Start-up Nation

Agassi raised the $200 million, making Better Place the fifth-largest start-up in history.⁴ With Israel in place as the first test case, others were quick to follow. As of this writing, Denmark, Australia, the San Francisco Bay Area, Hawaii, and Ontario—Canada’s most populous province—have all announced that they will join the Better Place plan. Better Place was the only foreign company asked to compete in developing an electric vehicle system for Japan, a highly unusual step for the historically protectionist Japanese government.

Among the many skeptics is Thomas Weber, the Mercedes research and development chief. He said that in 1972 his company had actually built an electric bus with a swappable battery, called the LE 306, and discovered that changing a battery could cause electrocution or fire.

Better Place’s answer has been a working battery swap station. Using one is like pulling into a car wash. Only, once the driver pulls in, a large rectangular metal plate—much like the lifts at the back end of moving trucks—rises up from underneath the car. The car then retracts the thick two-inch metal hooks securing the enormous blue battery, releasing it so it rests on the plate. The plate moves back down, drops the spent battery in a charging station, picks up a full battery, and lifts it into place under the car. Total time for the completed automated swap: sixty-five seconds.

Agassi is proud of how his team solved the engineering problem of precisely, instantly, and reliably releasing a battery that weighs hundreds of pounds. They employed the same hooks used to hold five-hundred-pound bombs in place on air force bombers. There was no room for error in a bomb-release mechanism; the battery would be just as secure, yet removable, in electric cars.

If it succeeds, the global impact of Better Place on economics, politics, and the environment might well transcend that of the most important technology companies in the world. And the idea will have spread from Israel throughout the world.

Companies like Better Place and entrepreneurs like Shai Agassi don’t appear every day. Yet a glance at Israel shows why it is not so surprising that, as Boston’s Battery Ventures investor Scott Tobin predicted, “the next big idea will come from Israel.”⁵

Technology companies and global investors are beating a path to Israel and finding unique combinations of audacity, creativity, and drive everywhere they look. Which may explain why, in addition to boasting the highest density of start-ups in the world (a total of 3,850 start-ups, one for every 1,844 Israelis),⁶ more Israeli companies are listed on the NASDAQ exchange than all companies from the entire European continent.

And it’s not just the New York stock exchanges that have been drawn to Israel, but also the most critical and fungible measure of technological promise: venture capital.

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.⁷ And Israel is the only country to experience a meaningful increase in venture capital from 2007 to 2008, as figure I.1 shows.⁸

Figure I.1. Sources: Dow Jones, VentureSource; Thomson Reuters; U.S. Central Intelligence Agency, World Fact Book, 2007, 2008.

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, as figure I.2 shows. And, as figure I.3 makes clear, Israel is the world leader in the percentage of the economy that is spent on research and development.

Figure I.2. Source: NASDAQ, http://www.nasdaq.com/asp/ NonUsOutput.asp, May 2009.

Figure I.3. Source: UNDP (United Nations Development Programme) Report, 2007/2008.

Israel’s economy has also grown faster than the average for the developed economies of the world in most years since 1995, as a chart on page 14 illustrates (figure I.4).