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Israel: start-up notions
Author  Daniel Isenberg

Start-up notions

The real roots of Israel's economic miracle

The 1990s were a revolutionary time Israel's economic development. The government created Yozma, the innovative venture capital vehicle structured by the Israeli government, saw an inrush of venture capital, a wave of NASDAQ IPOs, and benefited from a surge in corporate technology acquisitions. Recent accounts represent the period as a case study for governments looking to foster entrepreneurship. But that story is so incomplete as to mislead policy makers. In fact, developments in the 1990s were the fruits of a process almost forty years old.

The real timeline:
1.    1950s. The seeds of Israel’s entrepreneurial revolution were sown in the late 1940s and 1950s. Israel’s first (Weizmann) and fourth (Katzir) presidents were scientists. Both believed strongly in the role of science in national defense and societal prosperity; in and of itself unique in the world and a strong message about national priorities. The first military technology transfers took place then, half a century before Mirabilis created ICQ, the first instant messaging system.
2.    1960s. R&D got a huge boost in the 1960s, in part from the sudden 1967 French weapons embargo: military self-reliance became defense policy, leading to massive investments in military R&D and the seeding of what would become an entrepreneurial hothouse, the Intelligence Signal Corp (Unit 8200). In 1968 the Katchalski Committee recommended the establishment of the Office of the Chief Scientist (OCS) to help fix market failures in commercializing R&D.
3.    1970s. The early 1970s saw Israel’s first NASDAQ IPO (1972; by medical imaging pioneer, Elscint), the embryonic involvement of top-tier US-based venture capital, and very significantly, the establishment in Israel in 1974 of Intel’s first international R&D center. In 1977 the influential BIRD foundation was created to fund technology-based product development between Israeli and US companies.
4.    1980s. By the early 1980s there were numerous top-tier VC investments, and by 1984 the NASDAQ value of the first wave of a dozen Israeli tech ventures was $780 million. In 1984 the government passed the milestone Law for the Encouragement of R&D. In 1985 the first limited partnership venture capital fund, Athena Venture Partners, was established with $23 million. In 1987 the cancellation of the Lavi fighter-plane mega-project flooded the market with thousands of engineers who swelled the ranks of startups. By 1989 I even had enough material for my speech in Berlin at the European Venture Capital Association conference, “The History of Israeli’ Technological Entrepreneurship.”

You can’t write American history without Jefferson and Washington, yet the authors of Start-Up Nation tried to do the equivalent, overlooking founding fathers like Uzia Galil and Dan Tolkowsky. They’ve even neglected the founding sons—people like Zohar Zisapel (founder of 29 IT firms) and Efi Arazi (founder of Scitex). There are consequences to this revisionism. For example, by focusing on the 90s, policymakers have neglected the parallel entrepreneurship ecosystem that preceded—and enabled—initiatives like Yozma.

But it was this ecosystem that, by 1990, made Israel’s entrepreneurial revolution a fait accompli; so much so that by 1997 there had been 68 NASDAQ IPOs—all before Yozma’s investments started bearing fruit.

And in truth the massive Russian immigration of scientists and engineers has had little direct impact on Israel’s entrepreneurial revolution—in the 90s most had no choice but to accept K-12 teaching or low-level service jobs; Israel’s vast incubator program, admirably privatized, has bred a relatively low number of successful ventures; and Israel’s culture and institutions were anti-entrepreneurial until the mid-1990s, with labor and the government owning huge portions of the economy, wealth being scorned, and marginal tax rates discouraging extra work.

Israel’s entrepreneurial accomplishments have indeed been nothing short of miraculous. Since 1972, over 160 Israeli ventures have been listed on NASDAQ, more than any other country outside of the U.S. and Canada, and hundreds of tech ventures have been acquired. Tens, if not hundreds, of billions of dollars of value have been created. The world benefits from Israeli innovations, such as the USB memory stick, instant messaging and new generation cardiac stents, to name a few. The entrepreneurs who created such novel products have disproportionately contributed to Israel’s growth. So it is only natural for policy makers around the world to want to learn from Israel’s remarkable experience. But they will only reach the right conclusions if they first get the history right.


