A decade after the founding of Start-Up Nation Central (SNC), one of the largest and best funded non-profit organizations in Israel, CEO Avi Hasson feels no need to justify its existence. At the close of his first year heading the organization that grew out of the popular 2009 book "Start-up Nation", and that is aimed at marketing Israel to the world as a center of innovation, Hasson reveals he is no longer concerned about bringing in "traffic," as he calls it. "If anything, we screen the approaches made to us," he tells "Globes."
"If a large international cyber company comes to us, we’ll raise a glass and say 'Welcome’ - but is it of interest to us at this stage? In my opinion, no. A marginal addition in a field competing over a finite labor force is less interesting than, for example, Nestlé, which sent over several VPs who sat with us on work plans for three days, which may lead to their opening a local innovation center. The importance of the world’s largest food company coming to Israel, and providing capabilities that do not exist in the local market, is immeasurably greater than another cyber or software company."
In recent weeks, mainly due to the energy crisis in Europe and the US, and the search for alternative energy sources, Hasson believes that the biggest move Israeli industry can make is precisely towards climate technologies. "According to the Bank of America, there are currently $5 trillion looking for global investments in the climate sector, of which $2 trillion are for research and development, with over 42 million new jobs in the green economy," he points out. "Against that, there are 700 Israeli companies in this area."
Five years after leaving his position as head of the Israel Innovation Authority (IIA) - which he founded in order to give more government ministries access to the Office of the Chief Scientist (which was previously under the Ministry of Economy and Industry) - Hasson still sounds and acts more like a government minister or the head of a government ministry. Hearing him speak, one might think he is part of a ministry of foreign affairs, economy, or science.
Indeed, in what Hasson calls "Innovation Diplomacy", SNC was the first to delineate economic ties on technology and innovation with Morocco and the United Arab Emirates. It presently stands as a stable force against a landscape of changing Israeli governments, with deep knowledge of the local high-tech industry. "I recently met Moroccan Foreign Minister Nasser Bourita, and I heard from him exactly what they think of us in many places: a non-governmental, non-political entity able to weather election seasons, and not identified with the government of the day. We are building a bilateral layer here that goes beyond diplomatic work. Let's say there are security tensions, which is usually the case; here, the work continues and endures. What's more, we’re also active in places where Israel does not actually have direct relations."
"Decentralization of Israeli high-tech makes it more robust"
Hasson speaks like a diplomat and his outlook about the Israeli economy is optimistic. However, his major donor, Paul Singer, founder and president of hedge fund Elliott Management, made a bolder statement. The fund Singer owns, which has $56 billion under management, published a warning just two weeks ago, stating that extreme financial conditions along with rising interest rates will lead the global economy to hyperinflation, which could lead to social collapse and the worst financial crisis since World War II, no less. "I think that the small size of Israeli’s technology industry on a global scale, along with its diversity in its core areas of activity, make it, perhaps not immune to threats, but fairly resistant to most of these phenomena," Hasson tries to reassure.
Singer was SNC’s first donor, but over the years he has been joined by others, who together invest tens of millions of shekels a year in the non-profit. SNC currently employs more than 120 people in prestigious offices in the heart of Tel Aviv. In 2020, for example, SNC raised NIS 67.3 million from several funds in addition to Singer's, such as the William Davidson Foundation, the Edmond de Rothschild Foundation (Israel), Sylvan Adams, the Margaret and Daniel Loeb Foundation, and the Charles and Lynn Schusterman Family Foundation.
"There’s no doubt there was a bubble in 2021 - it was clear to me in real time. So now we’re discovering that the abnormal year is not 2022, but last year," says Hasson. "In valuations and multipliers, the market rose too high, and the correction that happened is not necessarily a negative thing. What makes it different from previous crises is the fact that Israeli high-tech has reached a crisis when it is concerned not only about the financial market, but also about the real one. There are companies here that generate significant revenue, and we’re interested in what’s happening in the markets themselves, not just the financial markets."
