FOREWORD Basic Research--A Vital Need for the Israeli Economy by Gideon Patt, Former Minister of Science and Development 1985-1988

The tremendous impact of science and technology on modern society has led to an increasing awareness of the need for greater government involvement in national science planning and policy making, as well as in the promotion and support of applied research in areas of national priority. This is particularly true for small countries, and even more so for Israel, whose limited natural and manpower resources demand that the country make the most of its intellectual assets. The government of Israel has consistently demonstrated a keen regard for the importance of scientiﬁc and technological activities for the advancement of its national goals. As a consequence, the government allocates a relatively high percentage of the national budget to the support of research and development (R&D), initiates and encour- ages R&D in areas of national concern, and devotes considerable effort to their integration into the broader economic and social context.

Examples of national priority R&D areas that are or have been major objects of government support include water desalination, solar energy utilization, natural resource utilization, agricultural and industrial development, environmental quality control, and public health. The government’s scientiﬁc infrastructure responsible for the implementation and coordination of policy has undergone a very signiﬁcant development, necessitated by the constantly expanding role of science and technology in every facet of the national economy and the general welfare.

The Scientiﬁc Council, entrusted with national responsibility for science, was established in 1949, only one year after the State itself came into existence. More recently, a manifest need to coordinate and represent the national science effort at the Cabinet level resulted in the establishment of the Ministry of Science and Development in 1982. Until a few years ago, high-tech industry was a dream and a hope; the actual scope of such activity was meager. The vast majority of Israeli scientists preferred academic seclusion and were occupied with basic research, which they regarded as more prestigious than applied science. But today this viewpoint has been replaced or at least balanced by an entirely different attitude, which sees technological development as the only rational way to deal with the challenges confronting the State. With- out constant innovation in defense, industry, agriculture, energy, medicine, and other ﬁelds it will be impossible to supply the ever-growing needs of the population. Moreover, it will be equally impossible to meet the keen competition of world markets, not only of highly developed countries, but also of developing countries that rely on mass production with readily available cheap labor. Israel, with its small population, is at a disad- vantage and so must develop and utilize its brainpower to the utmost.

Government policy makers, planners, and key ﬁgures in the national economy have been, and still are, directly involved in this process. During the last twenty years, and especially in the last decade, a scientiﬁc and technological infrastructure has been built with vision and diligence; this has had impressive results. New research institutes and institutions of higher learning have been established, and existing institutions have been enlarged.

Relevant ministries have established Research Administrations and Sci- entific Bureaus to advance technological development in the areas for which they are responsible. The national and interministerial activities are promoted by the National Council for Research and Development. The budgeting allocations for R&D clearly reflect the importance of science to the nation. In 1970, $15 million was invested in scientific R&D. By 1985 the sum was $200 million. At first, money was given mainly to basic research. Now this is no longer so. The allocation for applied research has become increasingly and proportionally larger. This is especially true in the defense sector, which has developed certain industries whose production equals that of their counterparts in highly developed countries.

Independent R&D in the defense sector continues to contribute to reducing dependence on external sources, and provides a substantial spin-off for civilian products. This phenomenon has also strengthened the country’s economy. The sophisticated products produced in this sector are also a source of considerable export income. In the future, we must increase exports of our best products, thus enhancing our international standing.

Utilization of our scientiﬁc manpower potential must not be neglected. If Israel wishes to prevent a brain drain and at the same time to attract scientists from developed countries, suitable conditions must be created to keep the Israeli scientists from leaving for greener pastures and also to encourage those living in the Diaspora to return home. It is my conviction that this matter is urgent, and that we must tackle it with the best of our resources.

The enormous technological advances in the developed countries oblige Israel to make every effort to cooperate with other countries in joint en- deavors in basic research. The Ministry of Science and Development is fully aware of the importance of strengthening scientiﬁc links with as many countries as possible. It will continue to increase the scope of cooperation, and will make efforts to mobilize funds both at home and abroad to ﬁnance research in Israel. The framework of international agreements will be expanded and additional binational research funds will be established.

By widening our existing R&D infrastructure, both in basic and in applied sciences, we will be able to intensify our links with the Third World by exporting know-how and technology. There are both diplomatic and economic advantages to be gained which have special signiﬁcancefor Israel. Thispolicy was implemented in the sixties with the African states and could be expanded today.

The Ministry of Science and Development will, in the future, devote its best efforts to increasing national awareness of the importance of R&D. The more we succeed in doing this, the more we will reap the beneﬁts. It is perhaps one of the best ways of strengthening the economy, guar- anteeing security, and providing a better future for the people of Israel.

INTRODUCTION

The Chinese are convinced that Israel’s agricultural progress and achievements during the ﬁrst quarter century of the country’s existence can serve as a model for its own development. Indian visitors to Israel express envy for its ability to cultivate land and feed its people. They contrast this advanced level of agricultural development with the plight of millions of Indians who are living under starvation conditions. Airport security experts come to Israel to learn how its people are coping with the problems of terrorism and how its national airline provides safety for its passengers. Alternative sources of energy, such as geothermal applications or the use of solar energy for laser research, are either highly developed or at an advanced stage of research--again, a source of deep interest on the part of the international scientiﬁc and industrial community. Diamond factories operated with automated equipment are maintaining a competitive edge for Israeli polishers who must compete with low-wage producers. Belgian diamond manufacturers have expressed concern about the advantage which the Israelis have gained as a result of this technological breakthrough. And then to top it off, Israel has become the world’s eighth member to join the exclusive club of nations who have successfully built and launched a satellite into orbit. What is it that drives Israelis to reach this level of achievement? The answer is rooted in part in the tradition of intellectual curiosity and analysis, which is an aspect of Jewish culture. It is a tradition that emphasizes education and that has produced, out of all numerical proportion, outstanding scientists and inventors. This age-old reverence for education has found expression in the development of a good Israeli public school system and excellent universities and institutes of science and technology. Even more likely, the technological accomplishments may be a result of the innate stubbornness, resilience, and creative drive of a polyglot people. Because of the multi-national mix of the population, many of the researchers have brought with them a variety of experiences and points of view acquired in different parts of the world. All are joined together by the determination to create a country which will become strong in spite of a lack of natural resources and of hostility on the part of most of its neighbors. This need for national security has led to the development of new defense technologies. Ambition for a better quality of life and higher standards of living has led to the creation of an export-driven economy. And most Israelis are aware that the ability to sell and succeed in the international marketplace is dependent on their products being more innovative and better priced than those of the country’s competitors.

In 1975, I undertook to provide broad English-language coverage on all topics related to Israel’s science-based industries. The decision to do so, however, was easier to make than to implement. While Israelis are known worldwide for their bravado, their reticence in discussing their business activities is nearly as great as the traditional silence of the Secret Service. To get at the facts, to get to know the individuals who are key to Israel’s technology, took many years of patience and, sometimes, frustration.

During the course of 1988, a year in which Israel celebrated 40 years of in- dependence, I initiated and co-sponsored the Inaugural Conference of Isra- el’s High-Technology Industry. The panelists represented a balanced cross- section of Israel’s top echelon in the ﬁeld of high technology. Feedback from attendees and panelists alike conﬁrmed that the leaders of Israel’s high- technology industries, aware of the problems of setting up strong industries when capital is not readily available, are becoming more open, more willing to offer foreign investors equity participation and opportunities to fund prof- itable local ventures. This marked a radical deviation from traditional thinking, which postulated that “If you have something good, keep it to yourself.”

For the foreseeable future, industrialists, venture capitalists, bankers, and businessmen in various parts of the world will be approached by Israelis interested in entering into joint business activities whose core will be science-based products and systems. Another important trend is a readiness to concentrate on exports and, in the process, to use the marketing expertise of individuals and organizations with proven records in marketing technologically based products.

Shortly after the publication of my first book on the subject, Science-Based Industries in Israel, former President Ephraim Katzir, a distinguished bio- chemist, urged me to continue to write about technologically innovative industries in Israel. It was a compelling imperative. From The Laboratory to The Marketplace surveys applied research and development, manufacturing and marketing, at institutes of higher learning and in industry. A cross-section of innovative technologies are reviewed and key emerging growth companies are highlighted. These companies reflect specific Israeli technological strengths. Many Israeli industries have successfully tapped the American capital market for a portion of their financing needs. Companies that have done so appear in an Appendix, which constitutes an update of my book Israeli Companies on Wall Street, published in 1984.

Privatization has already begun in Israel and will be a major theme of its economy in the coming years. As this happens, it is expected that the Israeli capital market will mature rapidly. Opportunities for investment will open up for Israelis and foreigners alike. I have also included a section intended as a primer on the capital market.

This book is intended to provide an insight into the current state of affairs of Israeli high-tech industries, to point out emerging trends, and to serve as a basis for evaluating investment in Israel.

The Universities in Crisis Education has always served as the cornerstone of Jewish life. It is small wonder that it has played such an important role since the inception of the State of Israel. The university infrastructure provides the high school graduate or soldier or individual seeking retraining with an array of educational and career opportunities. The vibrant atmosphere on the campuses of the seven institutions of higher learning, spread out from Haifa to Jeru- salem to Beersheba, is indicative of the importance of this aspect of life. There is a feeling of urgency resulting from the fact that many of the students are recently demobbed soldiers who have already served their country as part of the compulsory military service (young women serve for two years, young men for three). Viewing life as a competitive race, these students feel that they are two or three years behind their counterparts in Europe or the United States. They are in a hurry to acquire their education and to enter the professional mainstream.

Science and technology have always been viewed as preferred professional target areas. This is in part because of the prominence of scientists and technologists in the life of the country. Two of Israel’s past presidents, Weizmann and Katzir, have achieved international standing in the scientiﬁc community. Heads of science-based industries serve as role models, and many a young Israeli engineering student or researcher easily can identify with and seek to emulate the achievements of his predecessors--achievements that have been felt at key levels of the country’s economic life and defense establishment.

Increasingly, basic science is viewed as important not only for its role in the the search for answers to the mysteries of life but also as a foundation for the establishment of science-based industries. To apply the of dollars. In addition, to buttress ed the educational opportunties that were available to the generation that preceded him. It is also possible that there will be a brain drain among instructors and researchers. Israeli universities are not known for their generous salaries. Graduate instructors or professors can earn three to four times more in the United States.

Yet, on balance, since the tradition of educational excellence is well entrenched, there is a still a prospect of a continuous stream of graduates university/industry interaction, the universities have invested in building science-based industrial parks either on or adjacent to their campuses. Yet all is not well in Israel’s institutes of higher education. It would not be an exaggeration to suggest that there is a sense of crisis. Excellence in education is based on equipment, such as massive mainframe computers and laboratory facilities running into millions, and on the quality of the faculty. Both government and international support have played a key role in the growth and development of the institutes of higher learning. However, when the government began to retrench on what was once 50 percent support of the universities’ budgets, and traditional overseas support continued to be available for infrastructure but not for operation- al purposes, a sense of crisis developed. It had been simmering under the surface since the beginning of the 1980s, and by the time the period of high inﬂation had passed, the government began to cut back. At the start of 1988, the Hebrew University was forced to announce that it had debts to the banks of $70 million. The rector of Tel Aviv University spoke of an impending breakdown of the university’s ability to continue to provide a high level of education. Government planners and decision makers initially did not view the situation as problematic, but are slowly becoming more sympathetic to the plight of the institutes of higher learning.

