Small package, big success

Venture capital money tends to fly over and past Florida, with investors consistently lamenting there are too few startups in the state with the right mix of innovation, potential and moxie.

The stats show the problem: For example, Florida, the fourth most populous state in the country, ranked 17th nationwide in venture capital investment in 2008, according to the Naples-based Gulf Coast Venture Forum. With $235 million, Florida lagged way behind much smaller states like Minnesota and Colorado.

But local economic officials and entrepreneurs who seek to change that dreary tally could find an example of what works in a somewhat surprising place: Israel.

“Israel is the model,” says Dan Senor, a venture capitalist and a senior fellow at the Council on Foreign Relations who recently wrote a book on the topic. “It's the quintessential startup nation.”

For instance, Israel has the second most companies on the Nasdaq stock exchange in the world — more than Europe, China and Japan combined. American executives from companies including Microsoft, Intel and Google have all raved about the innovations that come out of their technology teams based in the country.

It seems so unlikely.

Israel is smaller than New Jersey, surrounded by mortal enemies, has next to no natural resources and no regional trading partners. Yet the country is one of the world's most vibrant startup and technology hubs, Senor told a crowd of about 300 people in Sarasota during a March 2 event put on by the Jewish Federation of Sarasota-Manatee.

Senor is on tour to promote the book, called “Start-Up Nation: The Story of Israel's Economic Miracle.” He previously worked in several roles under President George W. Bush, including a stint as a senior adviser to the Coalition Provisional Authority in Iraq.

Senor, a Republican, is also rumored to be a potential candidate to run for the U.S. Senate in New York against Sen. Kirsten Gillibrand, who replaced Hillary Clinton last year.

But in Sarasota, Senor talked business, not politics.

Senor says Israel's business success is based on a combination of factors. A big one is the country's culture of confrontation, otherwise called chutzpah. Unlike many American companies, in Israel, it's a daily ritual to argue, contest and debate.

That attitude of creative disruption, both in social settings and at work, isn't only accepted, but invited, Senor says.

Another big factor is the structure of the country's famed army, the Israel Defense Forces. Israel's military, says Senor, is one of the most improvisational and non-hierarchal fighting forces in the world. Every Israeli citizen is obligated to serve in the army in some capacity after he or she turns 18.

“The military is deliberately understaffed at the senior level,” Senor says. “There is no boss to go ask.”

That transfers well to the post-military world, when the country's young people begin working for companies. When they get there, they are more apt to create and innovate without fear of repercussions or office politics.

One more element in the success: The country's schools and institutions stick to the theme of failure is a learning tool.

“Teaching young people how to fail is hard,” says Senor, “but it's an important thing to do.”

— Mark Gordon