warfare units. They were on a mission so sensitive that their superior officers had been deliberately left out ofthe loop-no need for them to know, and they wouldn't have been happy had they known. Many had been enticed here by one of the oldest tricks in the spy handbook: an invitation from a ar- pretty young woman working * for the ,r*. i.r other side. Some of the operatives were tsfl .:4 r.:i.9 armed, M-r6s hanging loosely from I* L,. their shoulders. All were hunting for :, what has become one ofthe most cov- eted objectives in Israeli intelligence circles today: startup funding. IJaffaire Dugit was, in fact, a recruit- ing party thrown by a group of Israel's big-gun high-tech companies. The at- "-"-t:.*,f : tendees were targeted because they are i'.-, ilii among the brains behind the Israel De- fense Forces, or IDF. They belong to units that dream up the state-of-the-art intelligence and communications tech- nologies that give the IDF its tactical edge. These technological innovations power Israel's far-ranging high-tech boom. In Israel, yesterday's soldier is tomorrow's entrepreneur, and the event's sponsors, established Israeli tech outfits that include Comverse Technolog;4 RoseNet, and,Yazam, are trying to get an early line on ideas to fund or geniuses to hire. "X7e want to make a first contact with young entre- The Internet suddenly gives Israeli spy technology huge preneurs who are in the midst of form- ing some technological idea into a busi- powerhouses emerge. In Israel, the mil- code names suitable for a spv novel: 8- ness," says Rona Freund-Amitzur, one itary, much to its own discomfort, in- zo o, 8t53, Mamram, Talpiot, Mamdas. of the event's organizers. Their tactics creasinglyplays that role. Since the cre- In the incubator of the IDF, those units, for establishing those connections ation of Israel in t948, the military has as Israelis winkingly call them, have aren't subtle: To lure the mostly young compensated for its lack ofresources invented or improved technoiogies male crowd to this event, the sponsors and manpower with brainpower. Par- used in everlthing from digital switch- surreptitiously stationed a group of zo- ticularly in the past 20 years, the IDF ing to wireless telephon;r (For more, year-old women outside four different has invested billions ofdollars in devel- see Cheat Sheet, page 257.) With the military bases; the women handed out oping technological warfare. The result spread ofthe Internet, the kind of fliers to the soldiers as they entered and is a number of secret, semisecret, and technological wizardry once used to left their compounds. open-secret divisions devoted to com- guide missiles, beam secure commu- The United States has MII Stan- ing up with cutting-edge technologies nications, and break codes suddenly ford, and a handful of other academic designed to help Israel knowwhat its presents enormous commercial oppor- hothouses that nurture the talent and enemies are doing-and to kill them tunities. "By sheer luck," says Profes- research from which many high-tech when the need arises. The units have sor Shimon Schocken, dean of the 136 www.ecompany.com NOVEMBER 2OOO school ofcomputer science at the In- da. In the mid-r98os, the Israeli govern- immigrants-many of terdisciplinary Cenrer Herzliya, a pri- ment's socialist economic policies had them scientists-in vate Israeli university, "Israel aheady helped produce inflation of4io percenr, the r99os also provid- had the solutions to so many of the and the nation's major export was or- ed a tremendous infu- problems of the Internet." anges.Today inflationis in the single dig sion of talent. This is a Even a short list of hot tech compa- its and 7o percent oflsrael's $35.8 billion country that saw an nies that have recently spun out of Is- in exports comes from the high-tech opportunity in its arid rael's military-technological complex is sector. Thanks mainly to the kick from climate - 6o percent long. "I came out of one of those units," the tech industry Israel's economy stag- ofits land is desert- says Amiram Levinberg, president and nant for years, grew 5 percent during the and invented drip irri- co-founder of Gilat Satellite Networks, last sixmonthsof ry99. gation. There's a cloak- which last year made more than half of But even as the tech boom energizes and-dagger instinct the interactive VSAIs (small satellite the national economy-and, for many here that has been earth stations used in communications citizens, puffs up national pride-it has honed by years ofun- networks) sold in the world. raised issues that rear at the very fabric ceasing military alert. Several of the founders of Israel's of Israel's identity It turns out that in In 1966,Israel smuggled a Russian best-known tech success, the Internet sulprisingways, Israel is ill-equipped