The implications for the future may be higher cost for education and fewer egalitarian opportunities. Going into the 21st. century, it could well be that some potential world-class researcher or potential cap- tain of industry will be denied the educational opportunties that were available to the generation that preceded him. It is also possible that there will be a brain drain among instructors and researchers. Israeli universities are not known for their generous salaries. Graduate instructors or professors can earn three to four times more in the United States. Yet, on balance, since the tradition of educational excellence is well entrenched, there is a still a prospect of a continuous stream of graduates who will ﬁll their places in Israel’s science-based industries.

Bar-Ilan University: Combining Judaica with Science

In its 33-year existence, Bar-Ilan University has managed to maintain research centers in Jewish history and culture as well as in the natural and exact sciences. Lo- cated on a modern, l35-acre campus in Ramat Gan, the university also has branches in Ashkelon, Safed, and the Jordan Valley. Bar-Ilan has an academic staff of some l,200, and a student enrollment of about 12,500. The main lines of scientific research include math- ematics, computer science, organic and physical chemistry, physics, and bio-and medical physics. Bar-Ilan’s wholly- owned research and development authority, founded in the l970s, has encouraged and coordinated an impressive range of faculty research in the fields of biophysics and biotechnology, with applications to medical instrumentation, agricultural technology, and pharmaceuticals. The authority provides financial and scientific follow-up on grants and contracts and seeks new contacts and research funding both in Israel and abroad. Five faculty subcommittees administer internal research allocations.

Under the research and development authority’s aegis is the Committee for Science-Based Industry, which deals specifically with industrial and applied research. Among the joint ventures established with industry are: Scientific Diagnostics Inc. (SDI-USA), which is currently in the advanced stages of developing a non-surgical test for early cancer detection. Car- ried out as part of a routine blood test, it gives an accurate diagnosis of malignancy and provides vital data on the location of a primary tumor. Scientific Testing Inc. (STI-USA), which is developing a new substance for stimulating the human immune system, to be used in treating autoimmune diseases and cancer.

Among the authority’s successfully commercialized innovations is a new non-toxic, water-soluble natural antioxidant (NAO), with high stability and a long shelf life. This discovery, made by Profs. Shlomo Grossman and Mi- chael Albeck, could prevent cell deterioration by destroying free oxygen at- oms, which may have a destructive, and hence aging, effect on many of the cell’s components. Prior to this development, lipid-soluble Vitamin E was the most common antioxidant used to combat cell and organ aging. The latter is considered by the Bar-Ilan scientists as less than a good solution. NAO has wide applications: in medicine, as an active biological compound; in health foods, as a natural antioxidant; in the food industry, as a preserva- tive for a wide variety of products; and in cosmetics, as an anti-aging factor. The Revlon Corporation, having acquired exclusive rights for NAO use in cosmetics, has already begun marketing product lines using this substance.

Another project, which has already advanced to the commercialization stage, involves the AS101 Immune System Enhancement substance. This has been applied in the treatment of AIDS and cancer therapy, showing a remarkable ability to restimulate the body’s immune competence. One of the largest pharmaceutical companies worldwide, Wyeth-Ayerst, has signed a multimillion-dollar contract to develop this project, which has already received initial FDA approval for new-drug testing. Encourag- ing results of preliminary clinical testing have been registered in various medical centers in the U.S., Mexico, France, and Israel. This discovery resulted from a collaboration between Profs. Michael Albeck of the Chem- istry Department and Benjamin Sredni of the Life Sciences Department.

A novel combination of undisclosed substances has been shown to enhance learning and memory in preliminary testing conducted in Is- rael. These compounds also have analgesic and sleep-inducing effects. Developed by Prof. Shlomo Yehuda of the Psychology Depart- ment’s Psychopharmacology Laboratory, this new drug could be used to treat old-age dementia and Alzheimer’s disease, and improve prospects for children with learning disabilities. A well-known U.S. pharmaceutical ﬁrm has undertaken further testing and development. Prof. Rivka Beitner of the Life Sciences Department has developed and patented a new chemical substance that can be used to alleviate the effects of burns. It repairs and reverses the bio- chemical damage to tissue affected by burns or by frostbite.

For at least 50% of childless couples, male infertility is the cause of in- ability to conceive. Prof. Benjamin Bartov and his team in the Life Sci- ences Department have come up with a new, computerized technique for sperm analysis to determine accurately male infertility and its medical etiology. The Male Fertility Clinic at Bar-Ilan, in cooperation with Israeli medical centers, has so far diagnosed l,500 cases. This technique, to be marketed internationally, can be applied to animal husbandry as well.

A synthesized, patented pheromone effective against pests in greenhouses, citrus groves, and other commercial plant-growing facilities, has been developed by Prof. Ze’ev Goldschmidt of the Chemistry Department. The pheromone, in nature secreted by the citrus mealybug, is one of a series of such substances being developed in a biological pest-control program.

Ben-Gurion University: Bringing Life to the Desert

The existence of the Ben-Gurion University of the Ne- gev was inspired by its namesake, the late David Ben- Gurion, Israel’s ﬁrst prime minister, who dreamed of a university that would play a leading role in developing Israel’s Negev desert by establishing new industries and thriving communities. Founded in l969, the university has 6,000 students and awards degrees leading up to doctorates in engineering and the natural sciences, as well as B.A. and M.A. degrees in the humanities and social sciences. On the staff at BGU are internationally known scientists and scholars .

BGU’s desert research projects have resulted in important breakthroughs and new directions for the development of the Negev. Playing a key role in establishing and assisting science-based industry in the Negev are the Applied Research Institutes at the Research and Development Authority. Achievements are being recorded in the use of brackish waters for cultivating crops and breeding fish,.and in the field of solar energy, primarily in the use of saline pools for creating electric energy. For many years, Ben-Gurion University scientists have been experi- menting with the introduction from abroad of various breeds of sheep, hardy enough to withstand desert conditions and yielding better quality meat and more milk than local stock. At Kibbutz Sde Boker, the last home of David Ben-Gurion, a flock of Dorper sheep is being cross-bred with Awassi sheep under the guidance of Ben-Gurion University researchers. The Dorper, a cross between the highly fertile Dorset Horn and the palatable, hardy Persian Blackhead, is far superior to the local Awassi sheep raised by the Negev Bedouin. The Awassi produces less than one lamb per year, while the Dorper averages three every two years. The Jacob Blaustein Institute for Desert Research at the Sde Bok- er Campus is also active in the nation’s efforts to make Israel’s Negev desert blossom, while harnessing scientific knowledge in the worldwide struggle against the spreading of the deserts. These BGU-initiated developments are reaching outside Israel’s borders to those parts of the world where geographic conditions are similar to Israel’s desert area.

Advanced Products Ltd. is a non-proﬁt organization established and owned by Ben-Gurion University. Its major task is the commercialization of the patents and technology developed by university faculty and research institutions. BGU’s innovations in such areas as agriculture, chemistry, medicine, and mechanical and electrical engineering have led to the licensing of approximately 50 products for industrial and agricultural use, currently in various stages of commercialization. The company, headed by former American Joel Schechter, is also responsible for negotiating research and development contracts of potential commercial value for industry or agriculture. Among the major areas where licenses were granted:

Agricultural products and equipment, including new vegetable and fruit varieties, irrigation equipment and machinery; Food products, such as powdered instant desserts, yo- gurts, ice creams, various health foods, and additives; Medical and health care, including diagnostic kits of various types as well as medical instrumentation; Plastic products and appliances, including consumer products; Electrical products, encompassing several novel devices.

Dr. Lior Rosenberg is a plastic surgeon specializing in reconstructive surgery and burn treatment. His innovations include 1-mm, self-lock- ing pins for bone fractures, which lock the bone fragments three-dimen- sionally, and “Rosenberg knives,” which have been on the world market for over a year, used for skin grafts and cutting away damaged tissue.

A recent Rosenberg innovation is the pressure-sore prevention system for paraplegics, designed to free the patient from dependence on cumbersome external devices and on nursing personnel.

Developed in conjunction with scientists from the Department of Electri- cal and Computer Engineering at BGU, the system reproduces the natural biofeedback mechanisms of the body. The patient rests on air- or liquid-ﬁlled modules, each of which is connected to a small “balloon” that compresses an area of healthy skin with normal sensation. When the balloon presses excessively on a normal site, the patient knows that he must move his body to prevent pressure sores in the numb areas. This system has already been tested on patients at Beershe- ba’s Soroka Hospital and at medical centers in the U.S. and England.

Another promising venture from BGU has formed the basis of a new company. After having spent the better part of a decade studying chla- mydia trachomatis, a sexually transmitted infection prevalent among sexually-active women, Prof. I. Sarov, the head of the virology unit of the faculty of health sciences at Ben-Gurion University, and his group of scientists have developed a diagnostic system for identifying the bacteria.

This technological breakthrough has spawned a small but rapidly growing company called Savyon Diagnostics. Sales should exceed $1 million in the second year of the company’s existence. The Hebrew University of Jerusalem: A 2,000 Year Old Dream

In 1988, the Hebrew University of Jerusalem celebrated the 70th anniversary of the laying of its cornerstone on Mount Scopus. In 1925, when the university was ofﬁcially opened, prominent among its departments were the institutes of chemistry and microbiology. After 1948, when access to Mount Scopus was cut off during the War of Inde- pendence, the university held its classes at various sites in Jerusalem. Six years later, the Givat Ram campus was established, affording the university the opportunity of adding more faculties and departments. After l967, most of the faculties returned to the Mount Scopus campus. The University, which has been heavily backed by the Israeli government and supporters outside the country, prides itself on having been involved in the early phas- es of Israel’s national development. Student enrollment is about 17,000.

In 1942, the Hebrew University teamed up with the Jewish Agency’s Ag- ricultural Research Station at Rehovot to establish the ﬁrst School of Ag- riculture in Palestine. In 1969 the faculty was renamed the Levi Eshkol School of Agriculture. With a student enrollment of l,600, the Faculty of Agriculture awards degrees leading up to a Ph.D. In addition to special study programs for students from kibbutzim and moshavim and refresher courses offered through the Ministry of Agriculture extension services, it also supplies technical assistance abroad. The faculty’s twelve research departments, eight teaching departments, and eight research centers in- teract with each other. Currently, there are more than 350 projects being carried out, covering a broad spectrum of applied and basic research.

