[MUSIC] Hello. We are in a science park in north Tel Aviv To check out clusters. Clusters are groups of high tech startups, companies located more or less in the same area, competing in different industries. But crucially, they share valuable information. It flows from one person to another, from one company to another and in an informal fashion. So, it turns out to matter a great deal not just what you do as a company, but where you actually locate your start-up, where you put it. So, we're here to explore an interesting cloud of 128 start-up companies, all of which sprang from the mothership called RAD and a brilliant entrepreneur named Yehuda Zisapel who created this cloud. And we're going to with Yehuda to find out how he did it and what the secret of success is with a 70% success rate for startups in this cloud. So, please come join me as we chat with Yehuda Zisapel. We're speaking with Yehuda Zisapel. Yehuda is chairman of RAD Data Communications. Yehuda, thank you very much for agreeing to this interview. Okay, thank you. Yehuda, you were one of the pioneers of Israeli start-ups. You and your brother Zohar launched the company in 1981 long before venture capital, before it was fashionable to do so. I always say you're one of the giants on whose shoulders Israeli entrepreneurs, and entrepreneurs everywhere, stand. What led you to do this risky thing, starting a company to make high quality, low price modems? I think it's a personal consideration. We started designing. And as we were successful, but we found that we are very dependent on the help out on the third party or a vendor. And we depend on the successfully producing product, giving services, decisions, etc. So we felt that we would like to be more independent and to control our destiny. So we decide to develop our product. In this way, we control and manage better how the things if we are successful, if we are doing the right thing, if we are successful. If we don't do, we fail, but we don't have anyone to blame for. I find this among a lot of young people that start businesses. They want to be in control of their destiny, even if they fail. And they're frankly tired of working for people who aren't as smart as they are. So they start businesses. Yehuda, we have a little story. I was in your office some years ago chatting with you, and I looked on the wall and there was a very unusual chart. Now, the chart was like a cloud of little dots. And I asked you about it, and you told me that each little dot is a startup that essentially sprang from the mothership of RAD. Yeah. So these are, at last count, 128 startup companies, half of them are in this area, that sprang from your mothership. Tell us the story of this amazing group of companies employing 15,000 people, millions of dollars of exports. How did this happen? It's kind of an evolution. It's very typical in business. You have to learn from your mistake, and you have to learn also from your success. So when we decide to be on our own, I ask my brother Zohar to join and we established a spin-off which is RAD Data Communication. And RAD Data Communication was able to develop new industrial product, our own product, in order to sell it all over the world. And this was successful, and we decided that maybe we can duplicate this model. And we duplicate this model and develop it and improve it over the time. And we have done it. Every year on the average we start a new company. Cool. So, let me just go a little deeper into how this really works. I think startup companies, any company, innovative companies, have a big dilemma. Suppose you're the CEO and one of your bright engineers comes to you with a great idea. So, company had to be focused. If you do every idea, you lose focus and you fail. Yeah. But if you tell the engineer be quiet and just do your job, you have a very unhappy engineer. And very few companies resolve this dilemma. And you solved it beautifully. I sometimes describe it a little extremely, fire your most creative people. Yeah. Here's an office and a little bit of money, and some advice. Go start a company, let's see what happens. Yeah. So, how has this model developed into this cloud of wonderful startups? You describe it very well. I think, we in the business, our ecosystem, our environment, is very dynamic. And all the time are coming ideas from inside the company, from customers and competition, everything all around. You have to identify the right idea. And then, you cannot do everything in your company because you have to be focused. Right. So that's a very effective way to find the entrepreneur that is ready to take this idea and to develop it. And we give him the guidance, the support, and the opportunity. Right. And the result is what I call an entrepreneurial virus in the sense that one start up leads to others. Especially start ups that don't succeed. Sometimes they spin off companies as well. People go off and who start their business. I think what's important that in order to make the rate of success high, I think you have to develop the right environment, which is not so simple. But it has to be it. All the employees have to share and to have the same DNA. And then, yeah. Exactly. So let's talk about this environment that you've created, Yehuda. So, today it's very fashionable all over the world to start what they call incubators. And now they use the term accelerators. Yeah. I've talked to a number of people. I have a very negative view of many of these so-called incubators. And here's the problem. When a little baby is born, and its weight is very small, you need to protect it. You put it into an incubator and you keep it warm, and you feed it, and it grows. But a startup company is not a little baby. A startup company is like a baby antelope on the African Serengeti. Yeah. It has to run an hour after it's born or the lion will get it. Yeah. So you've created a system where you start a company, and then you have the infrastructure of RAD, the HR, the marketing, especially the market experience- Yeah. Since the big company is plugged into the market. I think this is a better incubator model. Yeah. I think the model that we created is more appropriate to the environment that we are. Let's say, the communication, computers, internet, cyber, etc. Copies very well. Company has to start from beginning be able to run, etc. Also, they need all