The New England – Israel connection

The New England Israel Business Council is building a technology pipeline between the two regions.It’s no longer news that Israel is a hotbed of technology research and development. Much of the world knows that cutting-edge technologies ranging from Intel’s Centrino chip to Given Imaging’s ‘camera-in-a-pill’ have been developed in Israel, and that Microsoft, Motorola, Google, Siemens and other iconic, technology-driven brands have chosen to establish research, investment or development centers in Israel.

Moreover, with two Technion researchers having been awarded the Nobel Prize in Chemistry, there is little doubt that Israel occupies its rightful place on the global science and technology stage.

It takes more than a reputation for world-class technology to bring ideas from concept to reality, however. There are many challenges that investors outside of Israel face as they seek to explore and assess new technologies from Israel’s relentless entrepreneurs, and there are innumerable Israeli inventors, start-ups and even mature companies struggling to secure investment, marketing, development and even mentoring support with larger partners in North America and Europe.

While creative and motivated partners may eventually find each other, investment opportunities and partnerships generally can often be hastened and facilitated by a community of willing, interested and highly able supporters dedicated to the bigger picture.

It is in the spirit of community – and the pursuit of profit – that the potential of a unique business development pipeline is rapidly being realized. Through the efforts of entrepreneurs with feet firmly planted in both the United States and in Israel, a New England-Israel connection has not only been established, but is now being formalized and given both shape and direction.

Much of the credit for this encouraging state of affairs goes to a highly active and engaged community of Israeli ‘ex-pats’ in the Boston area, many of whom repeat a familiar story: “I came to New England to run the US office of my company for six months, and I ended up staying ten years!”

A textbook example is Yuval Malinsky, CEO of Vigorous Mind, Managing Director of Stage 1 Strategies LLC, and now president of the newly formed New England Israel Business Council.

A self-described ‘serial entrepreneur’, Malinksy, like many of his compatriots, came to Boston to establish the North American office of his Israel-based company. The company’s largest customer was located in the Boston area, so in order to serve that client better, Malinsky made the move. He expected to stay for two years. That was in 1994.

Since that time, Malinsky has invested in, operated and spun off a number of successful ventures, and today continues to dedicate his time to various business and consulting interests.

What may turn out to be Malinsky’s most lasting contribution, however, is his work initiating and leading the New England Israel Business Council. Building upon a network of investors, entrepreneurs, local supporters of Israel and a vibrant New England technology community, the NEIBC was formed in late 2006 to promote economic development and investment in both New England and Israel.

The organization provides a forum for leading technology ‘players’ to discuss their companies, their challenges, and cross-development opportunities in synergistic industries such as information technology, security, biotechnology, medical devices, clean tech, semiconductors and nanotechnology. Attendance at these events is strong and growing rapidly.

In some respects, the NEIBC stands on the shoulders of New England-based and American investors who have already shown their faith in Israel and Israeli technology, including Greylock Partners, Charles River Laboratories, Battery Ventures, Polaris and many others. An important element of the NEIBC mission is to bring these success stories to the wider community, and then to bring like-minded businesspersons together to create an ongoing flow of business and opportunity.

And the word is getting out. One firm that received the message loud and clear is Portland, Maine-based Pierce Atwood LLP, which I’m associated with. The law firm, which is more than 100 years old, recently opened a Boston office and sent one of its intellectual property and life science partners to Israel. As a result, the firm anticipates that at least one Israeli start-up will be admitted to the firm’s innovative Catalyst Program, which supports entrepreneurs and technology companies by deferring all or a portion of the firm’s fees until agreed success benchmarks are achieved.

The development of a pipeline, i.e., an established flow of intellectual property and investment, between New England and Israel, has been in the works for some time, but never has it been as well defined and productive as it is today. By creating a framework for investors and entrepreneurs, and a vehicle for the public at large to learn more about outstanding and ongoing business opportunities in Israel, the New England Israel Business Council is likely to make a lasting contribution to the technology scene in both countries for years to come.

