Sun, sea, sand, and startups are just a few of the words that might spring to mind when you think of Israel. Oh, and maybe soldiers.
Born just 68-years-ago, the State of Israel, as it is officially known, has developed a reputation as one of the world’s most innovative tech hubs and Silicon Valley multinationals have cottoned on, setting up offices in the region and acquiring a number of Israeli startups.
Google, Facebook, Microsoft, and Intel are among more than 300 multinationals that have opened up research and development (R&D) facilities in the country, which is home to just 9 million people.
But what is it that makes Israel such a hotbed of innovation? Executives from each of the aforementioned US tech giants gave an audience of approximately 300 tech workers an insight during the DLD Innovation conference in Tel Aviv last week.
Google’s garage in the Middle East
Google developer partner advocate Don Dodge said: “My job at Google is to travel all over the world and talk to developers and startups and investors. I’ve been to every corner of the Earth. China, Japan, Australia, all of Europe, the Nordics, everywhere. There is no other country on Earth that thinks the same way that we [Google] do like Israel does.
“Israel truly is the Startup Nation. You think like us. You break things, you make things, you’re creative. It’s special.”
Google, headquartered in Mountain View, California, first opened an office in Israel back in 2006, when the search giant was still something of a startup at just five-years-old.
Today Google employs over 600 engineers in the country and they work on several of Google’s core products, including Search, Maps, and Live Results. Approximately half of all Google’s engineers in Israel are graduates of Tel Aviv University, said Dodge. “There’s an amazing source of talent here,” he explained.
There are cheaper engineers in places like Russia, India, and China but they’re often not as good, according to Dodge. “It’s about innovation, creativity, taking tremendous risks, understanding how to get to market. That’s what Israel does. It’s not about the cost.”
Google also has a dedicated startup space in Tel Aviv known as “Campus,” which provides entrepreneurs with a place to start and grow their businesses.
When Google sees a startup that it really likes the look of in Israel, it will move in and try to acquire it, drawing on the talent and expertise in that startup for future products and services. For example, it acquired Israeli security startup SlickLogin, reportedly with the view to integrate its technology into its two-step verification process.
“We’ve made a lot of investments in companies in Israel and we’ve acquired five of them,” said Dodge. “Waze was the biggest at over $1 billion and it was a great investment.”
Facebook focuses on the flip flops
Adi Soffer Teeni, the CEO of Facebook Israel, said the Palo Alto company first landed in Israel three years ago and today it has a “small” R&D team in the country, in addition to a team that works directly with entrepreneurs in the local tech ecosystem.
She explained that Facebook’s engineering team in Israel recently played a key role on one of Facebook’s most recent products, without naming exactly what that product was.
When the moderator asked what makes Israel such a unique place to do R&D, Teeni responded: “There’s amazing talent here. Multinationals come here with great R&D centres and recruit people with a very innovative way of thinking.”
Teeni also stressed that the mentality and culture at Facebook’s R&D centre in Israel is comparable to Facebook’s R&D facilities in Silicon Valley, where engineers “move fast and break things” while wearing “shorts and flip flops.”
“Something is happening here in Israel,” she said. “There’s a magic and it’s not easy to explain what it is but Israel’s a playground where it feels like home for the multinational.”
Teeni also issued a warning to those working in Israel’s well-established tech industry, saying that there are now other “Startup Nations” cropping up across Europe, perhaps referring to tech hubs such as London, Berlin, Stockholm, and Paris. She urged Israeli startups and engineers to get serious and focus on maturing their companies if they want stay ahead of the rest of the pack.
Intel looks for ingenuity in Israeli startups
Roy Ramon, managing director of the Intel Ingenuity Partner Programme, claimed that Intel is one of the biggest employers in Israel, with 11,000 workers across the country.
The chip manufacturer first set up shop in Israel some 40 years ago and today it operates several sites across the region, including a startup scouting ground.
Ramon spoke proudly of the Israeli “chutzpah”, which is a Yiddish word that derives from the Hebrew word ḥutspâ (חֻצְפָּה), meaning “insolence”, “cheek” or “audacity”. In business, the word is often used to describe the self-confidence that an individual has and Ramon said it’s a useful “tool” that Israelis have at their disposal.
“The reason I started the startup programme is because when you [a corporate] meet with a company in Israel, they come in and tell engineers that they’re doing it all wrong. They push everything off the table. These engineers have been doing this for years. They’re world experts. And yet that startup is bold enough to come to a mammoth like Intel and say you’re doing it all wrong. This is one culture that you can’t get anywhere in the world.”
Microsoft’s machine learning mission
Zach Weisfeld, general manager of Microsoft Global Accelerators, said Microsoft has grown its R&D team in Israel to around 1,000 people since it opened up its first office in the country 25 years ago. “It’s the first R&D centre we opened anywhere in the world outside of Redmond,” he said.
Weisfeld told Business Insider during an interview that there is a lot of “deep tech” happening in Israel, adding that Microsoft is keen to work with the startups, and possibly acquire startups, that are leading the way in fields such as artificial intelligence.
“Most of the founders we see [in Israel] come deeply from the tech world and don’t come from the business world trying to solve a problem and then finding a technical cofounder,” he said. “They really have a lot of IP (intellectual property) in the space and now they’re putting it to play in all categories: agriculture, robots, health.”
Weisfeld added: “There is something about the culture, and something about the market understanding and business understanding that might be a little more rough [among Israeli startups] at the beginning but at the end of the day and if you get them to the right place, they’re unstoppable.”
Some of the others
The likes of Amazon and Apple are also developing new technologies in Israel R&D centres, albeit a bit more quietly.
An Apple employee told Business Insider outside Apple’s R&D centre — situated approximately 15km north of Tel Aviv — that Apple engineers in Israel are working on hardware for the “iPhone 8.”
There are about 800 employees at Apple’s Herzliya R&D centre, which is about four years old and overseen in part by Johny Srouji, SVP of hardware at Apple. Srouji gave Bloomberg a small insight into what happens in Apple’s Israel R&D centre in February.
The office was set up after Apple acquired two startups: the flash memory designer Anobit in 2012 and the 3D sensor developer PrimeSense in 2013. Apple has since acquired the Israeli camera firm LinX.
Sources close to Apple said the company used the research-and-development facility in Herzliya to develop hardware such as chips, storage, cameras, and wireless technologies. Apple CEO Tim Cook said during a trip to Israel in 2015 that the Herzliya office was Apple’s second-largest R&D facility in the world, according to The Times of Israel.
Meanwhile, Amazon also has an R&D presence in Israel. The company declined to say how many staff it has on the ground but it did say that they work on Amazon Web Services, the company’s cloud business, and a range other other Amazon R&D projects. It also acquired Israeli chipmaker Annapurna Labs in 2015 for a reported $350 million (£275 million).