for MiG-zr out of Iraq; rhe secrets learned security firm Check Point Software an Internet boom. The challenge facing about the plane were crucial to Israel's Technologies, are former members of Israel is captured in two questions that defense ro months later during the Six 8-zoo who specialized in developing flashed insistently in the smoky sweaty Day War. (More recently according to firewalls between classified military glow that recent night at the bar ofthe Israeli and international press reports, computer networks. Today the seven- Dugit: Can the boom last? And if it Israel acquired a urine sample from ail- year-old company has a market cap of does, can the military-symbol of Is- ing Syrian president Hafez Assad by $23.4 billion and commands j2 percent raeli pride, steadfast guardian ofnation- clandestinely doctoring a toilet that of the worldwide market for commer- al survival-handle it? was set aside for his exclusive use at the cial firewall sofrware. Gideon Hollan- funeral ofJordan's King Hussein in der, CEO of wireless sofrware maker IsnaBr IS A srARTUp NATIoN. you February 1999. The toilet's pipes were is a veteran Jacad,a, of those units, couldnt design a more fertile ground for rerouted to lead to a specimen jar; Is- where he worked on artificial intelli- entrepreneurship. From the beginning, raeli agents Iatet analyzed the sample gence systems. Founders ofnew start- Israelis have confronted daunting chal- for clues about the Syrian leader's ups iVeb (software for deliveringWeb lenges-enemies on all sides, a harsh health and concluded that he was living c0mmelcial potential. "By sheu luck," say$ Interdisciplinary Centu Heruliya's "lstael $himon $chocken, already had solutions to many of the problems dt ttre lntetnet." ads), CTIz (Web telephony), Audio- landscape, embargoes, war-with perse- on borrowed time. Assad died l6 Codes (voice-compression technology), verance and innovation. Theylike to call months later.) and hundreds of others are former se- themselves natural-born entrepreneurs. But it is military intelligence, more cret warriors. "It's in our genes to try and do the im- than any other single factor, that ac- AII this technological ferment has cat- possible here," says AvivT2idon, a for- counts for Israel's tech prowess. In fact, apulted Israel into the front ranks of mer fighter pilot and co-founder of BVR the demands made by the elite intelli- global tech powers - and transformed Technologies, a high-tech holding com- gence units seem as if they're meant to an economy that just a decade ago was a pany with interest in broadband and be basic training for startup entrepre- disaster. There a.re now more startups in wireless technologies. "We're ahsays try- neurs. Soldiers work in small, highly Israel than there are anywhere outside ing to crack the code." motivated teams, with brutal hours and SiliconValley Israel, a country of 6 mil- Israel has a highly educated popula- little sleep. The pressure to innovate is people, lion ranks third in the world in tion, with more engineers per capita crushing-national survival is at stake. the number of Nasdaq-listed compa- (r35 per \ ro,ooo) than any other nation. They must sell their ideas to their com- nies, behindthe United States and Cana- The influx of nearly r million Russian manding officers, or swiftly dream up NOVEMBER 2OOO www.ecompany.com 137 gram known aslhlpiot, ser up in the aftermath of the bloodyYom Kippur War in October ry7. Is- rael eventually prevailed, but in 18 days offighting, Egypt and Svria inflicted heavy casualties on the much-vaunted Israeli fbrces. The idea behindTalpiot, savs -N'lajor Yariv Danziger, "was for a unit to gather geniuses in the armv to invent new tech- nologies and u.eapons." The pro- gram was officialh. started in r979 with an initial class of z5 "geniuses." Danziger, 34, has headed the program ibr the past r\1 0 \-ears. Think ofTalpior as somerhing like the old East German Olvmpic athletics program minus the doping. By the time young men and women are in- ducted into the army at age r8, the IDF has in hand all of their individual psychological and ac- ademic records. The IDF is no- tified of students with top grades, particularly in physics and math. Each September, 3,ooo Talpiot candidates submit "Business is like tt'ar, only without the Geneva Convention." something else. "The armywas the best eran, revered here as one of Israel's to a brain-busting batten' of intellecrual business school," says Aryeh Finegold, a high-tech pioneers, says: "The army and scientific tests. They undergo hean' g-year-old former paratrooper and one teaches technology in a very intensive psychological profiling, and tests on of the designers of a naval antimissile way It invests a lot of responsibility in leadership skills and their abiliry to work system.