It's the birthplace of some of the world's hottest software, Internet products and electronic devices. Though no larger than New Jersey, this country is second only to the U.S. when it comes to the number of high-tech firms within its borders. It's Israel - a country people tend to identify with kibbutzim and political strife - and today it boasts one of the most vibrant high-tech industries on the world, with strengths in network security, data communications and Internet products. Many compare Israel to the burgeoning Silicon Valley of the early 1980s. The hub of the country's high-tech revolution is sunny Sharon Valley, which, with its red-roofed stucco houses and abundant palm trees, is strangely reminiscent of its predecessor in California. Dubbed Silicon Wadi - a reference to the dried up riverbeds that crisscross the area - the Middle Eastern version taps the talent of army-trained computer wunderkinds. The country's mandatory military service exposes young citizens to some of the most sophisticated technologies around, knowledge easily applicable to commercial products. Israel's strength in technology was sparked in part by France's 1967 embargo on weapons exports to Israel. Forced to focus energy on its defense industry, the country developed a strong tradition of high-tech innovation.

Noticing an increase in entrepreneurialism among its young citizens, the Israeli government set up a number of high-tech incubators in 1991. Since then it has funneled more than $125 million into about 300 projects, more than half of which have evolved into independent companies. Young companies have also benefited from venture capital firms - which have blossomed as much in the Holy Land as they have in Silicon Valley. In 1991, there was one VC firm in Israel, with $35 million to invest. As of 1998 there were 70 firms in Israel, with combined funds totaling about $700 million. There are the foreign investors as well: the U.S. is the largest VC investor in Israel, and acquisitive Japan (known for its weak software industry) comes in second.

~ Among the most successful Israeli start-up stories is that of Mirabilis, which recently sold its ICQ (I seek you) software to America Online for $287 million. Its four founders are the youngest and most celebrated entrepreneurs in the country. With ICQ, users can alert a list of friends when they log on to the Internet, then exchange messages in real time or participate in chat rooms. The cool part is that ICG became the Web's chat software of choice with nary an advertisement. The phenomenon has spread to more than 12 million users, strictly "by word of mouse." Other thriving software companies are GEO-Interactive, which makes software that compresses and sends video, animation and sound over the Internet; and CheckPoint, which sells software that protects corporate computer systems from hackers.