the support. It's not so simple, but they need more way to go faster and to reach the market, and to raise money, etc., etc. But still, incubator are very effective to other part in the market, especially in, for example, in life science, or medical devices. Right. Or even an early idea from the university. It's a very good way to bridge between the knowledge, ideas, the scientific idea in an every stage, and industry. And the incubator allowed them to prove the concept and to develop the idea until it reached the situation that outside investor can participate. Got it. So, in some cases, perhaps in markets that move a little more slowly, you have the time to be in an incubator. In fast moving markets like your own industry, cyber and so on, you need to move much more quickly. Yeah. And you need a sense of urgency. Yeah. You need to tell your start up people, you have to get to market, as we heard this morning in the interview we did with the minimum product that create value. Yeah. Right. So, one of the things that concerns both of us, I know from past conversations, Israel has many start ups. And most of them do exits and are acquired because large companies have trouble being innovative because they're so big. And so, they basically buy their ideas and innovation. We're not sure that Israel as a country benefits from these exits. You've succeeded in doing a startup and then growing it into an independent global giant. What does it take to do all the steps of starting a company, getting into the market, and then growing it independently instead of selling it to someone? It depends on the first, on the idea that you select. Some ideas how, if well-fitted, and to create a large company and to be successful. It depends on the management team that are able to take this idea and make and build a large company. And then I went around. So it's complex, but I believe in general all the entrepreneur when they started they at least they dream, believe that they will be able to build their own big company, to take it public, and to make it maybe Coogan or Microsoft. Yes. It's not that they are limiting their dream or their idea, but life and circumstances are not always according to what you play. One of the people you and I know fairly well is a wonderful man named Ed Mlavsky, one of the persons who helped build Israeli high-tech. And he had a message for many years to all the startups that he worked with. And the message was every startup needs a strategic partner. The cloud of companies that you created, many in this area, you are essentially their strategic partner, sometimes very informally. How can a startup company find the right strategic partner that can be so helpful to them? Yeah, yeah. Strategic partner is very important, but it's also complex and sometimes it's also very dangerous. You can see some companies that are very successful without getting strategic partner in the early stage. Of course, when you are going all the time in corporation, competition is very important, it's part of the business. But I think a strategic partner, its very beneficial if you are not dependent on him. Or if you have more than one strategic partner, or if you have competition. But if you have a strategic partner that you are dependent on it, there are many examples that he dry you out and you destroy your business. Yes. So it's, and it's very sometimes tempting to be dependent on, so it's very convenient to be depending on strategy company, and then you lose your way in a competitive. Edge? Yeah. Yes, you make a good point. There is definitely a down side to strategic partners and being dependent on them. Yeah. And sometimes that can be ruinous. I think it's very good if you have strategic partner and they are depend on you and you are not depend on them. Then, you are in a good situation. Yes, Yehdua, a personal question. You started making these low cost, high quality modems in 1981 with your brother. You've been in high tech competitive business for 34 years. Very hard work, very eventful, exciting, difficult, long hours and you're still at it 34 years later. What is it that you derive from such a hard competitive, sometimes risky endeavor? What drives you? I enjoy this work. I get satisfaction from it. It's very demanding because it's very highly competitive and very changing very fast, all the environment. There are some in the industry that very attractive business wise, and then they are in a flat situation and there is a new one that replaced them. Yes. So, you have to be all the time innovative, and to renew yourself again and again. But in general, that's true to all the company. It doesn't matter if it's a large company or a startup, you have all the time to be innovative and to reinvent yourself. Otherwise you don't survive. In the startup on the one side it's the speed is faster, but on the other side it's easy to move, to maneuver. Right. In a large company, it's more difficult to do the changes, but still you have to do the changes. [INAUDIBLE] invents so you do larger changes slower. But you do all the time the changes until you invent yourself again and again. Got it. So, we have many students, many learners taking this Technion Coursera course. Some of them, maybe many of them, are thinking about starting a business. Some of them have really good ideas. Based on your long experience, what advice would you give these young people as they start thinking about starting a business? You have to start with a good idea. After you check it, etc. But idea, it's important to start with, but it's not the most important for the long run. The most important for the long run is the team and the management. Because as I said before, you have to reinvent yourself all the time and to find new ideas. So, if you have a good team and management to find new ideas and to execute them, then you can be successful. Yes. Just having new good ideas and not being able to execute and to invent, it does not work too well. So, I think at the bottom line, I think the most important is the team and management. Good team, good management, execution more important than just the idea. So, Yehuda, thank you for this interview. Thank you. And we're going to take a little stroll now, and look and this cloud of companies that you've created over the last 34 years. Thank you, very much. Thank you, very much. Thank you.
