Posts Tagged ‘israel’

Yozma and Italy – Why copying Israel’s VC cluster is unlikely to be a good idea

On his blog at il sole 24ore Gianluca Dettori recently pointed to a new proposal for VC in Italy. The gist of the purpose is to create a fund of funds with a mix of public and private money. The proposal is nicely summed up here and the idea is clearly to create an Italian parallel to Yozma, which was fundamental in creating Israel’s thriving VC and high-tech clusters.

VC getting more love and attention from politicians is very nice, however there are in my opinion several reasons why the “let’s make an Italian Yozma” is unlikely to be an ideal approach. (disclaimer: I don’t follow Italian politics, so if you believe my assertions below are wrong, please point it out).

First of all, it is a traditional cause-effect fallcy within public planning to observe a successful effect in one context and trying to replicate it without thinking more about all the underlying causes. This is similar to why many companies have failed in trying to copy the Toyota Production System. They observe that any employee can stop the entire prodution line by pulling a chord and then the problem is traditionally resolved quickly, so the key to lean production must be to install this system. However the system works because of all the tacit knowledge, trust and mutual understanding between the workers and therefore it is extremely difficult to copy and require a change in all the underlying processes that lead up to the “pull the part chord”. The similarity to the VC system is the countless and failed attempts to emulate Silicon Valley and just like I consider it unlikely that Italy can successfully copy Yozma, the people behind this proposal should start somewhere else and study the conditions in Israel when Yozma was launched.

Before Yozma became world famous they had the Inbal program which was a similar approach that suffered from problems such as too much bureaucracy, low upside and difficulty to attract good VCs. If an initiative in Italy is going to work there has to be a compelte minimum of bureaucracy, and the state has to acknowledge that private VC fund managers have to have an upside and might become very wealthy if the fund is successful. Paricularities of Israel, that I doubt are present in Italy:

  • A strong domestic military indusstry. A lot of Israel’s successful startups had a background in the military industry.
  • Office of the Chief Scientist (OCS). Excellent capabilities in applied sciences and a generally the OCS was a very respected and admiredĀ  institution.
  • Tech-heavy foreign multinationals such as Intel, IBM and Motorola.
  • Immigration in the form of thousand of highly skilled engineers and scientists.

Another aspect that is critical is that the Yozma program was seen as the third phase of the VC industry lifecycle which began with the background being set in the 1970. You therefore can’t ignore what happened in the 20 something years leading up to the Yozma program and instead Italian policy makers should study this period and find out why conditions in Israel were ripe for a VC cluster. Particularly, the experience from Israel also showed that there needs to be a critical mass of high-tech entrepreneurs before a VC cluster can successfully emerge, and as much as I wish this was the case in Italy, I think we are at least a decade from where Israel where when Yozma was launched. A good start would be to educate more engineers and scientists and make Italy more open to the best immigrants in these disciplines.

If you want to read more in detail about the the co-evolution of Israel’s high-tech and VC clusters, I co-wrote a paper about this two years ago. I couldn’t embed it but you can read it here.

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Posted: oktober 6th, 2010
Categories: Italy, VC
Tags: , , ,
Comments: 2 Comments.