Yigal Hennes is one of the faculty’s leading researchers. “The sophistica- tion of what we teach now is completely different from what we previously taught,” says Prof. Hennes. “Agriculture and biology have developed and changed in all the associated fields, especially due to the revolution in genetic engineering. It has become possible to transfer genes from one organ- ism to another. This opened a new era in biology, and in agriculture it meant new possibilities of breeding new varieties, inserting new properties into old plants, and opening a new field of biotechnology.” And the learning and searching doesn’t end there. Hennes disagrees with the notion of “putting all our eggs in one basket-- agriculture has its own limitations. One limita- tion is water. We do not have enough water, and I am sure that this problem will become more difficult to solve, say ten years from now. Unless we start to desalinate water on a large scale, we are going to be in trouble. Another possibility is to use the sea for developing aquaculture on a large scale.”

At the Seagram Center for Soil and Water Sciences, Researcher Prof. Yona Chen and his group have developed a novel method of compost- ing agricultural waste as a replacement for peat. Peat moss is the most commonly used substrate material for cultivation of plants in containers. The cost of peat is high due to depletion of natural sources. Furthermore, notwithstanding its high price, peat moss does not fulfill all criteria for the optimal substrate to provide good germination, rooting, and growth. Prof. Chen’s substitute for peat moss has proven economically effective in Israel and could serve as a model for other parts of the world. Known as “fortified compost,” the product has the chemical and physical properties of a growth medium, and is effective in suppressing soil-borne plant pathogens. The researchers produced fortified compost from two types of agricultural waste: cattle manure and grape marc, the waste matter remaining after grapes are pressed. Fortified compost is less expensive than peat moss, but the economic viability of the process depends on the ac- cessability of agricultural waste. For example, it is ideal for dairy farms, where substantial quantities of manure are produced. This has been demonstrated in Israel, where the raw material is collected at the milk- ing station. In addition to the waste products mentioned above, others are being tested as basic materials for the production of fortified compost. The process is at the scaling-up of production stage. “The whole trick depends on the availability of this agricultural waste,” declares Chen. “Economic evaluations have indicated that on remote farms such fortified compost is a byproduct, resulting in extremely cheap production.”

In the United States, Europe and Israel, the only mushroom species culti- vated was the champignon--the button mushroom. Its relatively high cost is a result of the special treatment required, which includes a compost base and highly regulated conditions of temperature and humidity. Outdoor conditions in Israel were never suitable for cultivating champignons, which are grown in climate-controlled hothouses. This method considerably adds to the expense of the ﬁnal product. Basic research by three scientists at the Hebrew University’s Faculty of Agriculture led to an innovative method of growing mushrooms. It all started when the scientists, Prof. Hennes, Prof. Ilan Chet, and doctoral student Mark Platt, discovered a fungus that breaks down the lignin in cotton. This reaction has the effect of changing the woody bush left after cotton picking into nutritious animal fodder. As a result, what was once a bothersome waste product has now become a useful material.

The fungus that does the job is the large, edible, oyster mushroom. This discovery, originally developed in the laboratory and subsequently in hothouses, resulted in the establishment of a new agricultural industry. The oyster mushroom, trade named Yarden, is sold to discriminat- ing Israelis and is finding export markets as well. Oyster mushrooms are so named because when steamed they smell like oysters. Gour- mets have declared their taste to be equivalent to that of the champignon. The demand for the Yarden mushroom was sufficiently strong to have led several kibbutzim to join in establishing a sophisticated plant in Kiryat Shmona, in northern Israel, at an investment of $3.5 million. A group of five kibbutzim has licensed the process and it is available for licensing outside Israel. The Yarden has been nicknamed the “double-barreled mushroom” because it converts cotton straw into animal feed as it grows into a palatable gourmet vegetable.

In l987, the Yissum Research and Development Company, a wholly-owned subsidiary of the Hebrew University, registered a turnover of $5 million--the highest recorded by an R&D development authority at any of Israel’s major institutes of higher learning. Turnover at Yissum for each of the preced- ing five years averaged $2.6 million. Yissum takes total responsibility for commercialization of the university’s applied research. Products of the research, in addition to those detailed above, include improved varieties of oranges, tomatoes, grapes, flowers, and cotton; increased yields of veg- etables and green crops; solutions to problems of pest damage and soil contamination; an advanced and most efficient use of water; and innovative irrigation techniques, which have resulted in propelling Israel’s flower industry from zero exports 20 years ago to more than $150 million in 1988. Yissum’s income is drawn primarily from research and licensing agreements with local and overseas companies. Of the 124 projects now licensed, 15% have been licensed outside of Israel, including nine in the U.S., three in Europe, six in Australia, and one in Canada. Among the most recent joint ventures are: Unikoor. Set up in 1984 to develop new fermentation techniques, Unikoor’s ownership is split between Yissum, with a 25% stake, and Koor Chemicals Ltd., with a 75% share.

Lev-Universities Ltd. This company was founded in l985 to develop speciﬁc R&D projects in medical physics. Yissum owns 25.1% of the shares; H.F. Scientiﬁc Ltd., a venture-capital company owned by the Lev Group, Israel, holds a 74.9% stake.

F.R.M. Agricultural Sciences Partnership, A.S.P. This recently established company develops new products in the area of agricultural biotechnology, including bio-insecticides. First Mississippi Corporation’s ﬁnancial facilities and up-to-date equipment were provided by the American group as part of its 51% investment in the ﬁrm; Yissum owns the remaining 49% of the shares. Yissum is Israel’s second largest patenter; its portfolio includes 187 projects available for licensing, with 42 in biotechnology, 41 in pharmaceuticals, 37 in the agricultural sciences, 29 in the physical sciences, 20 in chemistry, and18 in the medical sciences. Among projects being undertaken by researchers are cultivation of tomatoes that have a four-week shelf life, allowing them to be exported to distant markets; cultivation of onions with an eight-month shelf life; the previously mentioned growing of mushrooms on cotton straw, and solar heating of soil to control plant-borne diseases.

The Technion--Israel Institute of Technology: Engineers, Engineers, and More Engineers

Haifa’s Technion has had to its credit an impressive number of achievements during its 74-year history. It has the distinction of being Israel’s ﬁrst university--as well as the ﬁrst institute of higher education in the Middle East. Its faculties and departments now number 20; it carries out two- thirds of all university engineering research in Israel; and 75% of Israel’s scientists and engineers have been trained at the Technion. The Technion’s beginnings were marked by great controversy over the language of instruction at the university. Zionists demanded that classes be conducted in Hebrew, while others insisted that science could only be taught in German. Ultimately, Hebrew won out. Nowadays, so much is going on at the Technion that few would have the time to argue about such matters. Set up to be an Israeli MIT, the Technion is involved in myriad projects, from engineering to aeronautics, from medicine to architecture. Its l987-88 budget included more than $80 million for developing a biotechnology center.

The Aeronautical Research Center at the Department of Aeronautical En- gineering--the only such department in the country--has produced exciting innovations geared to the defense industry. A small, jet-propelled drone using vectored ﬂight, developed by the Turbo and Jet Engine Laboratory, could make wings and other currently essential parts of aircraft obsolete, as well as outmaneuver any enemy ﬂying a conventional plane. Its engines, located near the tail, have special air inlets and rectangular exhaust noz- zles that can be rotated up, down, and sideways--directing nozzle upward, forcing tail downward, and lifting the plane’s nose into the takeoff position.

In cooperation with Rafael, Israel’s Armaments Development Author- ity, the Aeronautical Research Center’s Wind Tunnel Laboratory has devised a spinning parachute with improved aerodynamic performance, increasing efﬁciency and allowing airdrops of larger payloads with smaller chutes. The spinning chute stabilizes cargo, an important consideration in airdropping sensitive munitions--and paratroopers.

According to Technion Professor Daniel Weihs of the Aeronautical Engi- neering Department, the institute has moved with the times. Following the Lavi’s demise, the Technion’s jet-engine lab is setting its sights on space: its space institute is already more than a year old. Although it is mainly working with rockets, Weihs believes that this is where Israeli industry should get involved, if only to build satellite components at the outset--a potential global market of tens of billions of dollars. He made this statement six months before Israel launched its first satellite, Of- fek-1, put into orbit by a rocket launcher developed by Rafael. Accord- ing to Weihs, the next Israeli satellite will carry a major scientific experi- ment, the nature of which is currently being discussed in Israel. It will be in the field of astronomy, earth sensing, biological experimentation, or lasers. Other areas of commerical promise that are currently being explored by the Technion’s space center are the manufacture of spacecraft parts, manufacturing in space, and the growing of crystals.

The Julius Silver Bio-Medical Engineering Institute has made inroads in what institute head professor Uri Dinnar terms “supporting devices” for body organs. One example of this institute’s work is a cardiopulmonary resuscitation treatment that pumps two and a half times more blood to the brain than conventional heart massage, by applying sequential compression of abdomen and chest. Another is artiﬁcial, charcoal-based “blood” to be used in emergencies, when real blood transfusions are not readily available or when there is no time for blood-group matching. Com- patible with all blood groups, this blood’s oxygen-carrying and CO2-ex- pelling capabilities enable it to stabilize a patient for at least 72 hours.

The Technion also conducts research with off-campus R&D institutions, yielding promising results. The development of specially treat- ed, CO2-sensitive “litmus paper” to help anesthetists discern breathing problems in their patients is the result of the combined efforts of Dr. Theodore Greenwald of the institute’s Faculty of Chemistry and Dr. Yehoshua Katz of Haifa’s Rambam Hospital. The red paper turns white upon exposure to CO2--a sign that the patient is breathing normally. No change in the paper’s color indicates a breathing problem.

This invention may prove especially useful to anesthetists, who sometimes inadvertently insert the gas-mask pipe into the esopha- gus instead of into the lung, causing the patient to stop breathing. To avoid this danger, the two inventors are considering manufacturing transparent pipes into which the litmus paper is inserted; then the anesthetist can discern, within seconds, if something is amiss.

Collaboration extends beyond Israel’s borders as well. Professor Joseph Hagin of the Technion’s Agricultural Engineering Department, in cooperation with Dr. S. R. Olson of the University of Colorado’s Agronomy Department, has developed some sophisticated methods of increasing crop yields by l0- l5% through the use of nitrogen-based fertilizers. Efficient application of this fertilizer can also decrease the incidence of underground water pollution. In an international effort headed by Professor Hagin, a simulation program was developed in tandem with controlled fieldtesting in Israel, Germany, and Mexico. The computer program enabled consultants to evaluate expected quantity, condition, and types of nitrogen found in the soil, based on factors of climate, temperature, and irrigation. This method, currently applied to Israeli cotton fields, saves on fertilizer and other crop-related expenses.

The Technion Research and Development Foundation, a limited-liability company established in 1952, serves as the institute’s commercial arm, handling outside requests for sponsored research at the Technion’s almost 40 institutes and centers. The foundation also handles the ﬁnancial and legal aspects of research projects, and evaluates their progress. Of the Technion’s $100-million budget, the majority of which emanates from companies, $20 million goes to the research and development foundation.

