Has the startup culture killed the innovation?

What Austria can learn from the start-up nation Israel

Founders wearing sandals work on their Macbooks in hip communal offices: Anyone looking for confirmation of start-up clichés in Tel Aviv will find what they are looking for. But also those who are looking for reasons for a high-tech boom and lessons for other countries.

While the Austrian government only recently announced a 185 million euro start-up package because it hopes innovative tech companies will generate higher employment effects than traditional company foundations, Israel discovered this potential more than 20 years ago - and in a great deal funded to a greater extent. Today, in terms of population, the country not only has the most start-ups in the world, but also the highest number of engineers and the highest spending on research and development. The high-tech sector is responsible for a good tenth job and half of the export volume.

Military and entrepreneurship

What can Austria learn from this "start-up ecosystem"? The Neos invited eight Austrian founders on a trip to Israel to investigate this question. The impression of the delegation after four days in which universities, state funding agencies, venture capital funds and other important players were visited: Many country-specific factors cannot be copied, such as the strong focus on IT and telecommunications, which is based on the important role of the military. Others, such as the much-touted positive attitude towards entrepreneurship among Israelis, can only be striven for in the long term.

Other factors, so the tenor, could easily be transferred. This affects several stations on the long and often arduous path from the business idea to the finished product. Two of them are particularly noteworthy.

  • Technology transfer
    It is exemplary how the entrepreneurial potential of basic research is used. Yissum is the name of an institution that is responsible for promoting and commercializing promising technologies at Jerusalem's Hebrew University, one of the most important research centers.

    "It's about bringing technology to the outside world, making investors aware that this technology even exists," says Dana Gavish-Fridman, marketing manager at Yissum. The majority of the more than $ 150 million annual budget is used to support entrepreneurs in the early stages of their existence financially and with other resources. If a marketable product emerges from this - usually only after several years - income flows back. Most of all, it takes the form of license fees from companies that use the technology.

    Unlike at Austrian universities, the position is not directly integrated into the university structure, but an independent company owned by the university. "This guarantees proximity to the market and prevents politics and bureaucracy from deciding what is and what is not," says Gavish-Fridman.

  • State subsidies
    Further up the path from the idea to the product comes the central funding agency that awards $ 500 million in tax money to start-ups every year. The approach is the same: it is not the state that selects the most promising projects, but private investors. 2,000 applicants for funding are accepted every year, with up to $ 50 million going for a single project.

    "We do not support the projects with the highest chance of success, but rather those with the highest risk," says Anya Eldan, director general of the funding program. It is precisely these that would often achieve the greatest spill-over effects, for example if the technology can be used in other areas. Precisely because they are associated with a high degree of uncertainty about success, the state must provide start-up funding. "We take on a large part of the risk, the private sector brings the know-how. The system is very mature and efficient," says Eldan.

Bulging, not spilling

When it was set up in the 1990s, the state took horrific sums in hand: In one program, for example, founders had to raise twelve million dollars from private venture capitalists. If they succeed, the state will add a further eight million in funding. If the company fails, the money for the state is gone - but through taxes and jobs that lead to successful projects, the profit for the general public is many times higher than the investments, according to Eldan. Because the review of the project is being outsourced to the private sector, the bureaucratic effort for the funding agencies is also reduced.

In Austria, the public sector generally has a greater say in funding channels when it comes to business decisions. The system of public-private partnerships also exists in this country on a small scale, in the form of the Business Angel Fund of the AWS development bank. Too little, says Niko Alm, start-up spokesman for Neos: "You need a critical mass. You mustn't mess around, you have to peck into the market properly so that an upward spiral is set in motion like in Israel."

In fact, the incentives attracted numerous foreign investors to Israel - one reason why, by the way, in the start-up scene almost all calculations are made in dollars. Private investors invested 4.4 billion of these in start-ups in 2015, the majority now coming from China.

Majority does not benefit

The high-tech successes are largely bypassing the Israeli population. The cost of living is enormously high compared to income, and rental costs in particular are growing over their heads for more and more people. For proponents of the start-up scene, this is just another reason to invest more. "Innovation and technological development could bring jobs and prosperity to many more people than they do now," says Erel Margalit, founder of a large venture capital fund and Knesset MP for the Labor Party. Agriculture and the food industry, biotechnology and renewable energies: all of these are areas in which there is still a lot of potential. (Simon Moser, November 4, 2016)

Note In the sense of the editorial guidelines: The trip took place at the invitation of Neos.

Start-ups want a "culture of failure"

What can Austria do better in terms of innovation, what can be learned from Israel? STANDARD asked these questions to local start-ups who had a look at the local environment.

· Alexander Murer, kilobaser.com: "The opportunities at universities are much better, that is, the support on the way from the idea to the start-up. And it is exciting to see that there is a lot more money available from venture capitalists than in Austria. And a lot more will."

· Thomas Schranz, lemmings.io: "Israel is particularly good at bringing research results to market quickly. Politics, the private sector and educational institutions interlock, there is a lot of mix. The state has recognized how important innovation is for the whole country."

Erwin Stern, app-ray.co: "Israel is particularly strong in the area of ​​cybersecurity, in which I am also active. The public and private sectors cooperate very well. In Austria it is fragmented. As a private person, there is hardly any opportunity to interact with institutions involved in basic research."

Wolfgang Fallmann, stabylizr.com: "This culture of failure is particularly impressive. Most of the founders here do not have the first, but the fourth or fifth start-up. Something can go wrong - just keep going and tackle the next project."

· Robert Eiter, linguician.com: "They are tightly organized and measure themselves against clearly defined goals, also in the state sector. The decision-making processes are also faster. You don't have to wait months for a funding approval."

Paul Resch, greetzly.com: "What I think is great: that the state is doubling private investments. You look for private investors, and then they put something on top again. You reduce the risk for the private sector. And the state knows that the money is not going to bad projects. "

· Markus Holzer, radiology-explorer.eu: "The technology transfer from the university clinics, with which I have experience, should be more structured. There should be a unit at the university that regulates everything related to spin-offs. Support in the spin-off phase - that could be better. That slows down the start -ups in the first few months. " (smo)