Now is the time for Israel to make gorillas

We need companies which acquire other companies, and are not acquired themselves.The Israeli high tech industry has an excellent reputation in the global market. The hundreds of start up companies currently active in Israel, and the dozens of new start ups established every year, have turned Israel in to the leading source of technological entrepreneurship outside of the USA.

This is probably why international giants such as Google, Cisco, Microsoft, Intel, IBM, and many others seek to acquire fresh and innovative Israeli technologies. In 2006, the local start up industry set an international ‘ratings’ record, with international corporations paying nearly $3 billion for the acquisition of dozens of private Israeli technological companies.

These numbers are a source of pride to the venture capital funds, which are the primary financiers of the start up industry in Israel. Successes are marked with profits of impressive multipliers, however the significant impact of these successes on the product of the Israeli market is one-time only.

Therefore, we cannot evade the question of why the shelf-life of Israeli entrepreneurship is so brief. Why can’t the Israeli mind come up with more large international corporations, which acquire companies themselves, and are not acquired themselves within a few years of establishment.

The claim that Israel, with its seven million residents, is a mere speck of global economy, is a lame excuse. Finland, a country with a population of 5 million, and with far less entrepreneurship than Israel, has introduced Nokia to the global economy. Nokia’s power has a great deal of influence on the growth of the Finnish economy. So when will there be another Israeli Teva, or, perchance, even Nokia?

Many see Teva, the largest generic pharmaceutical company in the world, as an ‘Israeli Nokia’ of sorts. Amdocs and Comverse, which employ tens of thousands worldwide and are global market leaders, also have a clear Israeli orientation.

But that pretty much sums it up. At the end of the day, Israel, whose strength lies in its ideas, is far less competitive when it comes to execution. The amount of international corporations established in Israel, which manage to grow with long term vision and execution, is rather small.

Israel has more entrepreneurs than Germany; however, Israel isn’t producing enough large companies from this entrepreneurship. While it is true that some of the traditional industry in Israel is incapable of generating large companies such as car manufacturers, which require market proximity and immense production costs, there are plenty of other industries with lower production costs and in which the physical distance from markets poses no difficulty in the age of the global village.

Therefore, the goal is for Israeli entrepreneurship to improve its capabilities in idea application and execution, in order to establish a long term high tech industry. Collaborations between the government and private sectors can make Israel an appealing destination for the establishment of local giant corporations seeking to build manufacturing plants for pharmaceuticals, communications equipment, chips, and semiconductors, as well as equipment upgrade plants.

This would enable capitalizing on the technological manpower, trained for service in the IDF and currently without productive employment after the service, particularly in the periphery areas. Such initiatives work very well in countries such as Taiwan, Finland, and Ireland, and have no reason not to work just as well in Israel.

Venture capital funds play an important part in this process, however there is also need for complementary financial tools. The financial structure of VC funds limits the duration of the funds? investment in companies to five to ten years. Afterwards, the funds must realize their investment and return the profit to their investors. The funds start investing, at the pre-seed stage, in ideas with good potential for growth. Later on, the funds invest in companies with high potential for leveraging.

After the companies reach maturation, the funds are required to sell the portfolio companies at a profit. NASDAQ IPO?s used to be the exit of choice for funds, as the profit multipliers were higher than the average multipliers received for acquisitions of the successful companies. Nowadays, there are far less NASDAQ IPOs. Each IPO requires meeting rigid standards for income, growth, and transparency, and entails steep annual administrative expenses. The alternative public market in Britain is no real alternative to NASDAQ. Its structure as well as the auxiliary banking structure facilitates trading of local consumption, and not multinational technological corporations.

We believe that serious consideration of selling VC-backed companies to private equity funds, which can provide the companies with the necessary takeoff, is in order. This market has yet to prove itself, but appears to have a great deal of potential.

To build a stable high tech industry in Israel, management skills also need to be improved. Israel is developing its managerial tradition lazily, while globalization is posing competitive challenges versus caches of administrative personnel from the finest training programs and the most successful companies. Over time, there has been a gradual improvement of management, however, we should practice assimilation of skilled managers trained in international companies to improve management skills.