The foundation has been responsible for establishing new companies and forming partnerships. The following are a few examples of such interaction:

Lidex Corp, the ﬁrst industrial enterprise in which the Technion became a partner, produces Technion-developed separation systems for medical diagnosis, lab analysis, and industrial purposes. Its separation methods have twice won it the prestigious American award, US IR100, granted to the hundred most innovative technological projects in any given year. Diagnostic Technologies devotes itself to devising diagnostic tests in the ﬁeld of gynecology. Its major innovation, developed by Prof. Michael Silber- mann, chairman of the morphological sciences department in the Technion’s Faculty of Medicine, predicts whether pregnancy will cause such future complications as high blood pressure, bleeding, premature contractions, diabetes, or toxemia. Such information can help doctors in prescribing pre- ventive treatment. Costing only $l0-$l2 per patient, the developers antici- pate that this blood test will become standard procedure all over the world.

Biolume develops luminescent viruses as markers to identify disease- causing bacteria. Applying genetic engineering, Professor Shimon Ulit- zur of the Technion’s Food Engineering and Biotechnology Department and Dr. Jonathan Kuhn of the Department of Biology have succeeded in speeding up and improving diagnosis of bacterial diseases. The new technique can deliver diagnostic information within 20-30 minutes--while the patient is still in the doctor’s office. The usual waiting period for such a procedure is three days. After having isolated the light-producing genes found in such organisms as the firefly, Biolume cloned them and, using genetic engineering techniques, introduced them into normally dark bacteria-hostile viruses (bacteriophages), thereby facilitating identification.

Environmental Systems Ltd., a relatively new company, solves some of the problems of waste disposal and energy provision. Solid, organic waste produced on farms, animal manure and vegetable residues, is broken down in a methane reactor via anaerobic digestion, yielding gas composed of 60% carbon dioxide and methane, for energy. A byproduct of the process is a peat-moss substitute (a result obtained also in previously mentioned research at the Hebrew University). To expand on the natural theme, algae, which grow very well in the reactor, are used to feed animals, which create the manure, and the cycle repeats itself.

Tel Aviv University: A Cosmopolitan Place for Learning

Tel Aviv University, founded in l956, is the largest Israeli university, with a student body exceeding 20,000, nine faculties, and 2,400 staff members. Tel Aviv University scientists are active in applying their research to the “real world.” Dr. Sandu Pitaru of the School of Dental Medicine in the Universi- ty’s Sackler Faculty of Medicine and Dr. Matityahu Noff of Kaplan Hospital of Rehovot have developed a promising method of improving the acceptability of artificial implants. Their invention is a long-lasting, self-renewing, non-rigid, biological anchorage to overcome the limitations of dental and orthopedic implants. Those currently in use are made of inert biocompatible materials, affixed by mechanical means. That type of implant, however, remains functional for only a limited period of time, as it is not recognized by the host as an integral part of the body. The new implant is affixed to surrounding tissue by a biological, non-rigid anchorage system; its biological components renew themselves continuously. The implant’s surface is a biological substrate that induces formation of a mediating tissue, which anchors the implant. The tissue also acts as a buffer system that absorbs the functional forces exerted on the implant, which are the main causes of bone destruction and implant fracture. High-salinity fish ponds in the Arava valley are producing as much as ten times the yield obtained in a normal, commercial pond, thanks to the scientific work of Professor Lev Fishelson of TAU. Using a hybrid of the Nile and Tiberias strains of tilapia (St. Peter’s Fish), and a new method for keeping brackish waters clean, Moshav Ein Yahav obtains a yield of 12 tons of fish for each quarter-acre of pond area. Other Israe- li fish breeders have adopted this technique in the mostly sandy, grav- elly Arava, maintaining ponds filled with highly saline water originating from underground water sources. This mineral- and algae-rich water is cost-effective too, serving as a nutritious food source for certain fish.

Ramot, the Tel Aviv University Authority for Applied Research and Indus- trial Development Ltd., was set up to act as a coordinator between industry and the various research groups. Through Ramot, companies both here and abroad may gain access to scientific and technological innovations in such fields as agriculture, biotechnology, medicine, pharmacology, chemistry, energy, electronics, mechanics, and computer science. Last year it was able to attract about $8 million in external grants for basic research. According to Prof. Levin, a significant amount of research is done directly for industrial firms; about $2 million worth of applied research was carried out in 1987 for a variety of firms by the university’s laboratories.

Ramot is currently seeking investors for some promising new research by Professor Zvi Nevo and Dr. Shmuel Itay, who have used cartilage cells in culture as transplants to correct mechanically created defects in articular cartilage. In less than 60 days defects were repaired. Although another two to three years of experimentation are required before human clinical studies can begin, this innovation may obviate the need for replacing joints with prosthetic devices.

Prof. Emanuel Peled of the Faculty of Exact Sciences has developed a long- life, high-energy, and high-power density calcium rechargeable battery as an alternative to alkaline and lithium sulphate batteries. Lithium batteries have the highest energy density among available primary batteries. They perform well within a wide range of temperatures and have a long shelf life. Nevertheless, because they may explode during charging and other extreme conditions, they are unsuitable for use in manned aircraft and in other applications where explosions could cause irreparable damage. Peled’s modi- ﬁed calcium thionyl chloride (CTC) safe high-power density battery over- comes the major drawback of the CTC battery--corrosion, which results in a shorter shelf life. The C-size laboratory prototype has an estimated useful life of at least three years. Operating normally at temperatures between -40 C and +80 C, the battery does not present an explosion hazard during charging reversals or other conditions and is also resistant to short circuits and mechanical compression. The battery, which has already received patent protection in Israel, the U.S., Great Britain, France, and West Germany, can be used in high-power, high-energy civilian and military applications.

An accurate state-of-charge meter for lithium-sulfur dioxide batteries has also emerged from the laboratories of Prof. Peled and his collaborator, engineer Israel Reshef, in cooperation with the Israel Defense Forces Signal Corps. Chemtronics Ltd. has purchased the patent and is now planning its marketing strategy. Lithium-sulfur dioxide batteries produce electricity for much longer than conventional batteries. They are used whenever there is a need for high-power density, high-energy density, and a long shelf life: in military and civilian communications equipment, in telephone repeaters, for surveying, in spacecraft, and in medical emergency equipment. But they are very costly, so throwing them away before their life span is over is an enormous waste of money. On the other hand, continuing to use a lithium battery when there is a no charge left in it can sometimes be dangerous: it could explode, catch ﬁre, or release dangerous chemicals. So ideally, one wants to use a battery up to the last minute, but not beyond.

The new state-of-charge meter should mean substantial sav- ings, especially for major users, including large commercial ﬁrms and the military. It is accurate, conducts the check very quickly and is suited to all lithium-sulfur dioxide batteries on the market. Among the other research projects overseen by RAMOT are protection of crops from frost damage, a new predictive test for tumor-cell response to chemotherapy, and the creation of a symbolic parallel software language.

University of Haifa--Trying to Catch Up

Little more than a quarter-century old, this institution was established to cater to the diversiﬁed population needs of the northern part of the country. By the mid-1980’s, its student body exceeded 6,000. It is strong in the liberal arts and in the social sciences. The Institute of Evolution carries out research in evolutionary biology, applying the results to practical improvements in various ecological systems.

Vulcani Center: Sophisticated Agricultural Research

The Jewish people’s return to their land, a process that began before the turn of the century, inspired a back-to-agriculture movement. It is a commonly held view that as a result of the challenge of providing food for the quickly expanding population of the 1950s, agriculture became more scientiﬁc and technically oriented. The results are intensive agriculture, running the gamut from irrigation to biogenetic cloning and breeding of species of plants that have built-in immunity to agricultural pests. Israel continues to produce ﬁrst- class farmers whose activities are rooted in brains rather than brawn, and who share their technologial know-how with farmers throughout the world.

The Vulcani Center, a Bet Dagan-based facility, is the headquarters for Ministry of Agriculture research. Among its duties are planning and implementing agricultural research, solving agricultural production problems, applying advanced technologies, and centralizing agricultural information and statistics. It offers testing services for seeds and fodder and courses for agronomists and others involved in agriculture. Fields of research run the gamut of agricultural needs. The following are but a few examples of the areas under the Vulcani Center’s purview: The Institute ofAgricultural Engineering has developed mechanical harvesting equipment for citrus fruit and tomatoes; a mobile clod-separation unit; energy innovations, including solar and geothermal applications to agriculture; new pesticides and aerosol chambers for disinfection of produce; environmental-control methods for greenhouses; and heating systems for ﬁsh ponds. In addition, feasibility studies are being conducted in such areas as systems equipment and quality-control systems for horticultural export products.

Research at the Institute of Animal Science focuses on soybean milk replacements, beef production, embryo manipulation, fertility increase by cross breeding, reproductive management of dairy and beef cattle and sheep, artiﬁcial insemination of sheep, and ﬁsh nutrition. The In- stitute of Field and Garden Crops centers its research on hybridization, weed control, irrigation, and growth regulators; while the Institute of Soils and Water concerns itself with such issues as soil salinity, recla- mation of saline and alkaline soils, and water conservation. The Gene Bank for Agricultural Crops studies plant introduction, seed storage, genetic resources evaluation, and information gathering and exchange.

The Weizmann Institute of Science: Excellence in Basic Research

More than a decade and a half before the founding of the State of Israel, Dr. Chaim Weizmann, the distinguished chemist and international Zionist leader, envisioned establishing a center of scientific research in Palestine. It was considered a utopian idea. The Jewish population at that time was less than 400,000, the country was bereft of natural resources, industry did not exist, and trade and commerce were highly limited. But Dr. Weizmann intuitively felt that the establishment of a scientific center, leading to the wise application of science and technology, would serve as an important pillar for a future state. In 1934, the Daniel Sieff Research Institute was created, and during World War II its scientists were active in the production of pharmaceuticals for the Allied Forces in the Mid- dle East. Weizmann and his disciple, Meyer Weisgal, who later became the Institute’s president, conceived of a broader role for the Institute and encouraged the establishment of a multidisciplinary complex. In l946, the cornerstone for what was to become the Weizmann Institute was set in Rehovot. Currently, this world-famous center of scientific research and study is spread over 240 acres, housing five faculties: mathematical sciences, physics, chemistry, biophysics, and biochemistry-biology. Nearly 20 individual research centers promote interdisciplinary collaboration. The Weizmann Institute’s full-time research staff consists of almost l,500 scientists, engineers, and technicians. The Fineberg Graduate School has more than 500 scientists-in-training, working toward advanced degrees.

The Yeda Research and Development Company, established nearly 30 years ago, is the administrative arm linking the Weizmann Institute to industry. The company’s shares are held by a board of directors made up of scientists and laymen, including well-known industrialists and business executives. Yeda brings the results of the Institute’s scientiﬁc work to the attention of industry, and serves as a clearing house for scientists who are prepared to meet the demands of Israel’s industry. An indication of Yeda’s importance as a conduit for applied research may be found in the activities of the Institute’s leading scientists, who focus part of their creative energies on such areas as organic chemistry, biology, computer science, solar energy, biotechnology, and biogenetics.

The Weizmann Institute of Science has seen a number of prominent commercial successes emerge from its basic research. These include a fe- tal lung analyzer for testing abnormalities, the development of totally new forms of bread, a mammoscan which detects minute breast tumors without discomfort to the patient, and a veterinary medication highly effective in pre- venting bovine milk fever, which attacks up to 50 percent of calving cows.

