Jerusalem Seeks To Rival Tel Aviv As ‘Start-Up City' With Help From Hebrew U High-Tech Village

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The reputations of Israel’s two largest cities are well established.

Tel Aviv represents the country’s modern heart, while Jerusalem represents its ancient soul. Tel Aviv is the young, hip, vibrant party town on the sea; Jerusalem the 3,000-year-old historical and religious center.

But a band of young entrepreneurs, policy makers and investors are starting to change the Jerusalem ecosystem and bring it in line with Tel Aviv as a modern, hi-tech hub.

“To feel like we’re contributing to the modern city on top of the historical city is really nice,“ says Zeev Farbman, the cofounder and CEO of Lightricks.

Farbman founded Lightricks, a company that creates photo-editing apps for mobile devices, with four fellow doctoral students at the Hebrew University of Jerusalem. The team was already in Jerusalem and briefly considered if that was the right place to start the business.

“We had a pretty good idea of the kind of thing we wanted to build, and it was a technological endeavor,” says Farbman. “So what we needed most was peace of mind to build it, which is actually great in Jerusalem. I mean I really appreciate the buzz and activity of Tel Aviv, but it wasn’t exactly what we needed.”

When the company started getting off the ground – its Facetune app is regularly the top-paid photo app on iTunes – they realized that Jerusalem had more to offer than they expected.

“We found that inside the Hebrew U, there is a hi-tech village, a place that was a dorm 20 years ago, and the Jerusalem Development Authority (JDA) and the university renovated to become a cheap start-up space,” he says.

The JDA, a joint project between the government and the municipality, is the central body driving the changes to make Jerusalem a more friendly place to do business and hi-tech.

One part of that is purely financial.

Like companies in the Negev or Galilee, companies based in Jerusalem are given substantial tax breaks. Those receiving funding from the Office of the Chief Scientist can get an additional 10 percent in their funding, and the JDA offers special grants from its $250 million annual budget. Small start-ups can get grants of $120,000, while a promising biomed can get a cool million.

Other grants cover property tax for four year.

“I think the special thing in Jerusalem is not only that we’re giving money,” says Itzik Ozer, the head of the JDA’s business development. “We’re really a one-stop shop and help the company with a lot of things.” They help with advice, mentorship and navigating bureaucracy.

The greater challenge, perhaps, is attracting young, ambitious, creative, entrepreneurial people, what researcher Richard Florida refers to as the “creative class” vital to driving modern economic development. The creative class tends to be attracted to cities with arts, music, coffee shops, nightlife – everything that Tel Aviv, and not Jerusalem, is known for.

“The problem was not that Jerusalem didn’t have the resources; it was that people didn’t want to live here for years,” says Ozer. “That’s starting to change now. We have a long way to go. If we want to be an international city, we have a lot of things to change, and we have to change them.”

But those changes are already in the works.

“It’s true that Jerusalem is not Tel Aviv; you won’t see bars and coffee shops every two meters in the neighborhood,” he says. “But if you go to the center of town – Rehov Aza, Rehavia, in Nahlaot – you see art students, creative people. Five years ago you couldn’t find anything to do in Jerusalem after 8 p.m. You should see Rehov Ben Yehuda now.”

Jerusalem brought Florida on board to help develop the plans. He said the large numbers of students, academics and policy makers in the city constituted a formidable creative class. Companies such as Intel, Teva and IBM already have offices there, and start-ups with some major tech success stories, such as Mobileye, hail from Jerusalem.

“It’s a view that’s very difficult to accept in Tel Aviv, where they think that the busiest thing in Jerusalem is the exit,” says Ozer. “Today there’s a line by the welcome sign too.”

The next steps is to boost the number of students, foreigners and multinationals.

Alongside the subsidized work spaces connected to top universities – not just Hebrew University, but also the world-renowned design school Bezalel – JDA is working to increase students in the city by 50%, opening an accelerator based in Hadassah Hospital and running a special tech promoting program called JNext.

After Boston and London, Jerusalem will become the third city with a branch of MassChallenge, a well-respected accelerator.

And, of course, one of Jerusalem’s main advantages is that it is not Tel Aviv.

“The competition for talent in Tel Aviv is extreme. The kind of salaries you hear about are crazy,” says Farbman.

An influx of 500 computer-science students each year create a talent pool that is ripe for the picking without the intense competition. Plus, if he needs anything from Tel Aviv, it’s just an hour away.

“I definitely had my share of rides to Herzliya Pituach and Rothschild in Tel Aviv to meet with investors,” he adds.

“But these days, we are not going to Tel Aviv on a weekly basis. Maybe on a monthly basis.”

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