Israel is the second largest source, after India, of senior management in the USA. Furthermore, high-quality boards of directors composed of foreigners and Israelis, which are capable of giving feedback to the management of Israeli companies and improving management performance, should be established. Improvement of companies’ management skills requires an improvement of executive skills. Successful companies leverage ideas for a business, and ensure that the international deployment and manufacturing will eventually bring the profit into Israel.

Ultimately, Israel cannot ignore rising global forces, and must redefine its competitive edge over China and India, in addition to its competitiveness in Western markets. The country’s responsibility is to fortify the programs for professional training and higher education, as well as to facilitate construction of an effective business infrastructure for expansion of the operation of Israeli companies.

Developing such a solid technological industry would generate additional workplaces in the Israeli economy, foster growth and productivity, create solid economical infrastructures, and ultimately ensure larger financial stability for the next generation.

My Israeli top 12 list

Just as the Torah portion recalls the sin of the 12 spies, here’s 12 good things about living in Israel. This week, Jews read the Torah portion Shelach Lecha, which recalls the sin of the spies. These were the 12 men that Moses sent to scout out the Land of Israel before entering. When they returned, their reports were distorted and negative and caused a 40 year delay before the children of Israel could enter their land.

Today, despite the challenges that come with living in Israel, we – who have decided to make Israel our home – are witness to all that is good and special about living here. We’re able to have influence and be a part of Jewish history and not merely a spectator. To ‘rectify’ the sins of the ancient spies – and modern day spies – this message serves to shed light on just a bit of the good of life in Israel.

Just as the Torah portion recalls the sin of the 12 spies, I’d like to share 12 good things about living in Israel. Too often, the positive side of Israel ‘beyond the conflict’ is obscured.

12. The entire Jewish world focuses on us. When Jews around the world pray for dew, rain, or peace, it is not for weather in America or peace in Zimbabwe – but rather in the land of Israel. When you pray for peace, it is for peace in Israel and Jerusalem – my home. When Jews celebrate Jerusalem Day or the three pilgrimage festivals (Passover, Sukkot, and Shavuot), they focus on the city I live in.

11. Safety. Despite fear mongering or the misrepresentation of the news, Israel is a safe country. I feel much safer walking the streets of Jerusalem at one in the morning than I feel in Washington, DC even in the middle of the afternoon. Random acts of violence are very rare in Israel. In addition, in Israel, we live long lives. The life expectancy for an Israeli man is 77.44 years and 81.85 years for a woman but in America, it is shorter – American men live over two years less (75.15) and women a year less (80.97).

10. Innovation and ingenuity – Israel ranks third in ingenuity in the world, second in quality of university education, and first in R&D investment. Only the US has more start ups in the world – yet Israel is only a fraction of the population. But, what does that mean in reality? It is an Israeli-developed processor that powers your computer, Israeli technology makes your small speakers give quality sound, it is Israelis that invented voice mail, Israeli doctors that find cures to diseases – Michael J. Fox is looking to Israel for a cure to Parkinson’s disease. When Warren Buffet looks for a good investment outside of America, he looks to Israel. These are my countrymen that are improving the world.

9. Israel is real – The Talmud says that mitzvoth (commandments) performed outside of Israel are just for practice for when the Jewish people return to Israel. Today, when I put on tefillin, or say a prayer, I know it’s for real – and God is a local call. Life isn’t just about catching the next dollar or empty meaningless lives. In Israel, it’s about making the world a better place, it’s about being a part of Jewish history and not just a spectator. It’s about LIVING LIFE. I don’t need to scuba dive or bungee jump to feel alive. I can do that every day in Israel.

8. Great food and wine – It’s not Manischevitz here! – Israeli wineries make some of the best wine in the world (Domaine du Castel – praised even by the French, and the one thing they know is wine – and Golan Heights Winery, for example). Restaurants from around the world – Mexican, Chinese, Thai, American, Italian, Brazilian, and Japanese, among others – make some of the tastiest food in the world. Even better – most of it is kosher!