Yeda deserves part of the credit for the establishment of the Kiry- at Weizmann Science-Based Industries Park in l970, adjacent to the Weizmann Institute. The 40-acre industrial park contains some of Is- rael’s most advanced and best known science-based industries, including BioTechnology General, InterPharm, and El-Op. This proximity ensures ongoing interaction between the industrial units and scientists working in the laboratories of the Weizmann Institute. At least one company is an outgrowth of such cooperation. InterYeda, formerly a Yeda-InterPharm venture, and now wholly owned by InterPharm, holds patents on various biopharmaceutical products from Weizmann, including alpha, beta, and gamma interferons and various immunological reagents. InterPharm itself, located within the industrial park, has taken many other Weizmann-developed drugs and brought them to market. Lately, it has also “borrowed” some of the Institute’s brightest scientists. Says Weizmann-ten- ured professor Menahem Rubinstein, who joined InterPharm as chief scientist to advance interferon gamma, the product he developed and to which he feels a personal attachment: “I must say I do have a double personality. My scientiﬁc interest is mainly in the mode of action of interferon. That is why I maintain my lab at the Weizmann Institute. What I do at InterPharm is not related to basic research at all. It is simply the exploitation of ﬁndings which are the direct results of pure research carried out at the Institute.”

That science and industry can work hand in hand is evidenced by another Weizmann-corporate liaison, this time with Teva. Another Weizmann-ten- ured professor, Shmuel Edelstein, took a two-year leave of absence from the Institute to help Israel’s leading pharmaceutical concern in applying for FDA approval of a drug he developed. Once there, he became involved in many other innovative products. “I began providing consultation and they suggested that I stay another year and be in charge of all the R&D in Teva. I decided to do it because personally I feel that this is the future of Israel. Life sciences are the strongest ﬁelds of science in Israel.” To encourage contact with the universities--and, it is hoped, fruitful interaction--Edelstein invites scientists to Teva’s plants. While showing them around, he tells them what the company would like from them. “And we commit ourselves in regard to what we are going to give them and at what stage. We are willing to support a scientist even during the feasibility study stage. We are willing to support them from the very basic concept onward--with no demands on the individual,” he declares. Edelstein does assert, however, that his company will not deal with any product that it cannot patent, a problem that he claims originates with the various universities’ business entities. “Yeda and Ramot and other such companies are not fulﬁlling their tasks because once they see the project it’s too late; terrible mistakes have already been made,” he charges, alluding to scientists who publish their research before ar- ranging for patents with the university’s commercial companies.

The charge that the university’s companies have not gone far enough in marketing is not a new one; given the innovations emanating from the universities, much more can be done. The infrastructure and personnel for scientiﬁc development exists; the missing element is the assumption of a more aggressive stance on promotion of the existing technologies.

“Technology scouts” can open the window for Israeli high technology to the outside world in a highly effective manner. Part of an international growth industry which reﬂects the corporate world’s thirst for innovation, the number of such scouts has risen from l00 six years ago to more than 1,000 today. They are individuals who specialize in searching for, identifying, and indexing the latest scientiﬁc discoveries, technologies, and patents. These scouts sell the information to their clients, mainly corporations, who are continuously monitoring such developments. Israel could do its part in establishing contact with the world’s leading technology scouts by setting up an independent body with convenient access to the universities.

This international exposure would enormously enhance possibilities for the sale and licensing of local technology. Within a period of two to three years, the program could be expected to lead to a major ﬁnancial payoff. In the meantime, a new pipeline would have been established for directing Israeli scientiﬁc achievements to interested parties abroad.

This type of targeted effort would go a long way to upgrading the development of science in Israel. Although such a body has not yet been established, Ben-Gurion Uni- versity has recently hired its own technology agent, the Philadel- phia-based University City Science Center, as its ofﬁcial U.S. agent, to sell and license BGU-developed technologies to U.S. companies.

Under the contract, the Science Center’s business development and venture management division has exclusive rights to BGU properties for one year. The Science Center is the first urban research park and the largest science and technology consortium in the States. It is involved in many other business development activities with Israel’s high-tech companies, as well as its universities. These commercial relationships are being developed via the Philadelphia-Israel Commerce Af- filiates Inc., a non-profit organization fostering reciprocal trade and commercial relationships between firms in greater Philadelphia and Israel. CHAPTER TWO R&D Taps the Public Purse

Scientific research in non-industrial fields has been carried out in Is- rael since before the establishment of the State. Agricultural research and development are to be seen as part of the Israeli’s love of his land, and have resulted in outstanding scientific and technological achievements that have made major contributions to the country’s economy. The security needs of the fledgling state led to many excellent defense-related R&D achievements. And although industrial R&D, both military and commercial, were aimed at domestic consumption during the state’s early days, they set the stage for creating an export-oriented economic base. It became clear to a growing number of political and business leaders that innovative industry had to be nurtured. They realized that agricultural expansion was marginal, given the limited availability of water and arable land; that world markets and competition for new and better products were increasing; and that Israel had a reserve of skilled graduates from local universities and technical schools, and of new immigrants with technological experience. Based on a government decision in 1969, the Ministry of Indus- try and Trade’s Office of the Chief Scientist (OCS) embarked on a program to promote sophisticated, innovative industry based on R&D and aimed at export. The benefits and incentives devised and approved by ministry heads and decision makers included:

1.Direct ﬁnancial grants for R&D projects, normally amounting to 50% of the approved project cost. Sometimes startups received 66%, but those projects recognized as being of national importance (PNI) received 80% grants. A generous subsidy was also applied to projects to pay the salaries of new immigrants or Israeli academics transferring to R&D jobs in industry. Requests for product or process improvement funding were rewarded with 30% of cost. Eventually, the grants were replaced by “conditional loans”: if the funded project proves to be a commercial success, the recipient is expected to repay the loan, or a portion of it, at a rate of 1-2% of sales, without interest. 2.Intergovernmental agreements, to promote binational cooperation. For example, a local, government-supported company can work with a foreign company on an industrial R&D project leading to a marketing effort; the foreign company becomes a partner to the agreement.

The Ministry also plans to establish additional binational research funds like BIRD and BARD. BIRD, the Binational Research and Develop- ment Foundation , was established in 1977 by the U.S. and Israeli governments to support cooperative projects that develop and market innovative, industrial R&D-based non-defense products. BARD, the Binational Agricultural Research and Development Fund, was established in 1978 by the U.S. and Israel to suppport agricultural R&D.

3.Government tax beneﬁts and/or easy-term loans, to encourage Israelis and foreigners to invest in R&D projects.

4.Establishment and subsidization of research and testing institutes to maintain Israel’s technological infrastructure. These institutes specialize in various ﬁelds of technology and assist industry with such services as libraries, market research, testing, and access to special equipment. The OCS also supports post-secondary technical schools.

5.Encouragement of applied research in universities and other institutes of higher learning, mostly on product-oriented projects which are transferred eventually to a manufacturer. The ofﬁce also lends a hand when faculty members involved in the project elect to start a company on their own, with the university’s blessing, and possibly with the university as a silent partner.

6.Special incentives for science-based industrial parks, which have been speciﬁcally sited next to institutes of higher learning to encourage interface between industry and academia. Such beneﬁts include providing appropriate space and buildings at subsidized rates for startup and small companies.

In comparison with other countries, Israel has one of the more comprehen- sive and complex sets of government incentives for industrial development. The government has emerged as the primary source of ﬁnance, as well as the lender of last resort, and as an active stimulator of the industrial technology system comprising the ﬁrms, research institutions, and universities. Government budget allocations soared from $15 million in 1970 to $200 million in 1985. The following tables indicate that such allocations have had a positive impact on Israel’s research and development activities, manifested in the extent of industrial exports.

Undoubtedly, the decision of the country’s policymakers to back R&D efforts has been responsible for enhancing Israeli high technology. In 1980, Israel’s industrial exports totaled $3.3 billion and in 1986, they exceeded $4.6 billion. In 1980, the export of products based on Israeli-originated R&D amounted to $1.1 billion, or 32% of the total, and in 1986, about 52% of all the industrial exports consisted of products which had been researched and developed within the country. The role of R&D in creating industrial exports is evident. The above information was provided by Dr. Moshe Zirin of the Ministry of Industry and Trade’s Ofﬁce of the Chief Scientist.

More on the BIRD BIRD, the Israel-U.S. Binational Industrial Research and Development Foundation, established by the Unit- ed States and Israel in 1977, provides ﬁnancial support to U.S. and Israeli companies working together to develop and market innovative, non-defense products or processes based on industrial R&D. BIRD derives its primary income of about $8 million per year from the interest on an endowment of $110 million provided equally by the two governments. Support from BIRD takes the form of grants to each of the two companies in the team, on a cost-sharing basis. Should the project lead to commercial revenues, BIRD recovers its investment--and sometimes a little more--in the form of royalties.

If, for any valid reason, there is no revenue, no return of the grant is due. Al- though BIRD is the brainchild of two government parents, it operates much as a private investor would. Its goal, however, is to stimulate and promote mu- tually beneficial activities in American and Israeli high-technology industry, rather than to make a profit. Thegains to both economies, and increased tax revenues to the two governments from successful projects, are profitenough. Every project supported by BIRD involves a partnership--temporary, conditional, or permanent--between an American company and an Is- raeli firm. In the course of initiating over 140 projects, BIRD has accumulated a portfolio of companies involved in a wide variety of technologies and innovations. Overall, it is clear that there is much to be gained from the marshalling of complementary skills and capabilities. This is especially true for commonly-owned companies, which are less likely to have diverging interests than the firms in ad hoc partnerships.

The more than 150 U.S. companies that have established subsidiar- ies or formal affiliates in Israel know they can find the R&D talents they need in that country. For firms that have yet to explore the benefits of even arm’s-length involvement, BIRD may be the answer. Israel, though small, abounds in highly trained and motivated technical personnel, in innovation, and in the proven capability to develop and manufacture sophisticated technical products that can compete in world markets. Israel as a market, however, is too small to justify the expense of developing such products. Moreover, Israeli firms--its small companies in particular--lack detailed knowledge of and access to major markets, putting them in a classical “Catch 22” situation: With- out a physical presence in a major market area, they cannot generate growth; but without growth, they cannot afford that presence.

The U.S. market for sophisticated technical products is huge, but it is also highly competitive. If American companies are to grow, they need a continous flow of new products. By cooperating with an Israeli firm, especially with support from BIRD, the U.S. company has the opportunity to acquire new products at minimal cost, while the Israeli partner gains entrance to major markets not otherwise easily accessible. A number of leading American industrial and software companies are among the twinned corporate partners who will receive a total of $9.5 million in support of 19 joint industrial research and development projects in the first six months of 1989. Some of the names include Westinghouse, GTE Spacenet, Computer Associates, Stratus Computers, KLA Intsruments, Napco Se- curity Systems, ElectroCom Automation, and Schein Pharmaceuticals. BIRD’s modus operandi can best be illustrated through some examples A major success in which BIRD had an important role was the development of Telrad Ltd.’s Key BX telephone, one of the earliest of BIRD’s projects. Telrad engineers, way ahead of their time, had conceived of, and in some measure implemented, a very “smart” key telephone system that could provide small and medium-sized offices with the kind of phone capabilities usually available only with complex local exchanges. But the original product did not meet U.S. needs. En- ter Pentacom Inc. and BIRD. Pentacom provided very detailed specifications of a product they could sell, install, and maintain in the U.S.

