The world has had one eye on the Middle East for a variety of reasons over the last several decades. The tiny nation of Israel has been war-torn, often featured in news stories because of violence, injury or other aggressive behavior. Not surprisingly, Tel Aviv is rarely considered as a start-up hub. In reality, Tel Aviv is one of the leading locations in the world for start-ups. Trying to discover the secret that this tiny nation possesses, and has taken it to the top of the start-up charts can help drive your own search for a start-up location. How does a company survive in a war zone? What specific elements does a company need to make money in spite of what is happening politically? When does the risk of starting a company outweigh a risk of personal safety? Can a company thrive under adverse conditions?
In this article, we look at six essential elements of any potential start-up location that must be considered: 1) location, 2) tax incentives, 3) legal incentives, 4) availability of investors, 5) local resources and workforce, and 6) specialization.
‘Location, Location, Location’ is often touted as an important real estate claim. The same ‘location, location, location’ chant should be heard throughout the world as entrepreneurs search for the perfect location to start their company. When considering the location for your start-up, you have to take into account the environment that the business will be open in. Are you looking for solid neighbors that you can collaborate with or do you want quick access to venture capitalists? What is the primary goal and the direction the start-up should take?
The diversity of the start-ups based in Tel Aviv allows for easy collaboration across industries. Internet, mobile communication, security companies can all benefit from working together to create new and compelling technology. Fashion websites that allow users to ask their social network for advice about outfits to wear are worlds away from robots that are designed for warfare, and yet they both co-exist in the start-up hub of Tel Aviv. In their own way, they are both products of the environment they were created in. The robotic developments are primarily created by ex-military officers who realized that using robotic controls would help save human lives in the case of an emergency. Men (and women) who face the fear of attack every day would be searching for a possible solution and alternative, and it is easy to see where the idea for such an invention came from. A fashion social network that is developed by people who may not be able to venture outside at random times due to imminent or potential attacks becomes not only a way of escape, but a way to maintain relationships with people who live away from you. It combines a love of fashion with the possibilities of technology, creating a useful, powerful network.
The buzzing feel of the city is from a combination of the creative atmosphere and a growing entrepreneurial market that makes the city feel alive. The city of Tel Aviv is home to thousands of people and a startlingly high proportion of start-ups. Living in a nation that is surrounded by hostile nations can be frightening, so one has to wonder how (and why) so many companies have decided to set up shop in Tel Aviv. One entrepreneur explained that after living with the very real threat of an enemy attack, deciding to venture into a start-up no longer seemed frightening. Apparently, this idea is correct, because the tiny Middle Eastern nation of Israel is home to more NASDAQ IPO’s than any other country outside of the United States and Canada.
As a major hub, access to and from Tel Aviv is relatively easy. The commercial airport lets business leaders have access to the city easily. Venturing into Tel Aviv can require summoning extra measures of courage, but can be worth the effort when confronted with a wide variety of start-ups just waiting for funding. The venture capitalist who invests in Tel Aviv knows that there is inherent risk to their investment, but the reward and payoff are more than worth the risk.
With the special security concerns that Tel Aviv has, there is much consternation among investors about the best and most economical way to ship products. With Tel Aviv’s heavy specialization into high-tech fields, however, there are no products to ship, no raw materials to gather and no products to try to ship out locally. This has allowed Tel Aviv to generate some of the world’s most impressive tech companies, while developers have built platforms that are used by consumers globally.
An interesting fact about Tel Aviv is the almost invisible presence it has to most people. While many people have heard of the city, it is rarely mentioned in a list of top innovative cities by people who are outside the technical industries. When given a list of companies or products that got their start in the Middle Eastern city, people are shocked. This almost under the radar persona has allowed Tel Aviv to quietly assemble the pieces it needed to make an entrance onto the world stage, catching everyone off guard.
2. TAX INCENTIVES
The city works hard to create a climate that is attractive to companies looking for a home base. With partnerships that include some of the largest names in the tech world, the incentives to operate out of Tel Aviv in many ways go beyond the tax and legal benefits available to the company. As with any location, investigation of the tax laws of the country will help to establish if the location is right for your company. There are specific tax incentives that encourage Israeli companies to start (and stay) in Israel, and multi-national firms are given additional consideration for tax purposes. Understanding the laws of another country may not be as easy as it looks at first glance, so make sure that you consult with a tax professional who is familiar with the taxation laws of Tel Aviv.
Companies that are developing in the fields of biotechnology or nanotechnology, and who meet the exacting specifications of the government are eligible for additional tax credits. Trying to navigate the murky requirements is not easy and requires assistance by someone who knows both the market and the law.