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World's biggest fund discovers Tel Aviv
World's biggest fund discovers Tel AvivFrom GlobsLast year, Rami Levy joined BTI, the group of businesspeople that supports peace with the Palestinians for the sake of the economy. When this step raised some eyebrows, Levy, a dyed in the wool Likudnik, stressed that his political position was still far from that of those who support the Oslo process. But in Oslo, it turns out, there has actually been a move in Levy's direction recently, or, to be more precise, in the direction of Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI). This stock is one of five Israeli stocks that in 2013 became part of the of the investment portfolio of the Government Pension Fund of Norway, the largest sovereign wealth fund in the world. At the end of 2013, the fund held shares in Rami Levy Chain Stores worth NIS 18 million, out of total holdings of NIS 3.5 billion in 62 stocks traded on the Tel Aviv Stock Exchange.Was the decision to invest in Ramy Levy Chain Stores politically motivated? Unlikely. But in other instances of investment in Israeli companies, the fund has certainly acted out of avowedly non-economic considerations. So, for example, in January this year the fund announced that it was putting Africa-Israel Investments Ltd.(TASE:AFIL), controlled by Lev Leviev, and its subsidiary Danya Cebus, back on its blacklist.This step was taken on the recommendation of the fund's ethics committee, which determined last November that the two companies were guilty of contributing to severe breaches of human rights through construction in East Jerusalem. As a result of this decision, the fund will sell off its holdings in Africa-Israel, which were worth NIS 7.3 million.Another loser is communications equipment producer Mellanox Technologies Ltd. (Nasdaq:MLNX). During 2103, the Norwegian fund liquidated its holding in the company, which only a year previously amounted to some NIS 60 million. Its holding in Emblaze Ltd. (LSE:BLZ) was also liquidated last year. Similar things have happened in the more distant past. In September 2009, for example, the fund decided to sell its holdings in defense manufacturer Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) because it provided equipment for the separation fence.Wary of the gas partnershipsThese instances are perhaps discordant to Israeli ears, but the general picture of the Norwegian fund's activity is actually positive from an Israeli point of view. In the course of 2013, the value of its investment in companies traded on the Tel Aviv Stock Exchange rose by 43% in nominal terms, from NIS 2.4 billion to nearly NIS 3.5 billion. Even discounting the boom on the stock exchange, the rise is impressive: the fund's proportionate holding in shares on the Tel Aviv 100 list grew by 21% last year, exceeding 0.5% of the total of shares listed.At the same time, the fund raised it holdings of Israel government bonds from NIS 2.674 billion to NIS 3.75 billion. Another NIS 693 million of the fund's money is invested in Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). The fund's total investment in the Israeli capital market is thus nearly NIS 8 billion.The fund's largest equity holdings are in Teva, the banks, and Israel Chemicals Ltd. (TASE: ICL), with the best performing stock being Bank Hapoalim (TASE: POLI). Apart from Rami Levy, it is noteworthy that the fund has added to its portfolio two gas exploration companies,Delek Energy Systems Ltd. (TASE: DLEN) and JOEL Jerusalem Oil Exploration Ltd. (TASE: JOEL). In both cases, the investment is in the parent company, and not in the partnerships they control, Delek-Drilling, Avner Oil and Gas LP (TASE: AVNR.L), and Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), which could indicate aversion in principle to investment in limited partnerships.What lies behind the growth in the fund's investment in Israeli stocks? Journalist Anders Horntvedt of financial newspaper "Finansavisen" points in this context to the decision by the Norwegian Ministry of Finance in the summer of 2012 to include Israel in its emerging markets index. "Beyond that, it is no secret that the current government in Norway holds more positive views on Israel than the previous government, and that certainly can't harm," Horntvedt adds.Indeed, on October 16, 2013, a new government was sworn in in Oslo headed by a center-right party, replacing a coalition of left-wing parties that took an openly pro-Palestinian stance. Since then, the new Norwegian prime minister, Erna Solberg, has declared her opposition to boycotting Israel.Aharon (Orni) Izakson, who heads the Norwegian-Israeli Chamber of Commerce, can testify to the warming of relations between the two countries. Izakson points to growing interest on the part of Norwegian companies in Israel's oil and gas exploration industry, and mentions an Israel-Norway business conference planned for November in Israel. "I hope that it will also be possible to promote the signing of an R&D agreement between the countries," he says.Will we see more Norwegian money invested in Israeli know-how?"I hope and believe that we will, although in my view it would be better to develop relations on a mutual basis, of investment by both sides."According to Horntvedt, the Government Pension Fund of Norway will continue to increase its investment in Israel and to reduce its under-exposure to the Israeli market. "The fund is growing rapidly, and so there is every reason to assume that its investments in Israel will continue to grow," he says. "There is nothing at present to prevent the fund from investing in Israel, apart from matters relating to the settlements."Do you think the ban on Africa-Israel will be broadened to other companies?"Any company that has activity in East Jerusalem or in settlements on the West Bank runs the risk of being put on the blacklist. Like it or not, that is the fund's declared policy."Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2014© Copyright of Globes Publisher Itonut (1983) Ltd. 2013Globes - World's biggest fund discovers Tel Aviv 
