Israel still tops in tech, says start-up expert

Advanced training and true innovation make for a scene that doesn’t need to fear global competition

There are many active high-tech scenes but few that are truly pioneering, according to a Silicon Valley entrepreneur who is on a mission to map, catalog, and analyze the world’s start-up ecosystems. And Israel, he says, is one of those few.

“True innovation is really rare,” Bowei Gai told The Times of Israel at the Israel-Asia Summit, held last month at the Peres Peace Center in Jaffa.

If anyone is in a position to know where the most groundbreaking start-ups are to be found, it’s Gai, who is on a self-funded tour to learn what makes start-ups tick in 36 cities and 29 countries around the world. Gai, a serial entrepreneur who sold his start-up, called CardMunch, to business networking site LinkedIn, set off on this journey at the beginning of the year and will continue on through September.

The idea for the trip came several years ago, when Gai visited his native China (his family emigrated to the US when he was an infant). “I was traveling for fun, but I also wanted to learn about the tech scene in China,” Gai said. “I met with a lot of people and chronicled my experiences and impressions on a website. My report on China became the most popular of its kind on the Internet, and I became an instant expert.”

Gai was contacted by thousands who wanted to know more — not just about China, but about start-ups elsewhere.

Gai is recording his reports on his World Startup Report website, which may one day become the biggest and best source of information about start-up ecosystems anywhere. Already completed are the reports for China and India, and they contain a plethora of data. Among the statistics in these reports: how many Internet and mobile users, Internet penetration, e-commerce market size, key players, top angels and venture capitalists, important conferences, cultural data relevant to start-ups, how many engineers, how to find a job/employee – even how late you can come to a meeting.

It’s information that a consulting firm would probably charge many thousands for, but Gai is not interested in making money off the reports. “I know I could probably charge a lot of money for this information, but I’ve been very fortunate with my start-up exits, so I wanted to give back to the community.”

Gai’s findings should be reassuring for Israelis who are worried about the rise of places like Eastern Europe, Singapore and especially China. “Israel is too small a country to have a local market, so almost all the tech being done here is high-level, which a large IT, consumer, or other kind of company in the US or elsewhere would be interested in,” said Gai.

Multinational tech companies like Intel, Microsoft, Apple, or one of the hundreds of others that have R&D facilities are looking for breakthrough, game-changing innovations — not run-of-the-mill tech that they could do themselves or contract out to India or China. So, in order to stay ahead in the tech game, Israelis have to develop top-flight innovation.

But that is not the case in many other place, like China. “The start-up scene in China is huge, like everything else there, and there is a lot of innovation going on. But the innovation they do in China is much different than that in Israel,” said Gai. “You might have a dozen Chinese start-ups trying to build the next local version of Groupon,” the coupon service that lets consumers try out new services, restaurants, etc. at a discount. “They will all develop their own code and approach, or maybe ‘borrow’ from each other or from foreign companies, but their main focus will be on finding ways to make it easier for users to interact with their technology.”

That, Gai said, is what he calls “commodity innovation” — a rehashing of existing technology and methodologies that builds on widely-known models. “In the end it’s about making money, and the best and easiest way to do that in a place like China is by using proven models that have been successful elsewhere. There are so many ways to make money in China using these models because there are so many people to market to, and they don’t need to innovate or invent something new to succeed. It’s much easier to go for the low hanging fruit of commodity innovation by basically duplicating existing technology.

Societal necessity is the mother of high-tech invention in much of the developing world as well, said Gai, pointing to Kenya as an example. “Very few people in Kenya have bank accounts, but in recent years cellphone service providers have begun adding mobile banking services to cellphone accounts. Essentially the bank accounts are on users’ SIM cards, with account information, balances and transactions based on text messages, one of the oldest mobile technologies” said Gai. “A quarter of the country’s GDP is now being transferred in this manner. It’s solving a social need, and that’s what is driving tech in most of the developing world, whether it’s dating sites in India or an online review recommendation site like Yelp in the Phillipines.”

What about in the more advanced Western societies? “While there is high-tech innovation in a lot of European countries, much of it is in niche areas that are specific to their environments,” such as the plethora of green tech companies in the Scandinavian countries. In addition, said Gai, the tech training in most of the Western countries is “not so advanced.”

The two exceptions where the tech training is advanced and where true, new innovation is being developed are in Silicon Valley, and in Israel. It’s not surprising that Silicon Valley would be a center of tech innovation. And now that he’s seen Israel up close, he’s not surprised that true innovation would emerge from here, as well. With no resources except brainpower and its people, Israel had no choice but to develop an innovative high-tech industry.

“Israel managed to survive in the face of many obstacles,” said Gai. “It’s a great example of how a country can evolve.”

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