How Tel Aviv Empowers Startups
3. LEGAL INCENTIVES
Developing an infrastructure that is friendly to start-ups required diligence and careful planning. The continual planning and success of the start-up hub is dependent on the highly experienced business and financial services which work in conjunction with the tech industry.
Intellectual property is valued in Tel Aviv – and is given protection under Israeli law. This legal backing is important in a country that focuses their attention on developing tech products. Without having to worry about products or items, the city knows it must protect one of its most valuable resources: innovation. By protecting the very skilled and detailed intellectual property that has come out of Tel Aviv, they have established themselves as a city that will continue to grow in the tech market. It is extremely attractive to a developer to know that their work is protected, and they will seek out those type of locations for continued work.
4. AVAILABILITY OF INVESTORS
In an effort to increase the city’s exposure to potential markets, new talent and capital, the city regularly promotes networking and conferences around international tech fields. New web interfaces allow local users to interact with city life and take advantage of the continually growing tech market. This entrepreneurial climate is rich with potential investors who are attracted to the start-ups that originate here. Surrounded by the world’s third highest amount of venture capital, the city is constantly producing start-ups that bring elevated returns on investments. In addition, over 60% of the seed start-ups in Israel are located within Tel Aviv – making this one of the most heavily invested hubs in the world.
The challenge, then, for entrepreneurs, is to ensure that their idea gets noticed in a sea of technology. By networking, using collaborative efforts and getting their product in front of the right investors, tech start-ups can jockey for position among the competition.
5. AVAILABILITY OF LOCAL RESOURCES AND WORKFORCE
The combination of: talent that is second to none, incubators for start-ups, research and development centers and co-working spaces makes Tel Aviv highly attractive for tech start-ups. With academic programs specifically designed for tech related fields in business, Tel Aviv consistently ranks in the top five nations of the world for availability of qualified engineers and scientists. Two years of required service in the military has helped Israeli entrepreneurs to overcome challenges, even in the fact of actual warfare. Those years of training have established Israeli entrepreneurs as risk takers who aren’t afraid to fight for what they want.
With a strong university presence, the graduates of colleges around Tel Aviv are highly educated and prepared to enter the workforce. Per capita, Israel is the number one country for engineers, which could explain why they are experiencing an explosion in innovation and design. The ability of Tel Aviv to retain those skilled workers is another component to their success. When their students graduate, they look for jobs within the Tel Aviv landscape, so there is a constant infusion of newly trained workers fresh from university. This also works to keep the industry on the edge of development and methods. With a population that is rich in young developers, it creates an environment where change is celebrated and fresh thinking is prized.
The workforce in Tel Aviv is constantly re-generating itself. By drawing talent from around the world, as well as populating their city with graduates, there is always a steady stream of available workers. Being able to draw from the many industries in the city allows start-ups to always be drawing from the top of the talent pool.
Tel Aviv is rich with high-tech industries: from fledgling startups to global tech superpowers. The combination of highly skilled workers, top-notch universities and programs that are designed for foreign students has given Tel Aviv an edge over other start-up hubs. Business, design and technology are key focus areas for the start-ups in Tel Aviv; generating a culture of creativity and innovation.
One of the most unlikely hotbeds of advanced technology, Tel Aviv has quietly built itself into a powerhouse in the start-up hub market. Without much fanfare or attention, the entrepreneurs in Israel began to focus their attention on generating a climate that thrives on innovation and cutting edge design. Against all odds, the tech market in the Middle East is not only still growing, but has expanded into new fields like cybersecurity and clean energy. By joining forces with international companies like Google or IBM, the start-up market has given itself an edge over the competition and is drawing skilled workers to the city. The backing of the large companies gives validity to the work that is being done in Tel Aviv and allows for the continued growth of Tel Aviv as a start-up hub. The future of Tel Aviv is rich with potential.
Startup Tel Aviv
A few key start-up companies that began in Tel Aviv:
Wix: A drag-and-drop web building platform that allows even the most novice user to develop professional looking websites. Growing at a rate of almost 2 million new users annually, Wix allows users to choose from templates or design their own site from scratch.
Fiverr: An online marketplace, Fiverr allows the user to seek out freelance work on gigs such as developing a company logo, copywriting or even translations for one low price. The consumer can then hire the freelancer and receive the finished product – all for $5.
MyHeritage: A genealogy site that uses algorithms to find connections between people, the billion registered users can perform searched for long lost relatives. Find stories in the newspaper from the turn of the century, locate photos from the early 1800’s and discover whether you really were adopted – all for a low monthly fee.
OutBrain: Comprehensive advertising that is more in line with pay-per-click advertising, OutBrain uses algorithms to determine the right ads to display. When a consumer clicks on one, OutBrain get paid from the advertiser.