TAU team takes part in discovering new planet
A team of astronomers at TAU and the Harvard-Smithsonian Center for Astrophysics have announced the first-ever discovery of an extrasolar planet via induced relativistic beaming of light from the host star.For the past two years, Professor Tsevi Mazeh and his PhD student, Simchon Faigler, from the School of Physics and Astronomy at TAU, have been searching for planets around other stars using a novel detection method. Their technique is based on identifying three very small effects that occur simultaneously as a planet orbits a star. The first effect is Einstein's relativistic "beaming" effect that causes a star to brighten and dim as it is tugged back and forth by an orbiting planet. Detection of planets via the beaming effect was predicted in 2003 by Prof. Avi Loeb, Harvard University and Sackler Professor by Special Appointment at Tel Aviv University, and Prof. Scott Gaudi (now at Ohio State University).The second effect that the Faigler-Mazeh method looks for is the stretching of   a star into a football shape by the gravitational tides raised by an orbiting planet. Such distorted star appears brighter when observed from the side, due to the larger visible surface area, and fainter when viewed end-on. The third small effect is due to starlight reflected by the planet itself.Because the brightness variations are extremely small (on the order of one part in ten-thousand), these effects can be detected only with accurate data obtained by space missions. The Tel Aviv team, which is supported by a European Research Council Advanced Grant, analyzed data for more than one hundred thousand stars obtained with the NASA space mission Kepler, looking for the beaming and the two other modulations. After discovering a planet candidate, they collaborate with Dr. David Latham from the CfA and his team, which includes Dr. Lars Buchhave, to observe the candidate from the ground for additional spectroscopic confirmation.On May 3rd 2012 Faigler and Mazeh noticed the three effects in one of the stars observed by Kepler. Ground-based observations to confirm the planet detection were performed by Latham and his team at the Whipple Observatory in Arizona, and by Lev Tal-Or, another PhD student from Tel Aviv, at the Haute-Provence Observatory in France. Both telescopes confirmed unequivocally the existence of the planet, now called Kepler-76b.Last week, Faigler, Tal-Or, Mazeh, Latham and Buchhave, announced the discovery in a paper to be published in the Astrophysical Journal.Kepler-76b is in the constellation Cygnus at a distance of about 2000 light years. The planet, with a mass of twice the mass of Jupiter, orbits its parent star very closely, with a period of one and a half days. The proximity of the star probably causes the planet to be tidally locked, so that the same side of the planet faces the star at all times. That part of the planet is heated by stellar radiation to a temperature of about 3500 degrees F.While examining carefully the stellar brightness, the team found strong evidence that the heat absorbed by the planetary atmosphere is carried around the planet by jet stream winds for about 10,000 miles, a substantial fraction of the planetary circumference. Such an effect has been observed before only in the infrared with NASA’s Spitzer Space Telescope. This is the first time a wind effect has been observed in the optical band. The study of such a jet is extremely important for understanding how the planetary atmosphere responds to intense stellar heating.All of the planets found so far by the NASA Kepler mission were discovered because they transit (eclipse) their parent stars. What is special about the TAU new technique is that it can find even non-transiting planets. "The irony is that Kepler-76b is in fact transiting the edge of its parent star,” says Faigler. “This is why originally it was misclassified as an eclipsing binary. Only through detection of the three small effects were we able to determine that it is actually a planet.""This is the first time that this aspect of Einstein's Theory of Relativity has been used to discover a planet", says Professor Mazeh, who is a participating scientist in the NASA Kepler mission. "We have been searching for this elusive effect for more than two years, and we finally found a planet! It is amazing that already a decade ago Loeb and Gaudi foresaw this happening. Shay Zucker of TAU, a former student of mine, called my attention to this prediction. At first, I did not believe it is possible, but I slowly got into it. Luckily, we got the support of the European Research Council to carry this project forward, and we collaborated with Dave Latham who believed in this project and kept following the false candidates that Simchon and I were giving him. In the end we found Kepler-76b! It is a dream come true.""The discovery proves the feasibility of the method," says Faigler. "We hope to find more planets like Kepler-76b using the same technique. This is possible only because of the exquisite data NASA is collecting with the Kepler spacecraft for more than 150,000 stars."
Israel doing big things with nano-materials
