How the Chairman of Rackspace, Some Navy SEALs, and a Few Israeli Innovators Came Together and Discovered the Heart of Entrepreneurship

IT WAS A WARM OCTOBER DAY in Tel Aviv in 2011. Graham Weston and I were sitting in a coffee shop, being entertained by Yossi Vardi, one of the fathers of the entrepreneurial miracle in this tiny country that likes to call itself “Start-Up Nation.”1 Among dozens of tech companies he has seeded, Vardi may be best known for funding ICQ, as in “I Seek You,” the Internet instant messaging program developed by his son, who hadn’t gone to college, and two others. ICQ had 12 million users by the time AOL bought it in 1998 for $407 million dollars. If you remember, 12 million users was a lot back in 1998.

Graham and I weren’t getting a word in edgewise in the conversation, but we didn’t care—we were listening to a guy who’d done more successful start-ups than most first-world countries, waxing poetic with statements like “Business plans and sausages are alike—only people who don’t know how they are made will eat them.” And “God created the world in six days because he didn’t have a customer base” (a back-handed reference to the barriers to innovation that big companies face). As Vardi expounded on the biggest obstacle to entrepreneurship—a syndrome he dubbed “middle manager disease”—he called on the young man who was mopping the floor by our table to illustrate a couple of points.

“The founders at the top of the company still believe in the ...

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