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Elite Military Schools Feed Israel's Tech Firms

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    How Elite Military School Feeds Israel s Tech Firms By CHRISTOPHER RHOADS Staff Reporter of The Wall Street Journal.
    Message 1 of 1 , Aug 12, 2007
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      How Elite Military School Feeds Israel's Tech Firms
      Staff Reporter of The Wall Street Journal.

      After graduating from high school in 1993, Arik Czerniak entered a
      secretive Israeli military program called Talpiot. The country's most
      selective institution, it accepts 50 students a year and trains them
      in physics, computers and other sciences. Its mission is to create
      innovative, tech-savvy leaders capable of transforming Israel's military.

      Upon graduating from the nine-year program, Mr. Czerniak took a
      different route: He helped launch Metacafe Inc., an online company
      that lets users post short videos, such as a clip of an acrobatic
      squirrel and one of a bikini-clad woman making a snow-angel. Now 32
      years old, Mr. Czerniak spends most of his time in the Israeli
      company's new offices in Palo Alto, Calif.

      Three decades after Talpiot was founded to modernize the Israeli army,
      the program has created an unforeseen byproduct -- a legion of
      entrepreneurs that has helped turn Israel into a technology juggernaut.

      With fewer than seven million inhabitants, Israel has more companies
      listed on the Nasdaq stock exchange than any country except the U.S.
      Its start-ups attracted nearly $2 billion in venture capital over the
      past two years, equal to the amount raised during that time in the
      much larger United Kingdom. Israeli companies pioneered instant
      messaging and Internet phoning.

      Mr. Czerniak and other Talpions, as graduates are called, have started
      dozens of these companies in recent years, specializing in security
      equipment, encryption software, communications and high-end Internet
      hardware. Many, like Mr. Czerniak, have moved to Silicon Valley.

      The Talpiot program's symbol
      But the results have prompted concern about whether government
      resources should go toward minting tech millionaires. In its goal of
      creating a new generation of military leaders, critics say, the
      program has fallen short. Graduates and Talpiot officials say fewer
      than a dozen Talpions in recent memory have gone on to attain senior
      ranks in the Israel Defense Forces. The IDF wouldn't disclose the
      number of Talpions in top positions.

      Some early supporters of the program are now asking whether the
      military, rather than a university, is the best way to nourish some of
      the country's brightest minds -- something they say a small country
      surrounded by enemies can ill-afford to waste. They also acknowledge
      that the booming tech sector Talpiot helped create, with its big
      paychecks, could work against the program's goal of retaining
      graduates in the military. The questions arise as Israel's military
      leadership comes under broader scrutiny for last summer's stalemate
      against Hezbollah in Lebanon.

      "The successful high-tech industry is a problem for the military,"
      says Zohar Zisapel, 58, considered a father of Israel's technology
      industry. Mr. Zisapel's Tel Aviv-based RAD Group has launched 28 tech
      start-ups over the years, six of them listed on Nasdaq. "It provides
      opportunities for Talpions the military cannot match," he says.
      Israel's military says it has been more successful than it expected at
      retaining program graduates. "We think it's excellent these people who
      carried out important jobs in the army later move on to contribute to
      the development of the high-tech sector in Israel," the IDF said in a

      Unlike Talpiot's sometimes highflying graduates, the program itself
      operates mostly out of view. During a rare recent visit to the
      classified program, housed on the Hebrew University campus here,
      officials would not disclose the work done during the military phase
      of the program and identified cadets only by their first initials.
      Though the cadets, who include a handful of females in each class,
      spend most of their days together, they do share some classes with
      other students on campus.

      Talpiot's roots lie in the 1973 Yom Kippur War, when Syria and Egypt
      launched attacks on contested lands held by Israel. The conflict
      shattered confidence within Israel in its military prowess.
      "It was the anguish of this surprise war -- there were so many
      casualties," says Shaul Yatsiv, a retired professor of physics at
      Hebrew University, who with another physics professor proposed the
      idea for Talpiot. Mr. Yatsiv, along with some in the defense
      community, argued that given Israel's scant manpower and limited
      natural resources, its military needed a technological edge.
      Young Talent

      Many in the military opposed the idea, arguing that the country's
      young talent could be put to more immediate use as pilots and
      intelligence officers.

      After several years of debate, the military leadership agreed to
      launch Talpiot, drawing the name from a Hebrew word loosely meaning a
      well-built structure. Hebrew University agreed to host it. In 1979,
      the first class of 25 cadets entered Talpiot. The class size was later
      increased to 50.

      Each year, the program selects the most promising high-school
      graduates in science and submits them to three years of grueling
      study, paid by the government, followed by six years of paid service
      in the military. That's twice the normal military service required of
      Israeli men. Women serve two years.