7. It’s my history – Not someone else’s history, Israel’s holidays are my holidays and Israel’s history is my history. Whether it’s King David settling Jerusalem, the sights in which Biblical events took place, or modern Zionism and the building of the State of Israel, it’s the history of my ancestors. The founding of Tel Aviv? It was my family who was doing the building. When the American founders were reading the Bible for inspiration, they were trying to duplicate my people – not the other way around. When the president wishes the country a happy holidays, or when the supermarket cashier does, it’s my holidays. No December dilemma for me! And that means more vacation days as Jewish holidays are national holidays here.

8. A caring community ‘ ‘How are you doing?’ isn’t just a formality. In Israel, whether it’s the man or woman on the street, or the supermarket cashier, the people care how you are. It’s not cold, impersonal living.

7. Kosher food courts in the mall. Kosher restaurants in the street. – Business lunch? No problem!

6. The fulfillment of Biblical prophesy – When a bride and groom get married in Israel, it’s a fulfillment of the words of Jeremiah. When Jews from all over the world – Ethiopia, North Africa, Europe, America, and the four corners of the globe – live in one area, it’s Kibbutz Galuyot – the ingathering of the exiles we pray for in our daily prayers and mentioned numerous times in the Bible is happening every day here.

5. A country that mourns together, a country that celebrates together – Memorial Day isn’t an excuse for a long weekend, a trip to the mall, or a barbeque. Rather, an entire country comes together to remember those who died so we can be a free nation in our land. Independence Day isn’t just an excuse for a barbeque (although it is the national pastime on this day) but a day to celebrate together as one nation. We don’t watch the fireworks on TV in our own homes, but in our streets and neighborhoods as a country.

4. 180 miles of beach – Who needs an expensive Mediterranean vacation? We are that vacation! On the shores of the Med, Israeli beaches are world class. There’s no place in the world quite like the Dead Sea. Who needs an expensive vacation? Just take a day off and go to Tel Aviv or Netanya or Eilat. The world’s best scenery and beaches. And, above all – no jetlag!

3. The language of the Bible and the Jewish people is our everyday languageAtem medebrim Ivrit? Ani medeber Ivrit. No need for translations – this is the original. Israeli children speak the same language as Abraham and Moses. The language of the bank, of the court, and, yes, of the criminal is the language of Abraham, Isaac, Jacob, Sarah, Rebecca, Rachel and Leah. Who needs translation? Here, it’s the original! Shalom!

2. It’s the fulfillment of a 2,000-year old dream. Who says dreams don’t come true? Ever since being exiled from our land, the Jewish people have prayed to return. Ever since losing sovereignty thousands of years ago, we have prayed for its restoration. Every day, every moment, every Jewish event has contained a dream to return to the land of Israel under Jewish rule. In the Grace after Meals, we prayed for an end to exile. For thousands of years, being in exile was not a choice. In 1948, being an exile became a choice. In 2004, my exile ended and I chose to be a free person in my land.

While our ancestors were mourning Jerusalem, today, I can celebrate Jerusalem at home, under a Jewish and democratic government, as a sovereign person in my land.

1. It’s home. ONLY in Israel are the words of Hatikvah true. Lihiyot am chofshi b’Artezenu – To be a free people in our land only happens in Israel.

Home may not always be fun, but it’s always home! And, as Dorothy says in the Wizard of Oz, ‘there’s no place like home.’

Dissecting the British academic boycott

When it comes to Israel, the acadmics have ignored the most elementary statistics.The British University and College Union describes itself as the largest national association of lecturers and academic related staff. And of all the burning education issues – budgets, standards and more – discussed at its recent conference, I am astounded to see which one has been assigned as the ‘top story’ on the union’s website. The answer: An academic boycott of Israel, due to continuing violation of Palestinian rights.

