We can repeat Israel's innovation miracle

Twenty years ago, Israel's biggest export was oranges.

The tiny nation's size and economy could hardly have foretold its transformation into one of the most entrepreneurial lands on Earth.

"Nobody could imagine (the change in) this place… including the people who were doing high-tech here," Saul Singer told our recent Australian trade mission in Jerusalem.

"They had to convince people that this is something that we do. It didn't seem like a normal thing."

Singer is the celebrated journalist who co-authored Start-Up Nation – the best-selling story of Israel's economic miracle.

During his address, the parallels he drew between Israel and today's Australia were stark and, I've got to say, incredibly exciting.

"I think Australia can be a regional and maybe even a global innovation leader," he said. "You have this opportunity now. This actually is the moment. It's up for grabs."

It may surprise that start-up investment rates (if not the volume of capital raised) between our two nations are reasonably similar: 34 per cent of Israeli start-ups are funded against 25 per cent in Australia.

On another metric, 40 per cent of Israeli founders have a postgraduate qualification while 41 percent of Australian founders are postgraduates.

However, a keen point of divergence is the threshold for failure. Forty per cent of Israeli founders have experienced three or more previous start-ups. In Australia, just 9 per cent of founders have the same tried-and-failed history.

In Israel there is a relaxed acceptance that start-up failure is normal and shouldn't be spurned.

In Australia, we too must tap those dynamic elements of our national psyche and character – such as our anti-authoritarian streak – to drive us forward as an innovation leader.

Governments should be the exemplar here. Just as they have done in Israel, we must be prepared to experiment with public policy, bringing an entrepreneurial mindset not only to spawning and supporting high-growth new businesses but across the business of government.

We must embrace a new political environment where government has the freedom to try things. This also means, as the Prime Minister stated at the Economic and Social Outlook Conference, that if a policy is not working we're unafraid to "chuck it out".

The other critical constituent in any innovation ecosystem is investment.

At $400 per capita, a huge amount of VC funding fuels diverse businesses in Israeli technology.

Despite the enormous reserves of capital ploughed into traditional industries such as resources, property and infrastructure in Australia, we're coming off a much lower investment quotient in relation to innovative companies.

And yet we are beginning to see significant change, with three Australian venture capital funds each raising $200 million this year.

Israel has impressive collaborative links between higher education, research and the private sector. In Australia, we must develop this nexus and grow our talent pool, particularly around STEM and digital-tech skills.

When global entrepreneurs are thinking about where to live, the lifestyle that comes with surfing in the morning and coding in the afternoon needs to be milked for all it's worth.

Published in The Australian Financial Review, 18 November 2015