreneurs continue to recognize the country as a hotbed of innovation activity.

The statistics back it up. Every year, the investment research firm PitchBook publishes a report of the top global universities for producing VC-backed entrepreneurs, and Tel Aviv University ranked #9, the only non-U.S. school on the top ten list producing almost twice the number of venture-backed companies as the University of Waterloo. Two other Israeli institutions round out the top 50.

So the question for Canadian entrepreneurs and policymakers is - why Israel? What makes Israel so fertile for innovation, follow-on investment and commercialization, and can Canadians take inspiration from the country's startup culture?

StartupSource's Mat Goldstein, a member of Aird & Berlis LLP's Corporate Finance group and Startups team, participated in a trade delegation to Israel earlier this year. Mat is convinced that Tel Aviv University's remarkable success in generating venture investment, as compared to Canadian peer institutions, is a result of national culture - but certainly, there are lessons to be learned from how the university stimulates and manages dialogue between research and industry.

"One area where Canadian universities and research institutions can learn from the Israel experience relates to the way that many Israeli researchers explore innovation with commercialization in mind," comments Mat. He supports this by noting that at Hebrew U, technology is commercialized by a stand-alone company, which is itself a for-profit company. "The Israeli tech transfer companies tend to be owned by the host universities, but are run as separate companies based on private sector principles and metrics. As a result, they seem very adept at determining when to incorporate a new company to pursue commercialization or when to license technology to an existing commercial enterprise or partner jointly."

Additionally, Israeli tech transfer companies have a strong track record of facilitating connections between academic researchers and industry at the earliest stages, leading to early market feedback on the direction of the research.

With the federal government having recently invested an unprecedented amount of resources into innovation departments of Canadian universities, it will be interesting to see whether this leads to an increased trend in follow-on investments, and whether we'll see a Canadian institution beside Tel Aviv University in a future Pitchbook Top 10. In any event, Canadian startups and the community behind them can and should take inspiration from the Israeli approach to commercializing innovation.

By Rebecca Kacaba, Mat Goldstein and Tim Jones, an articling student at Aird & Berlis LLP.

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