As an economics lecturer might say, assume that Israel is a pariah state and that Palestinians had not bombed the Hebrew University in Jerusalem nor the Sapir campus near Ashkelon. And accept that all those who voted for the resolution still believe that Israel has a right to exist in some guise. Even then, the intellectual logic of such a proposal will tax the most senior of professors.

The proponents of the boycott are academics, dedicated to the purity of fact and of research. Yet when it comes to Israel, they have ignored the most elementary of boring and inconvenient statistics. For example, a Jerusalem scholar pointed out recently that when Israel controlled the Palestinian territories, it founded seven Palestinian universities. Until then, there were none. And since 1994, when the Palestinian Authority assumed responsibility for education, no other pluralistic centers have been established.

Under the new ruling, British universities will not be allowed to accept this material, as it was obtained from an Israeli institute of higher learning.

Grasp the importance of this statement, and you realize how much the UK academics have just shot an enormous hole in their great big feet, all in the name of supporting peace. Academia thrives and depends on the exchange of materials, ideas and study papers.

For example, a recent survey conducted by the Milken Institute showed that of over 400 universities examined, Hebrew University and Tel Aviv University were ranked 12th and 21st respectively for registering biotech patents. Only one British establishment, London University, could beat those placings. Aside from deliberately sabotaging one of the potential areas of Israeli-Palestinian co-operation, UK academia will now deprive itself of much valuable input.

A business colleague of mine confirmed the problem. He is working with an Israeli start up on a unique technology in the field of homeland security. The company wishes to complete the research in the UK. He confined in me that “the software development is essential to prevent repeat bombings of the kind seen on the London underground. This latest development – political correctness taken over by extremists – will jeopardize the venture and place people’s freedom in danger.”

Israel’s software achievements in the past two decades have been extensive. They reach to numerous areas of daily lives of all peoples. A classic example is the very technology used to drum up support for the boycott, the Pentium NMX Chip. It was designed at Intel in Israel. Both the Pentium 4 microprocessor and the Centrum processor were designed, developed, and produced in Israel, as well as voice mail and the ICQ technology. Much of the groundwork for all these ideas came from whiz kids at Israel’s universities.

The absurdity of the issue rapidly stretches in to areas of Israeli bio and nanotech. To quote three examples, which mask thousands more: Medinol’s stents, used in cardiac surgery, are arguably the best in the world. Protalix is developing a system to produce complex human therapeutic proteins, which will help fight genetic disorders. Professor Aaron Ciechanover, recent Nobel laureate, has developed a series of cures for specific cancers.

All these projects emerged from research at Israel’s various universities. And not only is the UCU is asking its members to disassociate itself from such works. It is thus asking them and others not to use such breakthroughs, although they will improve the lives of millions.

Ludicrous? Maybe even wicked? Consider the Wolfson Medical Center, south of Tel Aviv. It is famed for its ‘Save A Child’s Heart’ program, which has treated around 1,500 children from around the world. Approximately 50% of the patients have been Palestinians. Much of the work is subsidized via the European Union and is supported by visiting doctors, including from the UK. Time to shut down the wards?

As a businessman, I meet with many Israeli companies developing new technologies. I recently visited Atlantium. Located outside Jerusalem, it targets the water protection and purification market in Scotland, where many rivers are losing fish due to a rare virus. Another CEO has made a presentation to the UK National Health Service, using Israeli medical trials that show he has discovered a way to contain the spread of contagious diseases in hospitals.

The delegates to the UCU conference are also asking for these projects to become taboo to its members and the consumer.

When I studied in Britain, new ideas were actively sought after. In the words of Dr. Sari Nusseibah, president of the Palestinian Al-Quds University: “The free flow of science and information… constitutes a powerful force against war… Of all possible bridges to burn as a form of ‘well-intentioned’ political pressure, the boycott of academic cooperation between Israelis and Palestinians should be excluded…”

If the UCU represents the best tradition of British academia, which has taken pride in its openness and progressiveness, the elected delegates of the members have taken a major step backwards towards selective teaching and predetermined research. Their decision will bring scorn upon itself and the community at large. It will damage those people they are supposedly seeking to help.

