There is a common thread running through many of Israel’s most innovative tech startups, and some of the venture-capital firms that fund them: an elite Israeli military group called Unit 8200.
Though heralded in Israel—the secretive intelligence unit came out of the shadows after being featured in the 2009 book Start-Up Nation—Unit 8200, and its global impact, are not as well known in U.S. technology circles.
Yet many high-profile tech companies originally founded in Israel, including traffic app Waze; business-software company NICE Systems; and security companies Palo Alto Networks and Check Point Software, among many others, all grew out of specific technologies developed in Unit 8200 that were later commercialized.
Gadi Mazor, the chief technology officer of well-known Israeli crowdfunding platform OurCrowd and a Unit 8200 alum, calls the group “the entrepreneur’s Harvard.”
Often compared to America’s National Security Agency and Britain’s GCHQ, the unit is the now the largest group in the Israel Defense Forces and its fastest-growing, according to the IDF. It holds a unique position in the army, operating as part boot camp, part intelligence/security service and part tech incubator. Unit 8200 manages the army’s signals intelligence, meaning it pulls in and analyzes massive amounts of electronic data from sources ranging from phone calls and emails to microwave and satellite broadcasts. It was started in 1952, four years after Israel’s birth as a country.
The commercial applications for some of the technologies developed in the unit are obvious, particularly in fast-growing markets such as “big data”, wireless applications and business analytics. Members of the unit develop sophisticated technology systems including predictive algorithms and data-mining tools.
“If you put the best, most creative people together and they work together, really good things happen,” says Amnon Mishor, the co-founder and current CTO of Leadspace*, a company that builds analytics technology for sales and marketing professionals. When recruits ultimately leave the army, “then they have networks,” and often start companies together, as Mishor did with one of his Unit 8200 colleagues.
And after their sometimes stressful and very high-stakes army experience, “you’re ready for the intensity, and the ups and downs, and the pace of startups,” he says.
Joining the unit is extremely competitive, akin to getting into an Ivy League college or, from an athletic perspective, being recruited to play football at a U.S. Big Ten school. Though military service is compulsory in Israel, only the smartest recruits are hand-picked for Unit 8200—while they are still in high school.
“By the time I was 17, I was a known-quantity to unit recruiters,” says one current unit member, who is not allowed to divulge his name per military policy. Now 25, he commands a dozen programmers and developers, many as young as 18, in the Israeli military.
Recruiters target students who excel in analytical abilities, work well in a team environment and can make quick decisions with the responsibility thrust upon them. Though 8200 recruits go through basic military training, they rarely participate in traditional military actions, instead spending most of their time indoors in front of computers. But these recruits’ value runs far deeper than coding.
“It’s an intangible thing — ha-atzmah, or empowerment — that’s developed from the start in the unit’s members, as they are given lots of authority at an early age, much younger than their peers in other countries,” said Itzik Parnafes, a Battery general partner who spent several years in the unit and later went on to co-found telecom firm Kagoor Networks. (Parnafes also serves on the board of Leadspace.) “With that comes a belief in the power of technology to do things otherwise thought to be undoable.” It also helps develop leadership qualities that can be leveraged after military service ends.
Tech Transfer Seeds Entrepreneurship
While one-to-one transfers of technology out of the unit sometimes happen—unit alums might start a cyber-security company, for example–many 8200 veterans who launch startups also draw on more-general concepts, processes and ideas from their military experience to develop commercial ventures.
Mishor, from Leadspace, says he learned management skills in the unit and, in effect, had “customers” for the projects he worked on. “I started three mini-startups in the unit,” he says. That gave him valuable experience that many first-time company founders in other countries don’t have.
The skills he honed trying to target potential state security risks, using big data, also relate to Leadspace’s current business of building technology to target potential new customers for businesses, he says. It’s just a different type of targeting. With big-data technology in its infancy when he was in the unit in the late 1990s and early 2000s, “we sort of had to invent everything ourselves.”
More broadly, unit members collaborate in real time with users of the technology they develop and are trained to believe there’s no such thing as “impossible”. They also learn to change a decision-maker’s mind with relentless persistence, a mindset they can carry into their own companies. (And like all IDF members, they question authority in a way not common in the more-hierarchical U.S. military.)
“I’ve seen some of this mindset seep into the DNA of other, non-Israeli companies,” said Battery’s Parnafes, who often funds companies led by 8200 alums, including Leadspace. He estimates that about a dozen of the startups in Battery’s portfolio, including some recently exited investments*, had founders with ties to the unit.
In other cases, “[a company’s] founders and leadership team have no connection to 8200, but maybe there’s an engineering team with a couple of former unit guys there, and their practices and methods filter out and are adopted by others in the company,” Parnafes noted.
Alumni Nurture Next-Gen Entrepreneurs
Three years ago, unit alumni set up a five-month program to mentor early-stage startups. Some 22 have received total funding of more than $21 million and now employ 200 people. Sales at Israel’s 5,000 tech companies, with 230,000 employees, were $25 billion in 2014 – representing a quarter of Israel’s total exports.
Drawn from more than 200 applicants, the 20 entrepreneurs in the alumni program receive advice and guidance from 8200 veterans and business leaders who serve as mentors. The program culminates with a Demo Day attended by several hundred venture capital and angel investors.
The increasingly volatile cyber-security environment is shining an even brighter spotlight on the unit, as governments and companies around the globe clamor for more-sophisticated technology to fight hackers and keep networks safe. Israel recently implemented a high-school major in cyber-science, now in more than 10 schools, with students learning programming, network management, systems design and administration, and hacking and defense skills.
It all may provide even more qualified recruits for Unit 8200 and, ultimately, successful tech companies in Israel and elsewhere in the world.
“This notion of doing the impossible among 8200 veterans seems to align with the attitude found in the Silicon Valley,” Parnafes said. “Both cultures seem to disregard notional limits.”
*Denotes a Battery investment. For a full list of all Battery investments and exits, please click here.