Innovation Ecosystem of Israel. Opportunities for Russian-Israeli
Total Page：16
File Type：pdf, Size：1020Kb
Innovation Ecosystem Sources of Israeli innovation of Israel. Opportunities for Russian-Israeli Cooperation. 1 Table of Contents Executive Summary 4 Introduction 6 Sources of Israeli innovation 7 Additional elements (mostly non-governmental) of Israeli Innovation ecosystem 10 Universities 12 R&D centres of leading technology companies 21 Defence Forces 29 Cooperation between Russian and Israeli companies 32 Case Study: Joint Product development and marketing to Western European and American markets 32 Case Study: Ray Q and Bee Pitron cooperating on Global defence and aviation markets 34 Case Study: Israeli high-tech company performing a multimillion project in Russia 36 Case Study: Israeli software developers outsourcing software production to Ukraine 39 Analysis of Israeli venture capital industry 45 Sources of funding 45 Opportunities for Russian investors 52 Attitudes and experience in outward investment of Israeli institutional investors and VC in particular 54 In conclusion 57 Experts 57 Appendix 1 – List of events in Israel sep13 – sep14 59 Appendix 2 – Intellectual property law firms in Israel 65 Appendix 3 – Small series producers, prototype and industrial design experts 69 Appendix 4 – Technology Transfer Companies of Israeli Academic Institutions 72 2 Charts and tables Chart 1. Hebrew university budget 15 Chart 2. A comparison of R&D commercialization 16 Chart 3. Number of R&D employees in Israel 23 Chart 4. The world of R&D 25 Chart 5. Trend in Israel’s defence exports sales 30 Chart 6. Average salaries of programmers in Israel 40 Chart 7. Average salaries of programmers in Russia 40 Chart 8. Average salaries of programmers in Ukraine 41 Chart 9. World bank “Doing business” survey 46 Chart 10. Total venture capital raised by VC funds 2002-2012 47 Chart 11. Israeli High-Tech companies: capital raised investors vs. proceeds from M&A and IPO 50 Chart 12. Israeli High-Tech capital raising Q1/2011-Q1/2013 51 Chart 13. Capital raised by Israeli High-Tech by stage 52 Table 1. A comparison of Yozma and Inbal 11 Table 2. A brief review of R&D centres in Israel (of Large multinational companies) 27 Table 3. Most active VC funds in Israel 48 Table 4. List of possible consultants 57 3 Executive Summary This paper is coming after series of quite diverse papers that covered various aspects of innovation ecosystem in Israel. Due to the supplementing nature and quite loosely connected content, it should be reviewed as collection of separated themes. Several elements of Israeli innovation ecosystem that were not covered in previous papers are covered here like Universities, the army, tech multinationals R&D centers. Each of them is playing its role and contributing to the outcome. In each of the elements, we choose to highlight the most relevant for RVC aspects. Alternative routes of R&D funding by the universities and their great effort to commercialize the research (through technology transfer companies) received our attention. Obviously, Israeli universities are participating in the ecosystem in many other ways but we decided to pick two and to focus on them. Same for the military. It’s a very little secret that the defence related R&D could be considered the founding father of local ecosystem and that defence R&D was always done in close cooperation with the military; however we focused on recruitment process and the synergies it creates between the army and the general society. R&D centers of multinational tech companies are often overlooked and not getting full credit for their role as management greenhouse. In Israeli ecosystem, there is common consensus on their crucial contribution to the development of today’s leaders of Israeli high tech industry. As a general trend, we can see that the market forces shape the Israeli innovation ecosystem. Obviously, it took fair amount of government support and intervention (with different degree of success as can be seen in the first part of the analysis) but now, it is a part of the global world, and thus affected by the trends that affect the global markets. When VC industry suffers elsewhere, VC industry in Israel feels the pain. This global pressure on VC industry, combined with conservative approach of local institutional investors negatively affects Israeli VC industry, when only the best funds are managing to raise capital. 