Israel must tap into new sources of workers and boost science studies if it wants to maintain its competitive edge as the Start-up Nation, Avi Hasson, the country’s chief scientist said in a wide-ranging interview, just months before he leaves the post he has held for the past six years.
“This is really the number one challenge of Israel moving forward,” Hasson said earlier this month from his Tel Aviv office.
Whereas funding was the major issue facing fledgling companies 25 years ago, when Israel’s startup ecosystem was being formed; today, with over $5 billion invested in Israeli tech companies by VC funds, the industry is well funded. “The obstacle to growth today is human capital,” he said.
Israel’s high-tech sector, which has been a growth engine for the economy, is facing an acute shortage of engineers and programmers as students shy away from studying computer science, math and statistics.
This lack of skilled workers is highlighted even more by the burst of activity in the sector, which has almost doubled the number of companies operating locally in the past decade. There are about 1,000 new startups being set up in Israel every year, with workers often wanting the challenge of starting their own company rather than joining an existing one, and successful entrepreneurs returning to the market with new ventures.
In addition, international companies, including Google, Apple, Deutsche Telecom and Bosch, have set up research and development centers in Israel, with 278 multinationals operating a total of 327 R&D centers around the country today, compared with about 250 such centers three years ago, data compiled by Tel Aviv’s IVC Research Center shows.
In his role as Chief Scientist and head of the Innovation Authority at Israel’s Ministry of Economy and Industry, the 46-year old Hasson — who served in the Israeli army’s elite 8200 technology unit — has been in charge of an annual government budget of 2 billion shekels ($515 million), weighing in on what civilian R&D initiatives to invest in as well as setting out government policies – from how to tax multinationals and which companies should benefit from government grants.
In the coming 2017-2018 budget the Innovation Authority will be allocated a special budget to address the human capital issue, he said. “The good news is that there is awareness about the manpower problem and there is an inter-ministerial effort to deal with this.”
Hasson said there are multiple action plans already in place to reach out to untapped populations such as the Arabs and ultra-Orthodox communities, which have been left on the sidelines of the startup economy.
“Arab communities are 21 percent of our population but just 3% of the high-tech industry. There is room for growth,” he said.
The good news is that greater number of Arab students are entering the relevant science faculties at Israel’s universities, which is the best way to access the Israeli high-tech ecosystem. “But much more work needs to be done,” as they also face cultural and networking obstacles in the workplace.
The education gap that needs to be addressed with the ultra-Orthodox populations is wider, he said, as many don’t even speak English. “The good news is that they know how to study, and there is more openness in the rabbinical leadership for allowing them to join the workforce and high-tech.”
Drawing more women into the game is also a top priority of the Innovation Authority. “We lose them (women) along the whole front — at high schools, universities, the workplace and at high-level jobs in the workplace…. This is unacceptable,” Hasson said.
“Under purely economic considerations, without taking ethical or political considerations into play, we must increase the funnel. The aim is to add more people into this game.”
Other plans to improve the pool of skilled workers include drawing Israelis living abroad to move back home, encouraging new immigrants to the high tech-sector, authorizing visa permits for highly skilled labor and entrepreneurs, tapping into unemployed 40-somethings and retraining them for high-tech.
The government is also pushing to enlarge the number of people who are benefiting from the high-tech boom, he said. The high-tech industry contributes to 50% of Israeli exports but employs less than 10% the workers in the economy, he said.
“How do we take all the positive things of Startup Nation and how do we help it penetrate other parts of the economy – the traditional industry, like food, plastics, agriculture and steel?” he asked. This will be “the main focus of the innovation authority for the next two decades.”
With over 1,000 new startups setting up each year in Israel, the ecosystem is a healthy one, Hasson said. “One of the ways to measure success is the $5 billion of venture capital investment — 85% of which is made up of foreign investors. The best global names are here. They find things that they don’t find elsewhere,” he said.
Even so, many of the startups are destined to fail, he said. “The fact that many fail is a feature of the startup ecosystem, not a bug. It is ok if that happens,” he said. “The tolerance for failure is one of the things that make us unique. Entrepreneurs fail, but then they come back with other ideas and initiatives.”