10/6/11 - the importance of start-ups

In today's encore excerpt - the extraordinary entrepreneurial culture of Israel:

"[Israel boasts] the highest density of start-ups in the world (a total of 3,850 start-ups, one for every 1,844 Israelis), [and] more Israeli companies are listed on the NASDAQ exchange than all companies from the entire European continent. ...

"In 2008, per capita venture capital investments in Israel were 2.5 times greater than in the United States, more than 30 times greater than in Europe, 80 times greater than in China, and 350 times greater than in India. Comparing absolute numbers, Israel—a country of just 7.1 million people—attracted close to $2 billion in venture capital, as much as flowed to the United Kingdom's 61 million citizens or to the 145 million people living in Germany and France combined. And Israel is the only country to experience a meaningful increase in venture capital from 2007 to 2008 [in the face of a global financial crisis.]

"After the United States, Israel has more companies listed on the NASDAQ than any other country in the world, including India, China, Korea, Singapore, and Ireland. And Israel is the world leader in the percentage of the economy that is spent on research and development. Israel's economy has also grown faster than the average for the developed economies of the world in most years since 1995.

"Even the wars Israel has repeatedly fought have not slowed the country down. During the six years following 2000, Israel was hit not just by the bursting of the global tech bubble but by the most intense period of terrorist attacks in its history and by the second Lebanon war. Yet Israel's share of the global venture capital market did not drop—it doubled, from 15 percent to 31 percent. And the Tel Aviv stock exchange was higher on the last day of the Lebanon war than on the first, as it was after the three-week military operation in the Gaza Strip in 2009.

"The Israeli economic story becomes even more curious when one considers the nation's dire state just a little over a half century ago.

"[The importance of start-ups and venture capital in any country is hard to overstate.] According to the pioneering work of Nobel Prize winner Robert Solow, technological innovation is the ultimate source of productivity and growth. It' s the only proven way for economies to consistently get ahead—especially innovation born by start-up companies. Recent Census Bureau data show that most of the net employment gains in the United States between 1980 and 2005 came from firms younger than five years old. Without start-ups, the average annual net employment growth rate would actually have been negative."


Dan Senor and Saul Singer


Start-Up Nation: The Story of Israel's Economic Miracle


Twelve/Hachette Book Group


Copyright 2009 by Dan Senor and Saul Singer


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