Telrad developed the product and manufactured it. Both did their complementary jobs beautifully. The result? Great success all around. Degem Sytems Ltd. is a rare example of an Israeli company that had grown steadily in the field of education and training systems, with exports to practically everywhere except the United States. Through a relationship with Technovate Inc. in Florida, a specific product for the U.S. was defined: the EB-2000, a computerized teaching system for electronics. BIRD supported both companies and is very glad it did. The EB-2000 is a winner. In another case, the marketing and much of the R&D were handled by the Israeli company, Scitex Ltd, but critical technical input was provided by the U.S. partner, Leo Beiser Inc. Their product, Raystar--a flat- bed precision system for producing printing plates--is also prospering. Of the more than 160 projects initiated by BIRD-- many of them quite recently--70 have had sales.

Twelve of the projects have sold over $1 million each, ﬁve have sold more than $5 million, and two have had sales of over $100 million. In the past eight years BIRD’S total commitment to projects has exceeded $46 million. Statistics indicate an impressive leverage of nearly eleven-to-one, whereby each dollar of BIRD funding has resulted in $11 of new products, more than $500 million since its inception.

Once a lonely outpost in the uncharted territory of binational industrial R&D, BIRD has become the model for many such arrangements between the United States and other countries. Many share the credit for this--not least, the intrepid U.S. and Israeli participants. Their joint efforts have unequivocally demonstrated that public funds, in the right framework, can be a powerful catalyst for private economic growth. More on the BARD

The Binational Agricultural Research and Development Fund (BARD) was established in l978 as a joint U.S.-Israeli venture to support research scientists in both countries, upgrade research project management, and exchange results. Farmers worldwide benefit from BARD, whose findings are publicized internationally in journals, presentations, workshops, and through networks linking agricultural research and extension systems. In its decade of existence, l,488 proposals have been submitted, 4l6 approved, 260 projects completed, and $72 million spent. BARD’s efforts have reflected the times, placing increased emphasis on molecular biology, genetic manipulation of plants and animals, computer usage, non-toxic chemical alternatives, and energy and resource conservation. All proposed research is evaluated for attempting to achieve realistic objectives and for meeting the needs of American and Israeli agriculture. The following projects reflect these premises. The bane of many strawberry crops both in Israel and the U.S. is the yield- reducing strawberry mild yellow-edge virus. Because such plants generally show no symptoms of the disease, detection is effected by grafting leaves from suspect material to indicator plants. This procedure, however, is time consuming and requires special conditions for growing indicator plants. A BARD-sponsored project, conducted by R. H. Converse of Oregon State University and S. Speigel and E. Tanne of Israel’s Vulcani Center, has developed a test that can distinguish accurately and quickly between clean and infected plants, through the isolation and identification of doublestranded RNA. Concurrent with this finding, work has been conducted to develop monoclonal antibodies and a DNA probe for the virus.

Increasingly, modified atmospheres are being used for controlling grain- storage insects. By introducing a controlled quantity of carbon dioxide gas into a specially constructed, steel-welded grain silo, S. Navarro and E. Donahaye of the Vulcani Center and E. Jay of the USDA created a high-carbon dioxide/low-oxygen environment that inhibits the respiration and interrupts the life cycles of six insect species--all major storage pests here and abroad, eliminating them completely from the grain mass. This method is an economical and effective alternative to chemical fumigants. During their first days of life, marine fish larvae raised in hatcheries depend on the small, primitive, rotifer as a crucial food source. Although they are only required for a short time, rotifers must nonetheless be maintained year-round within the aquaculture facility. E. Lubzens and A. Tandler of the Israel Oceanographic and Limnological Research Center, in conjunction with T. W. Snell of the University of Tampa, Florida, discovered that a fertilized rotifer female will produce resting eggs--an adap- tation for surviving dry or adverse conditions in a protected state. They screened diverse strains of rotifers, studying growth conditions and diet.

This research enabled them to maximize the resting-egg output of the rotifer population. The project also showed that rotifers are suitable as feed for marine and freshwater ﬁsh larvae alike. In controlled experiments, carp larvae, fed on a diet supplemented with rotifers, matured three times as fast as those fed an artiﬁcial diet.

CHAPTER THREE Emerging Technologies: A Revolution in Evolution

Israel’s innovations in technology bear watching: as quickly as the human mind can create, so can new technologies, unheard of only a few years ago, make their mark on the international market. Israeli inventions are numerous enough to ﬁll a book. Fol- lowing is a review of selected technologies in the ﬁelds of lasers, infrared detectors, biotechnology, computer software, robotics, magnetic resonance imaging, and geothermal energy.

Laser Technology: A Beam of Light for the Beneﬁt of Mankind Nowhere is Israeli inventiveness more apparent than in laser technology, and nowhere have lasers been researched with more intensity than at the Weiz- mann Institute of Science. Research aimed at utilizing solar radiation to produce laser beams has yielded the solid-state laser, developed by Profes- sor Joseph Shwartz, of the Institute’s Department of Chemical Physics, and Dr. Meyer Weksler, a visit- ing scientist from El-Op Ltd., a Rehovot-based electro-optics and engineering ﬁrm. Experimentation with the most powerful solar-pumped laser operated anywhere in the world has yielded a record 100 watts of frequency-pure infrared laser light--double the power ever previously extracted from any type of sun-powered laser. The long-term goal is to design communication and industrial devices. Increasingly, lasers are being used in surgery, replacing the scalpel in such areas as ophthalmology, gynecology, gastroenterology, otolaryngol- ogy, neurosurgery, burn therapy, plastic and reconstructive surgery, der- matology, urology, orthopedics, thoracic surgery, and oncology. If not for the conservatism of surgeons, it is likely that the number of Israeli-produced surgical lasers would exceed the 1,600 units now in use worldwide. The history of laser surgery begins with the pioneer- ing work of the South African-born surgeon, Isaac Kaplan.

Already well known for his great skill in reconstructive surgery when he settled in Israel, Dr. Kaplan performed hundreds of reconstructive surgical procedures on wounded Israeli soldiers. Always interested in improving surgical procedures, he obtained a carbon-dioxide laser tube from Eu- rope in the early 1970’s. Since a laser can focus exceptionally dense power and energy on a minute area, Dr. Kaplan reasoned that it could serve as a surgical device for cutting and removing body tissue by vapor- ization. He sought the assistance of Uzi Sharon, an Israeli engineer, in making lasers both mechanically functional and easy to use. In a burst of creative energy, Sharon created a prototype in just over a month. Dr. Kaplan subsequently became world famous for his success in using lasers in surgery, and he is justly known as “the father of laser surgery.” Each year, more surgeons are switching to this method because of its bloodless, nontraumatic features.

The laser allows treatment of microscopic amounts of tissue, with negligible effects on surrounding healthy tissue. Its cauterizing effect on the treatment site also reduces trauma and speeds healing, reduces patient discomfort, and minimizes scar tissue. Hospitals tend to favor laser surgery because patients can return home sooner, reducing bed occupancy. Lasers are also being used for other therapeutic and for diagnostic applications. Laser Industries, an Israeli company, is the world’s leading producer of a broad range of carbon dioxide surgical lasers. Others involved in medical lasers include the Eisenberg Group, which has established a research laboratory for laser applications in cardiology. Established in Chaim Sheba Medical Center in 1986 to develop and evaluate techniques for the treatment of heart disease, the research focuses on experiments which, if successful, could have a major commercial potential.

Currently under investigation is an evaluation of various laser systems and accessories for use in diagnosis and treatment of disease and damage, such as a surgical tool to scrape blocked blood vessels. A possible spinoff of this research is aimed at the application of fiber- optics in combination with medical lasers in dealing with heart disease. Another laser-oriented venture in which the Eisenberg Group has a stake--via its R&D division, T.M.D.-- is Alumor Lasers, a private company established in l983 by Ophir Optics Ltd. and scientists S. Yatsiv and A. Gabai.in conjunction with T.M.D. The company has specialized in developing an ultra-compact carbon dioxide laser. A unique cavity configura- tion in conjunction with a radio-frequency activating procedure, capable of a 500-1,000 watt output, made it possible to shrink the laserhead to a compact 28-inch length, 8-inch diameter, and less than 70-pound weight. The slow-flow cavity design ensures stable beam output; low gas usage keeps operating costs to a minimum. A narrow beam of light, produced by a carbon dioxide laser outputting 500 watts, effectively cuts a piece of steel one millimeter thick at a rate of four meters per minute.

Acting general manager Dr. Mordechai Brestel is convinced that the product represents a unique technology, expressed in the world’s most compact laser head. Its usefulness in industry is enhanced by this compactness, which allows it access to work areas here- tofore not reachable by carbon dioxide industrial cutting lasers. The compact laser can be used with a fully movable laserhead or integrated directly with a robot arm. It can be used for precision cutting and welding for fabricating airplane and train parts, and can replace expensive beam-delivery systems in nuclear-energy plants. Plans are for producing a number of units for use in automobile production lines. Should that prove successful, Alumor Lasers will be faced with the difﬁcult decision of whether to mass produce the laser in Israel, or perhaps in a Far Eastern country where the economics of production are more favorable. Alumor prototypes lend themselves to scaling up or scaling down, to enable production of lower and higher power ultra-compact carbon dioxide and carbon monoxide lasers. Future applications for its medium-high-power lasers may include robotics for computer-automated material-processing systems and for medical use.

Israel’s industrial lasers have been successful in finding overseas buyers. Chief among the companies that have penetrated the U.S. and Japanese markets is MLI Lasers Ltd, whose preferred shares are owned by Laser Indus- tries. In 1984, MLI unveiled the ML-109, an eight-kilowatt industrial carbon- dioxide laser designed primarily for the automobile and aircraft industries. In 1986, the company began marketing ML-105, a five-kilowatt industrial carbon dioxide laser. The company also makes beam-delivery accessories for carbon dioxide, high-powered lasers, including beam benders, focusing units, and beam shutters, and produces a laser diamond-marking system. According to the 1987 issue of Industrial Laser Review, the market for industrial lasers of five kilowatts or more was $11 million. Indications are that the market for industrial lasers will increase by 25-30% annually. MLI can be viewed as an important emerging participant in this field,which includes such companies as Spectra-Physics and United Technologies (USA), Rofin-Sinar and Trumpf (West Germany), and Mitsubishi and Toshiba (Japan). MLI expects to establish an important presence in the three-kilowatt to nine-kilowatt market. The high-powered industrial laser market is difficult to crack; MLI’s entrance into the marketplace is primarily based on its competitive prices, the reliability and accuracy of its systems, their flexible and expandable control capabilities, and their convenient integration into production systems.