      Instead of serving in combat units, Talpiot cadets are charged with
      improving the armed services through technological innovation. Some of
      the cadets delivered. Avi Loeb, who entered Talpiot in the
      early-1980s, developed a way to make projectiles travel at more than
      10 times existing speeds, propelled by electric rather than chemical

      In 1984, Mr. Loeb, who was then 21, was asked to present his project
      to a visiting U.S. military officer, who turned out to be the head of
      President Reagan's Strategic Defense Initiative, the missile-defense
      program known as Star Wars. Mr. Loeb says the officer, Lt. Gen. James
      Abrahamson, agreed to provide U.S. government funding for the project,
      which quickly grew to a group of about 30 people headed by Mr. Loeb.
      Lt. Gen. Abrahamson, now retired from the military, didn't respond to
      calls for comment.

      Another Talpiot innovation came from Amir Beker, who turned down
      medical school to attend the program. During his military service
      under Talpiot in the late 1980s, Mr. Beker learned that Israeli
      helicopter pilots were suffering from severe back pain from vibrations
      during flight. To build a better seat, he first had to determine how
      to measure the effect of vibrations on the human vertebrae.
      Together with a Talpiot classmate, Mr. Beker led a team that installed
      a custom seat in a helicopter simulator, cutting a hole in its
      backrest. Training a pen on a pilot's back, the team used a high-speed
      camera to photograph the marks caused by a range of vibrations. The
      researchers analyzed the computerized data to come up with a way to
      redesign the seats.

      In the program's early years, many Talpions went into academia or
      stayed in the military. "We had no idea about tech start-ups then,"
      Mr. Beker says. "Only the grand pursuit of helping our country."
      Mr. Beker, now 42, earned a Ph.D. in physics after the program and
      helped start a private college for financial studies in Tel Aviv. Mr.
      Loeb, now 45, pursued postdoctoral studies in astrophysics at
      Princeton University and is now a tenured professor of astronomy at
      Harvard University.

      Talpions' pursuits began to change in the 1990s, as the global tech
      boom got under way.

      Israel began to develop its own start-up culture, in part by using tax
      incentives to establish a local venture-capital industry. The country
      also benefited from an infusion of talent from abroad, primarily from
      the collapsing Soviet Union. Among more than one million Russian Jews
      who arrived -- increasing the total population by one-fifth -- were
      well-trained scientists and engineers.

      By the current decade, U.S. cash began pouring in. In 1999, Sequoia
      Capital, the Silicon Valley venture-capital firm that invested in
      Yahoo Inc. and Google Inc., opened an office near Tel Aviv. It now has
      five partners there managing close to $400 million in funds devoted to
      Israeli start-ups. Venture-capital firm Accel Partners has directed
      about 35% of its $500 million for Europe and the Middle East to
      Israel, after opening a London office in 2000.

      Today, the office parks in northern Tel Aviv and in nearby Herzliya --
      housing lawyers, venture-capital firms and start-ups -- evoke the
      atmosphere of U.S. tech hubs like Silicon Valley and Boston's Route
      128, even down to the coffee shops where deals are done. Some call the
      area Silicon Wadi, after the Hebrew word for a dried-up stream bed.
      "Taking risks, realizing it's OK to fail once or twice, wanting to
      strike out on your own and make something happen -- that is very hard
      to replicate," says Moshe Mor, a partner with Greylock Partners, a
      Walthan, Mass.-based venture-capital group with an office in Israel.
      "Those attitudes are very prevalent in Silicon Valley and Israel."
      About 30 Talpiot graduates return every year to run a two-day test to
      select the next class from a group of about 100 applicants. That
      number is winnowed down from the several thousand top scorers on a
      test taken each year by all of the country's graduating high-school

      During a blustery winter afternoon in a drab, four-story stone
      building where Talpiot's 150 cadets reside on the Hebrew University
      campus, the two-day selection test was taking place. Talpions ran one
      exercise by dividing applicants into groups of 10 in different
      classrooms. A psychologist who helped design the exercises moved
      silently among the groups.

      Uzi Eilam, a retired brigadier general who fought under Ariel Sharon
      during the Six-Day War in 1967, gives a tour of battle sites around
      Jerusalem to first-year Talpiot cadets.

      In one classroom, the 10 applicants, wearing blue T-shirts with the
      program's winged symbol emblazoned on the back, were given several
      minutes to complete a task. Without warning, a Talpion said they had
      less time than they had been promised. At other times, they were told
      suddenly to switch roles.

      "We need to move on! We need to move on!" one candidate shouted to the
      other group members. After more minutes passed, a Talpion stopped the
      exercise. The allotted period had already expired, and he wanted to
      know why they hadn't kept track of the time. The idea was not whether
      they got the right answer, but how they tried to find it -- testing
      for creativity, leadership and social skills.

