From the invention of the Internet to the birth of Integrated Circuit, the defense sector, through close coordination with the civilian sector, had played an outsized role in the development of cutting-edge technology during the Cold War. With the end of the Cold War, however, the high-tech industry saw a gradual decoupling between the defense and civilian sectors, notably in the United States, where the trend cumulates into the realization that the U.S. military risks lagging behind its competitors and the country’s own civilian sector in the latest technology developments, especially in AI.
Meanwhile, China has been pursuing what it calls “military-civil fusion“, seeking to enhance the technological prowess of its armed forces through a close coordination with China’s increasingly competent high-tech industry. Right across the strait, Taiwan is one of the world leaders in semiconductor technology, adding to its increasingly strategic and sensitive geopolitical role as Sino-American tension unfolds across military and technological fault lines. The rising competition from China, however, also draws attention to a significant capability gap between Taiwan’s powerful semiconductor industry and its startup as well as defense sectors, especially when dual-use technology has grown in significance.
In this regard, Israel might point a way for Taiwan: both countries have a lot of similarities when it comes to their geopolitical environments and economic development trajectories. With only 8 million people – half of Taiwan’s population, Israel however has the third most companies listed on Nasdaq, behind the US and China. In addition, the country also boasts the highest number of startups per capita in the world. While Isarel’s competence can be partly attributed to a highly successful industrial policy in fostering startups, its military establishment also plays a significant role. In fact, the symbiotic relationship developed between Israel’s military and startup ecosystems offers the world an example of how to reconnect both industries in fostering dual-use innovations.
A military version of the Ivy League?
Among various Israeli military units, Unit 81 and Unit 8200 are the most renowned as the engines of Israel’s startup scene. Both subordinate to Israel’s military intelligence directorate, Unit 8200 is the largest unit within the Israel Defense Forces and active in signal intelligence, while Unit 81 is primarily responsible for researching and developing products for Israel’s intelligence community.
According to a Unit 8200 veteran, 90% of Israel’s intelligence material come from the unit, and its capability is often mentioned on par with the National Security Agency (NSA) of the US. Most important of all, Unit 8200 has been routinely pumping out new startups: Check Point Software Technologies, Israel’s largest cybersecurity company, was for example founded by Unit 8200 veteran Gil Schwed. Avi Hasson, the founding chairman of Israel Innovation Authority, a governmental agency key to Israel’s startup policies, also served in Unit 8200. Similarly, according to an estimation, about 50 Unit 81 veterans founded 100 startups between 2003 and 2010.
Given their prestige in Israel’s high-tech industry, these secretive elite units were sometimes dubbed as “Israel’s equivalent of Harvard, Princeton and Yale“. In fact, some Israeli parents even paid to put their children in “preparatory courses” geared to increase their chances of joining such military units. For young entrepreneurs, in a sense, Unit 8200 and Unit 81 are double-edged knives. Firstly, they function like training grounds for future entrepreneurs. Secondly, they form the basis of a large alumni network that keep providing talents for Israel’s startup ecosystem.
“Establishing startups in a military”
Thanks to Israel’s conscription system, these prestigious units can source talents from the country’s population. Interestingly, the units screen for talents aged between 18 and 21 from high schools and after school feeder programs, and once they are selected, they go through specialized curriculum to prepare them for their missions. Unlike the intelligence units of other countries, here talents outweigh experiences, A significant level of freedom within these units also enable these recruited talents to realise their innovative potentials: challenges to authority are encouraged, and even no uniforms or salutes are required.
Yevgeny Dibrov, the Co-Founder and CEO of Armis Security as well as a Unit 81 veteran, compared Unit 81’s activities with “establishing startups in a military”, describing conditions where members had to solve concrete problems faced by the Israeli intelligence community with limited budgets – an experience contributing to their successful startup careers, as civilian entrepreneurs often offer innovations addressing no practical problems, or coming up with expensive solutions. In these elite units, young members acquire profound experiences of designing and building a product from start to finish while working with peers, sometimes having to lead them.
A talent pool unmatched by Silicon Valley
Apart from the strong solution-driven approach, the values of Unit 81 and Unit 8200 persist even after discharges: team members often leave in their late twenties to found their startups, and recruit former teammates in the process. Assaf Rappaport, the co-founder and CEO of cybersecurity company Wiz, considered the talent pool available at the likes of Unit 81 to be unmatched by Google and Microsoft – not even Silicon Valley.
The reserve system of the Israeli military also helps with keeping the country’s civilian tech sector updated with the latest developments in defense technology: until they turn 40, all former members of these elite units have to return to the military for three weeks every year, allowing them to see the newest projects in development by the young recruits.
Apart from training potential tech entrepreneurs within the military system, Unit 8200 also seeks to replicate parts of its training program outside of the defense sector. For example, Unit 8200 veteran Inbal Arieli has been trying to bring the unit’s entrepreneurship DNA to Israel’s Arab community, excluded from conscription, by launching an highly selective and competitive program taught by former and current Unit 8200 soldiers, covering topics from product design to fund-raising.
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