Lasers are also used in Israel’s important diamond industry for cleaving and sawing. Currently, 25 such machines are being used, with an output equivalent to that of 200 skilled workers.

***Indigo***

Modern defense systems rely heavily on laser technology. What science fiction writers could only imagine twenty years ago has turned into the reality of today’s battlefield. Lasers, which have a capability of locating and destroying flying objects, are being used in missile systems and artillery guidance. Israel, known initially as the country that developed surgical lasers, has also moved ahead rapidly in laser defense application. Two Israeli companies, International Technologies (La- sers) Ltd. (ITL) and El-Or Optronics Ltd, serve as good examples of the commercialization of laser technology. ITL specializes in a line of targeting products and systems based on the latest technological achievements in the fields of lasers and optics for night use. These systems have been battle-tested by the Israel Defense Forces. The company’s present-day challenge lies in penetration of international markets for institutional security products as well as consumer products. ITL’s products are big-budget items, but its systems offer special capabilities and advantages, particularly in anti-terror applications.

Following is an overview of selected ITL products.

Set Beam: Set Beam is a searchlight with extremely intense light, so compact it can be held in the hand: it is less than four inches across and weighs only 6 lbs. Used for recognition and identification, its light beam is shaped by the company’s specially developed optical system which reduces stray light, the major impediment to clear identification. Flexibility of application enhances its usefulness. Set Beam can be hand carried, mounted on a car, boat, light airplane, helicopter, or on a fence. It can be connected to a 12 volt standard battery or to 110V or 220V mains. Its main components are a remote control unit, searchlight, power supply unit, and an infrared filter. Set Beam’s effectiveness derives from its 150 watt lamp, which provides half a kilowatt light source, centered with optical lenses. Set Beam is an anti-terror accessory for use in places which are not accessible by automobile.

Set Beam has a zoom feature allowing the beam to open up at a 1-10 ratio. It illuminates individuals at great distances, making the enemy a pinpoint- able target. The sudden, intense illumination also causes them to lose their equilibrium. It can be used independently or mounted on weapons. Currently, Set Beam is selling at the rate of 100 units per year, in Israel and overseas. The Israel Defense Forces is a valued client. Applications for this product are expanding from its original anti-terror use. Customers requiring this type of highly deﬁned illumination are prepared to pay $4,500.

S-8: The S-8, mounted below a weapon’s handgrip, is capable of illu- minating either a stationary or moving target at distances of more than 300 ft. The system’s main feature is its “ease-of-aim.” Once an enemy target has been determined, a bore-sighted high-density laser light spot appears on the target, showing the exact spot where the bullet will hit, assuring that the ﬁrst shot will be accurate. The S-8 is used with goggles, which provide the element of night vision. The laser light that creates the point on the target cannot be seen with the naked eye. The units are said to provide better shooting ability in darkness than is possible in daylight. The lasers employed are of the semiconductor type and are battery operated. The unit sells for about $850 with accessories that include an infrared ﬁlter, rechargeable battery, a charger, and adaptors. The adaptors allow the unit to be attached to nearly all weapons currently in use worldwide. The market for this product is several hundred units per year.

Sniper’s Spotlight: This infrared system results in shooting accuracy when aiming through dark windows at a great distance, or at close range in dark or darkened rooms. The spotlight is alignable with the night-vision scope and illuminates the ﬁeld of view with covert infrared light. ITL’s system is being sold to such clients as the U.S. Navy and the U.S. Army by the American company, Litton Industries.

Fire Control Night Sight: This system is claimed to be unique. Weapon-mountable and measuring the exact distance to the target, it provides calculations for the needed ballistic compensation required from the weapon. The short aiming process allows excellent hitting results even over long ranges.

Nitecam--Laser Augmented Video Camera: ITL produces a laser augmented video camera capable of recording images in total darkness. The Nitecam incorporates a safe, invisible infrared laser with a light intensiﬁer, resulting in the ability to record clear pictures at 300 ft in total darkness and 900 ft in semidarkness. The technology allows, at the extreme, to record pictures on a dark night and at a distance of 75 ft through a window into a dark room. The unit weighs 22 lbs and is capable of operating on a battery for up to three hours.

ITL is owned by Clal, Israel’s largest investment company. It was founded in 1982 by Yossi Vardi and Yoram Almogi, who created a partnership with Clal Industries and Ampal--American Israel Corporation. In 1984, Ampal with- drew from the partnership. ITL continued to develop its product line and, by 1985, was generating sales of $500,000 (and losses of $1 million). At that point the ﬁrm had a staff of 22, including skilled engineers and technicians. A major turning point in the history of the company occurred when Clal took over ITL’s obligations from its founders. Avraham Sorek, who had served as Clal’s representative at ITL, assumed the top management duties. Sorek, a Technion-trained engineer, was general manager of Motorola before moving to Elscint in 1983, where he was in charge of development of the international magnetic resonance program. It was Sorek’s conten- tion that ITL should be headed by a professional versed in production. Funds for development, production, and marketing are currently generated internally.

Clal is providing the ﬁnancing in an innovative way which allows ITL to progress more rapidly than it would under conventional ﬁnancing terms. ITL carries out its own marketing functions. Management feels that the many special advantages provided by its systems can be best explained by the developers and users. Buyers are reassured by the fact that Israel’s Defense Forces and its anti-terrorist units are using ITL’s products and systems and attest to the reliability of the company’s products. If ITL wins its bid to participate in a big American tender, then the upside projection of a $10 million turnover would appear to be easily attainable. Even without it, a normal development of the market for its product should allow the company to double its existing sales by 1990.

In recent years, the subject of quality control has assumed growing importance on the Israeli industrial scene. QA, as the English call quality control, is especially critical in the manufacturing of munitions. A defec- tive bullet is potentially more dangerous to the user than to the target. The estimated $5 billion market for automated optical inspection systems for in-process quality control has attracted some 200 companies in the United States alone. All are trying to develop an answer to the requirements of various industries for reliable, cost-efficient production of large quantities of precision parts. The industry is in its infancy and at present only one company, with sales in excess of $15 million, is turning a profit. The reason for this rush into automated optical inspection systems is that in some industrial sectors, such as defense manufacturing, the cost of quality control represents up to 25 percent of each sales dollar. Industries are eager to find any system that can be integrated into the production cycle and, as a result, reduce production costs, increase productivity, and enhance quality. El-Or Optronics Ltd. has focused on this problem and is having success in selling munition quality control systems to European manufacturers.

The major target market area for El-Or’s products is the metal working industry which, compared to the electronics industry, is extremely conservative. This will work against rapid market penetration, but, on the positive side, industry observers acknowledge that there is great scope for improving its quality control and assurance programs. El-Or employs vision techniques for precision measurement of a variety of machine and manufacturing parts. The technologies employed in its systems are rooted in Israel’s proven experience in the ﬁeld of lasers, optical lenses, and digital solid state sensors. These technologies, combined with very smart software, have been used in El-Or’s Vidi, Vina, and Viga systems.

Vidi: Gauging is an industrial inspection task which confirms that the dimensions of a manufactured part agree with design data. Gauging applications in industrial quality control systems represent about 30% of all automated optical inspection systems. Dimensional data is obtained by the use of remote non-contact techniques. El-Or’s Vidi system does exactly that with the use of non-contact laser products. The sophisticated software and state-of-the-art scanning technology are employed in an integrated work station which performs tri-dimensional non-contact gauging. The software is claimed to be the first successful application of complex mathematical theories governing dimensional gauging. When applied as an airfoil (such as an airplane wing) measurement system, Vidi requires only 20 seconds to obtain all data recorded on the airfoil section being inspected, and conveniently displays, either on a screen or printout, the actual dimensions versus those of the prepared design. The Vidi system utilizes a laser and a camera fixed on a positioning table. The airfoil to be examined is fixed on a vertically travelling turnta- ble. The camera receives images which have been illuminated by the scanning laser and are evaluated by microcomputers working in parallel. The use of this system in one application replaces 12 quality control personnel and pays for itself (at current price levels) in 18-24 months. The Vidi system has an important target customer, Iscar Blades, a world-class company in Israel.

Vina: Vina is a system which may well be an expression of a unique concept in visual ammunition inspection. The Vina system has been and continues to be developed in con- nection with Israel Military Industries (IMI). Small arms ammunition inspecting and sorting is a highly labor-intensive activity, involving manual sorting. The Vina system can examine, with nearly 100 percent sorting reliability, up to 300 cartridges per minute. Vina includes all feeding, handling, and ejection sub-systems, an operator console with menu driven control, an operating sub-system, and an image processing computer. It is able to meet U.S. speciﬁcations (MIL Q 9858).

Viga: El-Or’s Viga series is a high-precision non-contact gauging system, with a major area of application being the gauging of end mill cutting tools. The system is capable of gauging parts at an accuracy of plus or minus 5 microns and at a speed of 300 measurements per second.

El-Or is equally owned by Elron Electronic Industries Ltd., Clal Electronic Industries Ltd., and the West German company, Schneider Optics GMBH. Financing for the company’s activities has been provided by the three partners and the Officeof the Chief Scientist of the Ministry of Trade and Industry, which covered some 30 percent of the development cost. Management is planning to use income from ongoing sales for further development prior to the next major financing,which is likely to take place in the next one or two years. Shmuel Alkon serves as general manager. Alkon earned his electronic engineering degree at the Technion--Israel Institute of Technology and completed his Masters in electronic engineering and business administration at Tel Aviv University. He has a rich background in the high-technology management of defense industries, including several years at Rafael, Israel’s Armament Development Authority, and 20 years at Israel Aircraft Industries, where he served as project and general manager of some of the major divisions of IAI. El-Or employs 35 people; 20 have advanced degrees in engineering and other sciences, 10 are advanced-level technicians, and five are employed in marketing. Since El-Or produces technologically sophisticated systems, the product line does not lend itself to sale by representatives. A highly qualified sales force, which thoroughly understands the systems and understands production problems, is a must. At this stage of development, the company is carrying out the marketing functions. Funding and establishing the proper marketing organization will prove to be a major challenge for management. The fact that Israel is serving as a beta-site for the company’s products continues to be the major strategic marketing asset. The imported components in El-Or systems represent 15-20 percent of the selling price. This is a favorably low figure and our analysis points to healthy profit margins. However, over the next two to three years, overall profitability of El-Or will be very much affected by the high level of expense required for continuous R&D and the high cost of establishing itself in its chosen markets.

Infrared Technology: The State of the Art in Brilliant Detectors

The state of development of infrared (IR) detectors makes this a leading-edge technology. The recognition of Israel’s excellence in this ﬁeld has led to millions of dollars being granted to Israeli ﬁrmsforresearchrelatedtoshort-range anti-ballistic missiles, as part of the U.S. Strategic Defense Initiative program. The United States Department of Defense has a program, valued at no less than $500 million, aimed at developing and acquiring new IR detectors. Israel could be a valued part of this American effort as well. IR systems assist in locating, identifying (ATR: automatic target recognition), and destroying targets, day or night, even during the poorest weather conditions, from the air or from the ground. IR systems are of particular interest to the military sector because they emit no signals of their own. Radar-like systems are becoming less acceptable as developments in electronic countermeasures and radiation-seeking missiles move ahead.

