Written in 2007 and still actual
Why are Israeli companies number 2 on the Nasdaq since September 2005?
Forty years organised support of potential entrepreneurs
This is no coincidence. For more than forty years, the Office of the Chief Scientist (OCS) at the Ministry of Industry and Trade analyses about two thousand business plans every year submitted by potential entrepreneurs who had an original idea and, in some cases, registered it.
With an annual budget of $300 million, the OCS supports about thousand R&D projects undertaken by 500 companies with grants of up to 50% of R&D expenditure. If a company is successful, it will pay royalties to the OCS; if it fails, there is absolutely no financial obligation and the entrepreneur can even try again with a new project.
The fields covered by the OCS are split as follows: Electronics/Communication 19%, Software 15%, Medical devices 23%, Biotechnology 19%, Agriculture and environment 11%, other 13%.
More than twenty incubators, private and public exist in Israel.
Key factors in Israel’s worldwide business success
Israel, number 1 with worldwide R&D investment rate -- 4,8% of GDP
Israel, number 1 in submitting patents per capita.
Israel, number 1 by proportion of scientists -- 140 per 10,000 citizens (85 for USA and 60 for Germany).
Israel, number 1 with 25% of its active population involved in technical professions.
Israel, number 1 with highest penetration of computers and mobile phones per citizen.
Israel, number 1 with the highest number of start-ups in proportion to its population.
Israel, number 1 with active high level women, and people over 55.
Israel, number 1 with the production of scientific papers per capita: 109 per 10,000.
Source: Invest in Israel where breakthroughs happen brochure, 2006
Local and foreign investors interested in Israeli companies
Despite a war in July 2006, Israel ended the year with a 5.1% increase in its economic growth rate and the business sector product grew by 6.4 percent, a situation never seen anywhere.
More and more foreign investors wish to participate in the Israeli success story: the legendary US investor Warren Buffett invested $4 billion in Iscar, an Israeli company founded by Stef Wertheimer who for the last forty years has been the world’s leading innovator in metal cutting tools and techniques for machining. Wertheimer promotes the idea of economic development by establishing industrial parks which encourage new businesses. He built Tefen Industrial Park in the north of Israel as a working model of this idea.
Google, Yahoo, AOL, Motorola, Siemens, Intel, Microsoft and many more have benefited from the skill and expertise of Israeli engineers for the discovery of many technologies that contributed to their successes worldwide: e.g. the technology for the AOL Instant Messenger ICQ was developed in 1996 by four young Israelis from Mirabilis, the Pentium MMX Chip technology was designed by Intel in Israel. Many more stories are available on www.investinisrael.com.
Chart 1: Capital Raised by Israeli High-Tech Companies ($m)
ISERD = Israel Europe R&D
ORCKIT Communications a pioneer in ADSL was approached by Italtel (Telecom Italia) in 1994 when Israel became the first non-European country to be associated to the EU’s Framework Programme for Research and Technological Development (RTD) enabling R&D cooperation between EU and Israeli companies/academics on specific projects. Israel also participated in the Second Agreement for Scientific and Technical Cooperation (1999-2002). An agreement was signed in 2003 associating Israel to the 6thFramework Programme (FP6).
ISERD is part of the Office of the Chief Scientist and makes a contribution to the European Commission. The amount that is paid back is dependent on the joint projects finalised during the Framework Programme.
“The FRAMEWORK PROGRAMME (FP) represents an investment for the state of Israel: 5th FP (1999-2002) = 154 million euros for a return of 167 million euro; 6th FP = 191 million euros for a return of 204 millions after four years (2003-2007). To date, the FPs registered 2,200 Israeli projects either with universities or enterprises. Tenders were launched in May 2007 for the 7th FP which will last seven years. The investment from Israel is estimated at 50-60 millions per year during the first three years”says Marcel Shaton, General Manager - national coordinator of ISERD.
The educational system encourages R&D and business efficiency
The International Institute for Management Development(IMD) ranked Israel 4th in the world for labour skills, ahead of most European countries. The IMD has rated Israel’s computer science productivity and quality amongst the top five nations. Additional areas of excellence include economics, business mathematics, psychology, psychiatry and biology.
Israel counts five major universities of worldwide reputation: Technion in Haifa, Hebrew University in Jerusalem, Ben Gurion University in Beersheva, Tel Aviv University and the Weizmann Institute in Rehovot.
A private university is on the rise: the Interdisciplinary Center (IDC) in Herzliya.
Cooperation between academics and industries
The Weizmann Institute of Science is ranked third in the world for creation of revenues from transfers of technologies: $93 million in 2003. In 2004, Israel was ranked number 5 in the world for cooperation between industry and academia.
Source: Invest in Israel where breakthroughs happen brochure, 2006
From military defence to civil applications
Shimon Peres, now president of the State of Israel, often said that because Israel is such a small country coping with ongoing survival threat, the only asset it could develop was their brain power the results of which had to be exported.
Most of the hi-tech civilian applications resulted from knowledge developed for the army aimed at the defence of the country. Israel is today also recognised as a technological leader in the development of security products in all kinds of fields such as: fences, alarms, bodyguards, monitoring systems, software, and more.
“Our ongoing research on the VC investments in Israeli companies shows an amazing interest in our abilities to build successful companies” says Guy Holtzman, General Manager of IVC Research Center.
No wonder Israeli companies are number 2 on the Nasdaqsince September 2005.
Charlotte Gutman
Founder & Managing Director
CGP Europe SA
European Public Relations
Charlotte Gutman has been promoting Israeli High Tech companies in Europe since 1984
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