There was a failure here without a doubt, but if we don’t know who’s to blame, might we be doomed to repeat it?
"The situation in Israel is a reflection of global trends: high demand for technology, accelerated adoption of everything technological. It is clear that super powerful, aggressive global investors came here and invested a lot in Israel very quickly. Investors walked around with checkbooks and said to the entrepreneurs, 'You write the number: how you want and at what valuation'. It’s asking too much of a high-tech entrepreneur not to accept the offer and say 'I'm sorry, but I’ll conduct myself responsibly.' Putting the valuation question aside, having raised all that cash is helping the companies a great deal today. The test of a good entrepreneur versus a less good entrepreneur isn’t in raising capital, but in much the cash is used, and how much is wasted."
"It’s wrong to undermine ultra-orthodox worldviews"
The election results raised the question of the [Ministry of Education’s obligatory] core curriculum. Is it acceptable to maintain the existing situation, in which one population group doesn’t study the core curriculum?
"The connection between the core curriculum - English, mathematics and science - and the ability to integrate into the industrial workforce is proven. We have an interest as a country and as individuals in providing these skills to as many people as possible. The debate should not involve challenging ultra-orthodox worldviews. What’s the right way to do this? I’m not sure it’s something that’s possible to compel people to do, because that's where the complex community dynamics lie. I'd prefer to talk about models of integration."
Government-sponsored technology training is also not yielding results. Private companies are taking their own initiatives so as not to rely on the education system alone.
"It has to be said that something has big happened: for the first time, there’s awareness in government of the problem. They realized there is a national challenge that requires budgets and inter-ministerial activity. But if we look at the record of the programs to date, it is very unsuccessful. For example, in terms of size, we haven’t seen large numbers of graduates. This is, of course, not unique to the outgoing government: often the problem is to make companies aware of these programs, and define them so that they aren’t stifled by bureaucracy.
"There are quite a few companies that gave up on the project in advance because of bureaucratic requirements. There is also a problem of too many players in professional training. The government is making good strides in taking this on, but historically, the record of government agencies dealing with professional training is a catastrophe - dozens of different entities spread out over different ministries, different agencies and incentives, although overall the process is headed in a positive direction."
What’s the solution?
"It has to start with the industry that’s hiring. In the end, it’s a matter of placement, not training. You can train tens of thousands of people who won’t be right for industry and then you only create frustration. The last thing you want is, ‘I went and studied and nothing came of it.’ The government understood this, and many of its tests are placement tests. Training must correspond to industry needs.
"We, for example, launched our own program called Talent Finder to promote the placement of juniors - graduates with no work experience - in conjunction with large technology companies. As a non-government body, we have many more degrees of freedom - we can set out, and then correct as we go. It’s a pattern of learning and change that is much harder for a government agency to do."
Simhon helped, Deri pushed
In her term as Minister of Science, Technology and Space, Orit Farkash-Hacohen stirred up a small political storm with her decision to subordinate the Israel Innovation Authority - the reincarnation of the Chief Scientist’s Office that Hasson brought about a decade earlier - to her ministry , the idea being that the minister determines policies which are then implemented by the authority that reports to her. The IIA opposed the decision but the move was carried out and completed last summer. Hasson says this was not what he meant when he founded the IIA, which deals not only with providing budgets to startups, but also with technology policy at the various government ministries. "When we established the Innovation Authority, the goal was to create an entity with exceptional execution capabilities within the government sector, agile and innovative, and with the ability to bring in the best people and launch the newest programs. To be experimental, to correct quickly, and in this respect, it had to keep a distance from the government.
