There has been much talk recently about Israeli high tech having reached a peak and is now faltering ….whatever that means.

After all, there are signs that VC funding is falling off. The continually high level of the shekel against other key currencies may be having an adverse effect on exports. Even the government admits that tax incentives introduced over the past few years have had a miserly effect.

Take a look again. All is not so gloom and doom. For example, Johnson and Johnson has just given its financial backing to a new biotech incubator.

The item that caught my eye was that “online translation company Babylon Ltd is in preliminary talks to merge with online and mobile app distributor ironSource Ltd.” I am talking about two Israeli minnows with barely a decade of commercial experience between them. And yet together, their sales cross the one billion dollar mark.

How have they done it? What will allow them to go for a full launch on NASDAQ? Will they seriously start to challenge parts of Google’s empire?

Recent articles in the Guardian and Business Insider highlight an important and unique element to Israel’s high tech industry. The key is the geeks who emerge / graduate/ are demobbed from the Israeli army’s 8200 Unit, the techy part of intelligence operations. In Hollywood terms, such anonymous heroes help the James Bonds of the Holy Land do their work.

As Matt Kalman wrote, these people:

have made the most of their expertise in cybersecurity, data storage, mobile communications and analytical algorithms to help transform the basis of Israel’s economy from orange groves to mobile-phone apps. Israeli inventions include instant messaging, the USB memory stick, the firewall and the secure data links that enable most of the world’s banking transactions and TV signal decoders.

Israeli tech firms Nice, Comverse and Check Point were all created by 8200 alumni.

Such companies are turning over billions, employing tens of thousands, and generating tax revenues of equally vast sums. Maybe there is a lesson for the Israeli government.

Go out and listen to what the new entrepreneurs are saying. Keep the incentives simple. Some of them just want cheap office space and no bureaucracy for a year in order to get started…..and maybe turn into another Babylon or Nice.