4 One of the main objectives of RVC in Israel is to support further integration of Russian companies into global supply chains through increase of trade and business connections with Israeli high tech companies (that in any case are export oriented). Obviously, in order to start, it’s important to learn existing cooperation stories. Currently the cooperation exists on many levels and the case studies presented here show the success stories and the issues arising from cooperation attempts. The case studies were written after interviews with relevant people, mostly CEO’s or business owners. Some stories, interesting and educational were excluded in order to keep the size of the document manageable and reasonable. The main lesson from the stories is realization of great potential for cooperation where Israeli and Russian tech companies can supplement each other and have a mutually beneficial collaboration. This is the only way it will be sustainable. Additional important task is to establish a relationship with people who possess knowledge on specific subjects that might be of use for technology companies in the RF. Due to the structure of Israeli labor market, and particularly to the narrowing pyramids in the top management of the technology companies, quite significant number of good quality experts are engaged in consulting. They can create important knowledge base that can be a great support for young technology companies. With the Venture funds, the situation is quite different. In several background conversations, managers of good quality funds mentioned that they would be happy to share their knowledge but could be able to do it if RVC became an investor. The appendixes of this report are not trying to create a substitute to yellow pages but to list several relevant service providers that support Israeli technology ecosystem. All IP lawyers, engineering companies and development subcontractors allow sustaining industrial scale of innovation and based on preliminary conversations they will be happy to see additional clients coming to them. 5 Introduction When we are coming to review an ecosystem, one thing leads to another and without noticing we are finding ourselves “deep in the woods”. We are well aware of the phenomenon however, we are not completely sure we managed to avoid it entirely. The purpose of this paper is to touch on many aspects that the combination of them creates the famous “Israeli Innovation Ecosystem”. Many books and academic papers were written about it, some accompanied with heated debates, some widely accepted with long ovation. Nobody got a monopoly on what is the definition of Israeli ecosystem. Moreover, as the term itself, adopted from natural science, suggests, ecosystem is ever changing. Whoever spend long enough time observing it, noticed the constant change it undergoing. Not only the names of the leaders change, as it should be in any market environment, but also some industries, that were the dominant players in the Israeli ecosystem until very recently, are not around anymore. Like dinosaurs, they disappeared and vacated the space for new industries that emerged and are now attracting top talent. Taking into account the ever-changing nature of the ecosystem, we tried to cover some elements and tendencies that are not related to the specific industry but rather characterize the relationship between parts of ecosystem or highlight long term phenomena. Nobody should look on it as “definitive description” or “full review” or worst of all “prescription”. We are rather happy to offer the intelligent reader a view from within, highlighting the aspects we perceive as important, ask questions, think about applicability of some ideas and try to derive something useful from them. There is something useful to learn from every well-functioning system or company, however, in Russian–Israeli context, we believe that there is much more to do. The amount of personal, business and cultural connections between today’s Russia and Israel is mind-blowing. Free movement of people, ideas and goods between the countries, supplemented with approximately million Russian speakers in Israel creates great opportunity for both countries. More importantly, in both countries there is a growing understanding of big potential and willingness to develop it. We believe that although unique, there is something to learn and to adopt from Israeli experience, and will be happy to focus our research on specific subjects based on the feedback we are hoping to receive from the target audience of this report. 6 Sources of Israeli innovation Sources of Israeli innovation Very little argument can be about the origin of Israeli innovation. First there was a need – the need to survive in a very complex environment that mixed Middle Eastern (ME) conflict with global political game. Before 1948, when the current territory of Israel was part of the UK ME mandate (with Transjordan, Egypt, Iraq and most of the Arabian Peninsula) and the UK was imposing military rule, Jewish underground movement was craving for weapons. Small underground arm industry was created. In kibbutz tractor shads, at night, young self-made experts were making hand guns, grenades and explosives. The process escalated together with the situation in the country when it became clear that British mandate would come to an end. Interesting to mention that Stef Wertheimer, who later built and subsequently sold ISCAR (producer of high end cutting tools) to Warren Buffett for $6 bn dollars, started his mechanical engineering activity by repairing guns for Hagana (Underground Jewish Military Organization) in 1947.