Israel doing big things with nano-materialsIsraeli scientists are making significant contributions to the advance of nano-technology, discovering and developing some of the most important breakthroughs.26 Oct 2010Applied Nanotech, one of the many companies presenting new products at the International Nanotechnology Conference, will highlight its nano-based copper ink technology. By David HaleviIsraeli high-tech has done some big things in the past - creating some of the most important advances in computer security and networking, social media, and telecommunications. Today, Israeli companies are set to do some little things - which may have an even bigger impact than some of those high-tech achievements.What Internet startups were to the past decade, nanotechnology will be to the next one, experts say - and Israel is already a world leader in development and deployment of applications based on this new science. Already, Israeli scientists have made significant contributions to the field, discovering and developing some of the most important breakthroughs.Among the applications Israeli start-ups have developed using nanotech are water purification membranes, agents for oral drug delivery, inkjet digital printing systems, diagnostic tools, holographic storage systems - and an 'e-beam on a chip,' which is similar to a laser beam, to be used for semiconductor manufacturing.Thanks to nanotech, for example, organ transplants may become a thing of the past, as special growth factors based on nanotechnology help grow healthy cells in an organ to replace unhealthy ones. Nanotechnology could also help to vastly reduce pollutants from internal combustion engines and could even develop elements that provide the taste of sugar in foods, without the calories and tooth decay that are part and parcel of the product today.The nanotechnology revolution is here, and moving forward rapidly, with a host of Israeli companies already producing applications based on this new science, which allows researchers to control matter on an atomic and molecular scale.Highlighting Israel's nano-accomplishmentsHighlighting Israel's accomplishments and research in the emerging nanotech field, the second annual International Nanotechnology Conference will be held in Tel Aviv in November. It will focus on innovations and business opportunities in the energy, water, environment, nano-material, nano-electronics, nano-photonics, nano-bio and nano-medicine fields.Investors seeking opportunities and companies from Israel and abroad will attend, showing off their nano-wares. Speakers will include the leading lights of the discipline from Israel and abroad. Among them will be the 2010 co-winner of the Nobel Prize for Physics, Professor Andre Geim, for his discovery and work with the nano-material graphene.The conference is being chaired by Nava Swersky-Sofer, who is one of the leaders of Israel's life-science industry and is the former CEO of the Hebrew University's tech transfer arm, Yissum; Mr. Dan Vilenski from the Israel National Nano-technology Initiative (INNI); and Prof. Arie Zaban from Bar-Ilan University."Israel is known worldwide as a center of knowledge and innovation in nano-technology and research in the nano field. Israel's achievements are at the forefront of a variety of the industrial fields, such as communications, electronics, computerization, security, medicine and life-sciences," says Swersky-Sofer.Israel is already on the international nanotech map, according to the INNI, one of the conference sponsors. The group lists about 80 large and small companies working in Israel's nanotech sector, along with more than 40 academic and governmental labs, employing some 300 researchers and scholars. The INNI states that Israel has the third-largest concentration of startup companies in the world, surpassed only by California's Silicon Valley and the Boston technology corridor.A survey conducted by INNI shows that the Technion employs 119 nano-researchers, followed by 55 at Tel Aviv University, 47 at Ben-Gurion University of the Negev, 43 at the Weizmann Institute of Science, 39 at the Hebrew University in Jerusalem and 30 at Bar-Ilan University. Since 2002, the number of nano-researchers in Israel has doubled. The two main scientific disciplines are chemistry (25.6%) and physics (19.5%). Most of the researchers (33%) focus on materials, followed by electronics and photonics (22%) and biotechnology (17%).Israel had a head-startIsrael is ahead of many other countries in this new field, because its researchers have been working in the nano sphere for years. Among the researchers is Prof. Reshef Tenne of the Weizmann Institute. Tenne, who will chair a session at the conference, is best known for leading the group that discovered and studied the inorganic fullerene-like nanospheres and nanotubes, generally termed IF nanoparticles, considered a new class of nanomaterials. Tenne says that nanotech development suits the Israeli development model: "This is a small country, and nano-material research, of course, is done on a small scale. But the research can yield big results, and we expect that today's research will pay off handsomely in the coming years.""Over the next five to 10 years we'll see nanotech applications take off," Prof. Reshef Tenne of the Weizmann Institute.Israeli researchers have done a great deal of work in helping to discover new nano-materials, and Israel is by far the most advanced country in its neighborhood in nano-research. "You can tell how advanced a country is by the number of high-resolution electron microscopes a country has. We certainly don't have the resources that rich European countries like Germany and Holland have, but we've got quite enough for a country of our size. We're in a good spot in the middle, and our researchers take full advantage of the resources available," Tenne says.Tenne himself conducts ongoing nanotech research at the Weizmann Institute in both basic materials and applications, a combination that he says suits him well."Over the next five to 10 years we'll see nanotech applications take off. Most of the first round of applications will probably be in the medical field, and we here in Israel have been making great strides in the area of nano-medical technology," Tenne relates.Manipulating small elements of matter as it does, the science of nanotechnology is also considered an art form. 'Nanoart' features nanolandscapes (molecular and atomic landscapes, which are natural structures of matter at molecular and atomic scales) and nanosculptures (structures created by manipulating matter at molecular and atomic scales using chemical and physical processes). These scientific images, captured and processed with various artistic techniques, will be on display at the November conference.

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