      Final applicants appear before a panel of judges -- professors,
      military leaders and other officials -- who ask for explanations on
      things like the theory of relativity and how solar heating works.

      Missiles in Haifa

      Some of those selected by Talpiot say the biggest challenge is
      realizing they will devote their military service to research, not
      fighting. During Israel's war with Hezbollah in Lebanon last summer,
      missiles rained down on the northern part of the country, reaching as
      far as 30 miles inside the country to cities including Haifa. Cadets
      say it forced friends and family in the area to abandon their homes.
      "All of our friends were fighting in the war, and we were here
      studying for exams," a lanky third-year Talpiot cadet said one
      evening, sitting in his dorm room. Posters of rock bands and the
      Kramer character from "Seinfeld" covered the walls. "I felt ashamed
      that I couldn't do anything." Another in the room, with a neatly
      trimmed dark beard, said he has to convince himself that the "changes
      we are making are far bigger than anything we could do in a combat unit."

      Over dinner in the building's simple cafeteria, cadets lamented that
      soldiers, in particular fighter pilots, are far more popular with
      girls than "computer geeks." But they think that is beginning to
      change as tales of technology IPOs become more common.

      The commander of Talpiot, Maj. Roy Shefer, says he tries to counter
      the trend toward the high-tech world by instilling in the cadets a
      sense of obligation to country. He recently took the first-year class
      on a tour of the Nazi concentration camps in Poland.

      "We view them as a national resource, and we want to determine how
      they can best contribute to the state," says Maj. Shefer, a
      28-year-old with thick-framed glasses. He acknowledges, however, that
      the private sector's pull is difficult to resist. He sometimes
      questions whether the country, and in particular the military,
      benefits as much as it should from the program. "Some commanders have
      tanks," he said. He nodded toward photo identifications of the 150
      Talpiot cadets, attached to a whiteboard on the wall next to his desk.
      "I have them."

      Second Thoughts

      Talpiot co-founder Prof. Yatsiv says he's having second thoughts about
      the program. There's no evidence that cadets couldn't receive better
      training elsewhere, he says. "No one knows if we developed
      resourcefulness -- or if such things just grow naturally in people,"
      he says. He doesn't mind that graduates are getting wealthy, but says
      that if they aren't working in the country, "Israeli money should not
      be invested in them."

      Aharon Beth-Halachmi, who helped create Talpiot as the brigadier
      general in charge of the military's research and development arm in
      the 1970s, says the Talpiot approach is necessary in a small country.
      "What we are showing is that you don't need a lot of people for
      breakthroughs, just the right people," he says. Today he runs his own
      venture-capital firm from offices next to a seaside hotel his company
      owns in Tel Aviv.

      Mr. Czerniak of Metacafe suggests the military could retain Talpions
      by managing their careers more carefully. Mr. Czerniak and his class
      were trained in paratrooping, operating armored tanks and firing a
      variety of weaponry, and he realized a childhood dream by becoming a
      fighter pilot.

      He considered working on a multimillion-dollar flight-radar project,
      but he says a superior made him a flight instructor instead. The
      military "didn't always step back and look at the big picture," he
      says. The IDF says it places a priority on using Talpions to their
      full potential.

      After completing his service in July 2003, Mr. Czerniak was recruited
      to help launch Metacafe, first in the basement of his grandmother's
      house near Tel Aviv, then in a loft and now in an entire floor in a
      large office building in downtown Tel Aviv. During one afternoon,
      employees dressed in jeans and T-shirts, most in their 20s and 30s,
      moved about desks made of light wood and separated by glass walls.
      Mr. Czerniak, who last November opened the company's Palo Alto office,
      has tapped his Talpiot network for new recruits. A year ago Mr.
      Czerniak hired Ido Safruti, a Talpion who finished the program last
      July, to run the Tel Aviv office. Talpiot is "a very aggressive,
      extremely competitive, stressful environment," says Mr. Czerniak.
      "This is why we hire from there -- it's a stamp of approval."

      Mr. Beker, who developed the helicopter seat, has gotten the start-up
      bug as well. Three years ago he began working full-time on a new
      company, Biological Signal Processing Ltd., that has developed
      software he says can test for heart disease at one-tenth the price of
      prevailing methods. After listing on the Tel Aviv Stock Exchange last
      year, the company opened a sales and marketing office in Rockville, Md.

      The company's head of research and development is also a Talpion.
      Though most graduates aren't involved in defending Israel, Mr. Beker
      acknowledges, their role in the country's economy is just as important
      to Israel's survival. "What we are doing is generating new ideas and
      solutions," he says. "That is very difficult to wipe out in a war."

      Email your comments to sjeditor @ dowjones.com.



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