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Welcome to the startup nation

As governments worldwide search for that elusive economic growth, some eyes are turning to Israel, the self-styled 'Startup Nation'.

Despite many barriers to success, Israel boasts it has more startups per head of population than any other country; more companies listed on the technology index Nasdaq (apart from the US); and has posted a string of high-tech wins, especially in water technology, surgical equipment and (surprise) military equipment.

All this from a country of just six million, which is devoid of natural resources and is surrounded by belligerent enemies. What gives?

Perhaps it's precisely these challenges which led to its success – the old necessity is the mother of invention argument.

Or perhaps it just helps having some wealthy friends in Wall Street?

I'm here as a guest of the Israeli government to uncover more about this remarkable story, and what we might we learn for Nu Zild.

A good place to start is with Israel's incubator programme, which was launched 10 years ahead of New Zealand's in 1990.

In themselves the 26 incubators are providing a rich pipeline of startups and spins-off from universities and research institutes. But it's the origins of the incubators that provide our first clue about the recent tech boom.

Following the fall of the communism in 1989, Israel experienced a surge in Jewish immigration from Eastern Europe, about a million new arrivals over a five-year period.

An unusually large number were scientists and technologists, fleeing from the deteriorating economic and work conditions.

To ensure the skills and knowledge were not lost in taxi cabs and takeaways (that's a hint New Zealand) the government established an incubator programme to translate all that science into business.

The scheme worked. It was tweaked 10 years later to become a more privatised affair but the long-term effect was an explosion of venture capital investment and a slew of ambitious tech entrepreneurs.

What's more, incubators are graduating their startups into companies with remarkable success.

According to the official website: By the end of 2006, over 1000 projects had matured and left the incubators. Of these graduates, 57 percent have successfully attracted private investments. Some 41 percent of the incubator graduates (since the beginning of the programme) are still up and running.

I don't have the recent statistics but every indication suggests that trend has accelerated. Something like 80 percent of the 3000 R&D-based companies in Israel are younger than 10 years old. And since then, two more incubators have joined the programme.

Just what magic sauce is stirred into to these incubators?

That's for tomorrow. Stay tuned.