If that is the result of the union’s actions, the time has arrived to question seriously the true motives that have brought its members to such a segregationist position.

Israel has world-class economy

With only seven million people and no natural resources, Israel has achieved amazing results.When one evaluates today’s miracle economies, that designation usually is reserved for China, India, the Southeast Asian Rim and Brazil. Even Vladimir Putin’s Russia has used its energy dominance to accumulate the world’s third-largest currency reserves of $250 billion.

But no one, with the exception of Berkshire-Hathaway owner Warren Buffett, would put tiny Israel into that category.

After buying 80 percent of an Israel-based, world-class tool company for $4 billion, in addition to several smaller adjunct concerns, Buffett called the embattled Jewish state one of the world’s most productive on a per capita basis.

With a sparse 7 million population, no natural resources and all borders being totally surrounded by enemies, Israel has achieved mind-boggling results. This was accomplished despite a 30-day war with Lebanon-based Hizbullah last summer and the need to keep its population on constant alert through universal military training and a 25-year reserve commitment.

In spite of these hardships, Israel has been admitted to the Organization of Economic Cooperation and Development (OECD), which consists of the 30 leading economies in the world. This will improve Israel’s credit rating, yielding a substantial reduction of risk premiums for the financing of the coming multibillion-dollar infrastructure prospects.

It also will accelerate the flow of overseas investments in Israel. Economic statistics tell a big part of the story.

The International Monetary Fund projects a 4.8 percent growth for Israel for 2007, one of the highest in the industrialized world, trailing only Hong Kong, Singapore and Ireland, respectively. Inflation is negative, while unemployment is projected to decrease to 7 percent from 9 percent in 2005.

Gross domestic product growth particularly is impressive, projected at a 5.1 percent annualized rate compared to 3.1 percent in the European economic community and 2.3 percent in the United States during 2007. Israel’s just-announced first quarter came in at an even higher 6.3 percent.

Israel also has become one of the world leaders in annual military arms sales with $4.4 billion in 2006, an all-time record for that beleaguered nation, with 75 percent sold overseas.

With a GDP per capita of almost $20,000, far higher than any of the oil-rich Arab countries, Israel is the “go-to country” when it comes to high technology.

One in 10 Israelis works in the tech sector. Some 3,500 startup companies were created within Israel’s 7 million population last year, second only to the United States with 300 million inhabitants.

Under finance minister Binyamin Netanyahu, a once and possibly future prime minister, Israel took a giant step toward privatization, including banks and communications networks.

Israel increasingly is being considered worldwide as an alternative to Silicon Valley, with 90 percent of venture capital coming from foreign investors, mostly from the United States.

Such venture capitalists as Silicon Valley’s Greylock Partners have set up offices in Israel, with a $150 million dedicated expansion fund. Fifty-seven Israeli technology companies were sold last year to overseas buyers for a total of $90 billion, six times the value of 2004.

Microsoft is hiring 150 research and development people for its second R&D center in Israel, in addition to 200 persons already working at the company’s R&D center in Haifa.

Intel-Israel also has been responsible for that chipmaker’s recovery due to a freelance design bureau 7,400 miles from Silicon Valley. Intel credits Israel’s mavericks with new approaches that saved Intel from processing setbacks, according to CEO Paul Otelini.

Today, Israel has more scientists and engineers proportional to its population than any country in the world, including the United States. Israel’s stock exchange has been booming, including its investments in Africa, Moscow, Germany, United States, China and Finland.

Israel also has become a global leader in water and environmental technologies, planning to increase its current research staff from 1,700 to 8,000 in the next five years.

A consortium of Nokia Siemens has announced expansion of their Israel R&D operations (350 persons) while shrinking their global workforce by 15 percent. The consortium’s only non-Finland and non-Germany operations are in the United States, China and Israel.

One may or may not believe that Israel is God’s country, but it certainly seems to be enjoying divine blessings.

(Originally appeared in the Palm Springs Desert Sun)