American and Israeli officials visited the Juniper Cobra 16 exercise site in Israel, February 24, 2016.

American and Israeli officials visited the Juniper Cobra 16 exercise site in Israel, February 24, 2016. Israel Defense Forces

US Tech Firms Race to Hire Israeli Army Engineers

New offices and nonstop flights from Silicon Valley to Tel Aviv illustrate a talent rush for prized former military specialists.

United Airlines started a three-flights-per-week service from San Francisco to Tel Aviv last year. It was so popular that the carrier now runs the route every day, with a Boeing 787 Dreamliner.

It’s another sign of the insatiable global demand for technology talent, with former Israeli army engineers particularly prized. The world’s tech giants snap them up as fast as the government can train them.

Amazon, for example, is reportedly boosting its presence in Israel by renting 11 floors in a new Tel Aviv tower building. Google has been there for more than a decade, and now Wall Street banks run initiatives across the city. China is pouring in money, on top of Silicon Valley venture capital.

Israel’s unusually high rate of entrepreneurship—it’s not known as “start-up nation” for nothing—is partly attributed to the army, which maintains compulsory service and selects many of the country’s brightest minds for its intelligence division. The army’s elite Talpiot recruits are credited with helping develop missile defense systems, while Unit 8200 produces some of the world’s most formidable cybersecurity experts.

The US has long been a major source of investments in Israel, but now China is getting in the game, too. Chinese suitors spent $11 billion on Israeli acquisitions last year, according to Dealogic, more than was spent on buyouts in Germany, a much larger economy. Many, if not most, Israeli venture capital funds are raising money from Chinese investors.

These days, the country of 8 million people is about 10,000 engineers short of what it needs, according to Guy Naor, chief technology officer at NEX Optimisation, part of London-based NEX Group. The electronic markets and trading technology company, formerly known as ICAP, has 370 employees in Tel Aviv, making it the firm’s third-largest office. NEX’s headcount in Israel recently increased about 10% as part of a cloud and distributed-ledger project.

“There is a worldwide shortage of good developers,’’ said Naor, who was previously a bomb-disposal expert in the Israel Defense Forces.

Tel Aviv is perhaps best known for its cybersecurity and artificial intelligence experts, but more financial technology firms are sprouting up there. Joab Rosenberg headed a group of analysts as a colonel in the IDF. His military experience became the basis for Epistema, which uses software to help financial analysts collaborate. Epistema was part of Citigroup’s startup accelerator, and he credits the New York-based bank with helping boost the fintech ecosystem in Tel Aviv.

Tel Aviv is best known for cybersecurity and AI, but more fintech firms are sprouting up there.

Yoni Assia says he launched his first startup—making rollercoaster videos—before he even left the IDF, where he was a programmer. Now, he’s the CEO of social-trading company eToro, which has operations in Israel. While the shortage of engineers is the most acute in San Francisco, Assia says the crunch is especially pronounced in Tel Aviv—many local companies are now looking to Ukraine to hire workers.

There are about 90 Israeli companies listed on the Nasdaq stock exchange, the most of any non-US nation apart from China. The sheer number of big foreign companies setting up shop in the country may eventually damage the startup sector, though, by snapping up the best engineers, choking off the supply of talent to innovative upstarts, according to Asaf Homossany, senior managing director at Nasdaq.

But in Israel, bigger companies say they don’t always get their way. Large corporations can offer a lot of money to new hires, but they can’t sell the dream of starting something from scratch and making it big—like Intel’s $15 billion acquisition of Jerusalem-based Mobileye.

It’s not uncommon for young developers to jump between big companies before starting their own. That’s not all smooth sailing, of course. While going to work for a startup tech firm sounds romantic, especially when so many others around you are doing it, NEX’s Naor says 99% of them don’t make it. But if there’s one thing you learn in the army, it’s resilience.