"Note that we did not establish a research and development authority, but an innovation authority - and this is not just semantics," he continues. "The country's biggest challenges are not necessarily in high-tech, but in different sectors of the economy and the use of different levers. There was an understanding that the way to direct more budgets to innovation and high-tech was not necessarily to increase the Authority's budget, but to work with all government ministries and direct their budgets towards innovation. For this, the authority had to be a supra-ministerial body that knows how to work with everyone, and in this context, it was important that it should not be politically affiliated. Of course, I worked with ministers all along the way - I worked with seven different ministers and they all had something to say and they all had their policies. Fuad [Binyamin Ben-Eliezer], Shalom Simhon, Aryeh Deri, [Naftali] Bennett, [Benjamin] Netanyahu for six months, [Moshe] Kahlon, and Eli Cohen."
Whose was the most productive collaboration?
"I learned from everyone. Shalom Simhon, for example, didn't come from high-tech, and we worked well together. He taught me a lot about politics and gave me know-how that helped me a lot later on. He helped me understand the web of political interests, and to know what motivates everyone. It was thanks to Aryeh Deri that the Authority was established - he came before the finance committee and spoke about how important it was, and this is to his credit. He, as well as others, understood that the issue was too important to interfere with. This is evident in the workforce that has been moving from ministry to ministry in recent years: transferring workers between so many ministries comes at a price - it creates friction among employees, and in the workers union. In the world of government, there is value in stability."
Let's talk about the elephant in the room. In the end, Start-up Nation Central is an NGO. There’s a limit as to what you can achieve as a non-profit.
"Working as a non-profit is not a limitation, but one of our strongest tools. So, while it’s true that there’s no other animal like it in the world, it is a tremendous privilege. When I meet with the CEO of Nestlé, or the Minister of Foreign Affairs of Morocco, or the head of the Innovation Authority, or the Vice President of Gong, the fact that we are 100% funded by philanthropy, do not receive money from foreign governments, or from the startups, is a source of tremendous strength, and it creates absolute neutrality for us, and dialogue at a high level of trust.
"The fact that we have the ability to bring four different government ministries and an industry representative to one table stems, in part, from our position and this is a tremendous privilege. The operating instructions I ultimately receive from my board of directors are quite general: A strong Israel, and the understanding that this means a strong economy which produces innovation and technology and, by virtue of this, is connected to the world - that’s it, nothing beyond that. Where are the difficulties? It imposes on us the burden of managing ourselves like a business: to issue procedures for professional conduct, to run ourselves efficiently, quantify processes and products, bring in the best people. We manage ourselves like a business operation, we have clients, products, customer management software, quarterly goals".
Your goals have changed. You were established to attract global investors to Israel. Today, you deal in integrating different population groups into high-tech, and engage in diplomatic relations.
"The overarching goal has not changed - but many new things have happened. I call it ‘importing problems’. What do I mean? We’ve developed the ability to talk to foreign companies and governments, understand their problems and expose them to the right ecosystem in Israel that may provide them with a solution. Not long ago, we spoke to Swiss pharmaceutical manufacturer Roche, which was looking for an early detection solution for Alzheimer's.
"We received 40 solutions from the Israeli market, three of which are currently being pilot-tested. But goals change depending on our ability to help. Unlike a commercial company that keeps moving about until it finds what works for it and then replicates it, we work the other way around: as soon as we succeed with a project, we move aside, give it to a commercial company, and continue on to the next challenge."
Avi Hasson
- Personal: 52 years old, married and father of three. Lives in Modi'in. His wife, Efrat Fink, is a judge in the Central District Court.
- Professional: Holds a BA in Economics and Middle Eastern Studies and an MBA, both from Tel Aviv University.
- Served as Chief Scientist at Israel's Ministry of Economy and Industry and as head of the Israel Innovation Authority between 2011 and 2017. Before that, was a managing partner at venture capital firms Gemini Israel Funds and Emerge.
- One thing more: Grew up in Venezuela before the Hugo Chávez era. Has been a fan of Hapoel Holon FC since childhood.
Published by Globes, Israel business news - en.globes.co.il - on November 16, 2022.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.