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Why Israel Is Letting Its Tech Startups Go

The Silicon Wadi, as Israel's tech sector is known, has a penchant for creating innovative new companies. But rather than grow to maturity, they're often sold off early to larger, foreign firms.

Man uses technology presented at CyberTech conference in Silicon Wadi
Man uses technology presented at CyberTech conference in Silicon Wadi
Nathalie Hamou

TEL AVIV — "Who will be the next Waze?" Israeli newspapers asked in 2013 as soon as the startup, founded just five years earlier in a Tel Aviv suburb, was sold to Google for $1 billion. "Who will be the next Mobileye?" they asked four years later, when the vehicular anti-collision software, developed in Jerusalem starting in 1999, was sold for $15 billion to Intel, another U.S. giant.

Announced some years apart, these two "mega-deals' were relayed by the media and public officials in this nation of 8 million people as cause for national celebration, and as further proof that in Israel, there's nothing taboo about selling startups to foreign companies.

Quite the contrary. In the Silicon Wadi, as the country's high-tech sector is known, startups practically beg from the outset to be absorbed by industry leaders. Adept in the so-called "culture of the exit," Israeli tech startups are simply designed this way. As a result, in 2017, for example, approximately $6 billion worth of startups were sold — not counting Mobileye, which is listed on the Nasdaq. During that same period, Israeli firms saw their value increase by roughly $5 billion, more than twice as much as their French counterparts.

The goal isn't to create an enterprise that will last, but rather something that will go up in value very quickly.

Why the discrepancy? For Jérémie Kletzkine, the Franco-Israeli vice-president of business development at Start-Up Nation Central, a business that helps large international groups find local tech solutions, the explanation is simple. "In Israel, a company worthy of the startup name tries first and foremost to increase its value. That, and not job creation, is its chief goal," he says.*

A second reason Israeli companies are so often and easily absorbed by foreign companies is that even before the purchase, they "don't belong to Israel," says Kletzkine, 41, who began several of his own companies, one of which PrimeSense was sold to Apple. They are financed by Israeli venture capitalists, he explains. But the money itself mostly comes from abroad.

The kind of business model that high-tech Israeli companies follow is typical of the venture capital world. These startups were designed from the beginning to be sold. They're set up in the domestic market, but with a global niche in mind. The goal isn't to create an enterprise that will last, but rather something that will go up in value very quickly.

Another thing that sets Israeli and French tech companies apart is the emphasis in Israel on innovation and risk taking. In France, large investment groups try to minimize risk among startups. But doing so dampens innovation. Such was the case of the Aldebaran school, a French robotics specialist who sold in 2012 to the Japanese company SoftBank, much to the chagrin of French officials.

Startup conference in Tel Aviv, Israel's Silicon Vadi — Photo: Athos Capriotti/Instagram

Other factors that set Israel apart are its full-employment economy and relatively high level of R&D spending: 4.5% of GDP compared to 2.23% in France. Approximately 85% of that money, furthermore, comes from private sources. And even when ambitious projects fizzle out, they have a tendency to spawn a cluster of new startups.

Still, things are far from perfect in the Silicon Wadi. There's the brain-drain phenomenon, for one thing. And with the high-paying web giants now opening international R&D centers in Israel, local startups are losing even more talented engineers. Analysts also agree that the Israeli economy cannot rely on startups alone. Other sectors also need to thrive to keep the job market healthy.

Even so, Israel's dynamic tech industry is worthy of praise, especially for the fluid links that exist between the research and business sectors, and the role the Israeli army's technological units play as catalysts for innovation. And while some might fault Israeli entrepreneurs for being too eager to sell their startups, those voices are few and far between, especially in wake of the recent move by Mobileye, which waited 18 years to sell, and did so just as the driverless car industry is taking off. A sign, perhaps, that the sector is maturing.

*Correction: In an earlier version, due to a translation error, Jérémie Kletzkine was misquoted about the priority of company value over job creation.

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The Problem With Always Blaming Climate Change For Natural Disasters

Climate change is real, but a closer look at the science shows there are many factors that contribute to weather-related disasters. It is important to raise awareness about the long-term impact of global warming, but there's a risk in overstating its role in the latest floods or fires.

People on foot, on bikes, motorcycles, scooters and cars navigate through a flooded street during the day time.

Karachi - People wade through flood water after heavy rain in a southern Pakistani city

Xinhua / ZUMA
Axel Bojanowski


BERLIN — In September, thousands of people lost their lives when dams collapsed during flooding in Libya. Engineers had warned that the dams were structurally unsound.

Two years ago, dozens died in floods in western Germany, a region that had experienced a number of similar floods in earlier centuries, where thousands of houses had been built on the natural floodplain.

Last year saw more than 1,000 people lose their lives during monsoon floods in Pakistan. Studies showed that the impact of flooding in the region was exacerbated by the proximity of human settlements, the outdated river management system, high poverty rates and political instability in Pakistan.

There are many factors that contribute to weather-related disasters, but one dominates the headlines: climate change. That is because of so-called attribution studies, which are published very quickly after these disasters to highlight how human-caused climate change contributes to extreme weather events. After the flooding in Libya, German daily Frankfurter Allgemeine Zeitung described climate change as a “serial offender," while the Tageszeitung wrote that “the climate crisis has exacerbated the extreme rainfall."

The World Weather Attribution initiative (WWA) has once again achieved its aim of using “real-time analysis” to draw attention to the issue: on its website, the institute says its goal is to “analyse and communicate the possible influence of climate change on extreme weather events." Frederike Otto, who works on attribution studies for the WWA, says these reports help to underscore the urgent need for climate action. They transform climate change from an “abstract threat into a concrete one."

In the immediate aftermath of a weather-related disaster, teams of researchers rush to put together attribution studies – “so that they are ready within the same news cycle," as the New York Times reported. However, these attribution studies do not meet normal scientific standards, as they are published without going through the peer-review process that would be undertaken before publication in a specialist scientific journal. And that creates problems.

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