All objects on the earth and in orbit around it emit strong IR signals, which lend themselves to being picked up by detectors. These detectors are designed to respond to one of the three major bands of IR radiation: short-wave (1-3 microns), medium-wave (3-5 microns), and long-wave (8-14 microns). Both the medium- and long-wave bands are the most common target application areas for detectors. Radiation in the 5-8 microns band is absorbed by water vapor in the atmosphere. Objects emit radiation of varying wavelengths. The wavelength is related to the object’s temperature. Short- and medium-wave IR detectors are useful in identifying targets that appear “hot” against a cold background. One example would be an airplane whose engine heat stands out against the cold sky. By contrast, the detection of a “cool” missile in space against the warmer background of the earth below requires a long-wave detector. Crucial to any IR detection system is the individual sensor. It is a square cell, measuring about a thousandth of an inch on each side, which converts the energy of infrared light into electrical signals.

A photo-lithographically produced chip containing hundreds to thou- sands of such cells, called a focal-plane array (FPA), provides signals that can subsequently be processed into television-like images. To achieve optimal detection capabilities, one must take into ac- count a number of requirements, some of which are in conﬂict. The higher the results required, the smaller the individual sensors should be. To heighten sensitivity, the sensors should be densely placed on the chip and the number of detector elements increased so as to pick up comparatively weak IR signals. Noise caused by sensors themselves increases with rising temperatures. The maximum practical temperature at which the systems can operate is 77oK (-196.15oC).

To achieve such low temperatures, liquid nitrogen can be employed. Sensors in the system are sealed in a flask containing that element. An important producer of IR detectors is the Jerusalem-based Semi Conductor Devices (SCD) company, which is a Tadiran and Rafael n partnership and a leader in silicon photodetector products and technology. SCD has achieved a leading edge in the technology of mer- cury-cadmium-telluride (MCT) sensors. The use of new materials provides the sensors with a greater versatility in detection. These sensors are especially desirable because they operate on all three major IR bands. In long-wave bands this is the only material which is usable. The sensors are used primarily in thermal imaging systems. SCD’s silicon detectors are used in laser designators, laser range finders, and smart munitions. Since SCD develops and produces solely detectors, it cannot always identify the systems in which the products are used. However, it is likely that these detectors are used by some of Israel’s major defense systems’ manufacturers. Among the military applications is Rafael Armament Devel- opment Authority’s Python 3, its infrared air-to-air missile. A typical application is in conjunction with El-Op’s computerized tank fire control systems. The Matador Tank Fire Control system trans- forms an “ancient” tank into a modern weapon. The system uses day and night sights for gunner and commander, laser range-finding, a ballistic computer, and various environmental sensors to achieve first-round hit capabilities. El-Op also produces an IR Search Set for use on missile boats to detect low-flying anti-ship missiles.

Elbit Computers Ltd., at its American-based subsidiary, has developed thermal imaging systems which provide real-time images for night viewing and can detect targets at night at distances of up to six miles. These systems are easily carried and can be adapted to armored vehicles and airplanes.

Israel’s advanced standing in the ﬁeld of IR detectors and military systems employing this technology was developed in direct response to the country’s perceived security needs. This will undoubtedly continue to be the driving force behind further developments in detector technology and systems.

On the other hand, considerable attention is now being drawn to the prospect of applying this leading-edge technology to non-military applications. The commercial potential is much greater than in the military market. It is not farfetched to think that, in the foreseeable future, the dentist may be using an IR detector as a replacement for the X-ray with its harmful side effects, and that the dairy farmer may be examining his cows for bovine mastitis with a small and portable IR detector-containing unit. At all levels, whether military or commercial, the stakes for those who excel are great.

Biotechnology: A New Life for Old Genes

Biotechnology, still in the early stages of development, appears set to be an explosive growth industry in the l990s. Forecasts are that by l990, worldwide annual turnover will exceed $27 billion in the ﬁelds of energy, agriculture, food products, health care, medicine, plastics, and chemicals. Nearly $3 billion of the total is derived from the health care and medical industries. Biotechnology is primarily a contributor to products and processes, rather than a creator of individual products. Though biotechnology as a concept is relatively new, it is rooted in centuries-old processes, including brewing, baking, distilling, and other forms of fermentation. With the advance of technology, these processes formed the basis for genetic engineering. This is the manipulation of living cells--especially the DNA mol- ecules within the cells--to create modiﬁed organisms through the transfer and insertion of genes into host recipients, such as bacteria microbes.

The process of gene splicing is complex and expensive, but the ultimate product is more than worth the effort, since its impact can be spectacular. The original impetus came in the early l950s, when Frances Crick and James Watson discovered the structure of the basic genetic material, DNA, winning a Nobel Prize for their discovery. Biotechnology has emerged from its ﬂedgling stage, and a growing number of genetically engineered creations are available for general sale. Wide public- ity has been accorded such products as human-based insulin, interferon for the treatment of cancer, and a vaccine for foot-and-mouth disease. In the human health care ﬁeld, biotechnology is active in two major areas: diagnosis and therapy.

Monoclonal diagnostic devices, generally sold in kits, are used in tests for pregnancy, cancer, cardiovascular disorders, and uro- logical diseases. Monoclonal antibodies are hybrid cells that detect and attach themselves to foreign substances in the body. Diatech Diagnostics, which purchases rights to commercialize Israeli university-generated technologies, produces a kit to detect one form of pneu- monia. The kit detects a specific antibody present only in the blood of infected patients, and eliminates the previous two-week waiting period for such diagnoses. The company, set up by BioTechnology General, Israel’s largest biotechnology firm, and partly owned by Athena Venture Partners and Adler & Co., is expected to reach $l5-20 million in sales within five years.

The second major area of biotechnology is drug therapy. This most promising field is based on recombinant DNA technology. The first recombinant DNA product to receive FDA approval was human insulin, the vital diabetes drug produced by the American firm, Genentech. In Israel, Bio- Technology General, located in the Science-Based Industries Park adjacent to the Weizmann Institute, has collaborated with other major firms in developing, manufacturing, and marketing such products as animal and human growth hormones (HGH). In developing animal growth hormones, BTG is a partner with the American Cyanamid Company. Cyana- mid receives all its bovine growth hormone (BGH) field material from its Israeli-based R&D and production unit. Using its own systems, BTG has produced optimal environments which force the bacteria to produce 30%, 40%, or even 50% of their total content in the form of the desired protein.

Fred Adler, the largest stockholder in BioTechnology General, states: “When you talk with researchers in other companies in the U.S. and Europe, you get a picture with a 15% or 20% expression rate.” Although BTG has not retained full production rights for BGH, it has retained such rights from its partner in HGH production, DuPont Critical Care-ABI Technology. BTG expects HGH sales of $20 million, which, according to Adler, is about four times the normal income based on royalties. Of all its products, the human superoxide dismutase (hSOD), on which BTG teamed up with Bristol-Myers for marketing--BTG retains full production rights--is seen as having the greatest potential. Original research was done in Germany for this drug, also known as free radical oxygen, which was developed using recombinant DNA methods. Superoxide dismutase cuts down the existence of free-floating oxygen radicals, and therefore reduces damage to heart tissue following an attack. The product is also intended to reduce inflammation in the joints: knees and hips. hSOD is also said to be beneficial in organ transplants. BTG’s pre-clinical animal studies of hSOD, conducted at John Hopkins University School of Medicine, have been highly encouraging. Late in l986, phase l human clinical trials were initiated.

BTG is not alone in developing drugs with world demand. InterPharm, located in Kiryat Weizmann, is currently marketing interferon gamma, a protein that must be administered by injection. A product of the immune system’s lymphocyte cells, interferon gamma is released in one of the initial responses of the system to bacteria or any parasite entering the body. This protein activates antibodies, making them potent enough to destroy the invaders. Together with Michelle Ravel of the Weizmann In- stitute, scientist Menahem Rubinstein--currently at InterPharm--cloned the gene inserts, producing sets that easily produce milligram quantities of the protein. This capability to produce pure interferon gamma, which is identical to natural interferon gamma, is considered a major feat. Interferon gamma may be used to treat rheumatoid arthritis, giving it a large potential market, as well as and such parasitic diseases as leprosy and ma- laria, problems still affecting mankind. InterPharm is currently scaling up the procedure, ensuring the production of ample supplies of interferon gamma.

InterPharm is also the leading supplier of beta interferon, produced from human fibroblasts (con- nective tissue cells), and sold under the trade name Frone. Frone sales showed a strong increase in 1988, reflecting a good acceptance of this new treatment approach in the immunological field (in particular for genital herpes). InterPharm’s beta interferon is of the native beta variety (from non-genetically-engineered human cells), which is relatively expensive to produce. The company is in the process of moving towards the production of this product as a recombinant beta interferon (utilizing genetic engineering of host cells, such as bacteria). Most analysts agree that genetically-engineered beta interferon will be a less costly alternative than the currently produced native beta interferon. Software Developments: A Non-Capital-Intensive Endeavor

A newly emerging niche as a target for national and international R&D investment is that of sophisticated software programming. Well-designed software provides a competitive edge for the manufacturer. The more sophisticated the software, the more difﬁcult it is for it to be cop- ied. Aware of this, manufacturers will often forego the efforts of obtain- ing patent protection. American venture capitalists, with their demand- ing criteria for high return on their investment, are recognizing that software is an area in which Israel has much to offer. This industry has attracted some of Israel’s best minds. It is an area most suitable for entrepreneurs and requires little capital for initial entry. Israeli software exports rose from $8 million in l98l to about $30-40 million in l988. No fewer than 80 Israeli companies are dedicated to developing software.

Mayda Software Engineering, a privately-owned ﬁrm founded in l980 by Nancy and Moshe Yavne, creates supporting tools for increasing productivity during the process of software development. Its SDP software design language, marketed since l980, has been installed in 40 different locations in Israel and abroad. Users of SDP include the Israel Defense Forces’ Data Processing Center, Tadiran Cor- porate Headquarters, Israel Aircraft Industries, Telrad R&D Center, Elscint, the Israel Ministry of Defense Computer Center, and Motorola.

In France, half a dozen companies, the most prominent of which is Thompson CSF, have used SDP. Germany’s AEG Telefunken also uses the language, as does the University of California, Los Angeles. Mayda’s ADA/SDP is a design tool intended to be part of a computer environment created to support a complete lifecycle of software development. ADA/SDP is an off-the-shelf product, installed for evaluation by Westinghouse, Data General, Computer Sciences, and the U.S. De- partment of Defense, in addition to nine installations with the Israel De- fense Forces. The system reﬂects current state-of-the-art in software design and serves as a guide for the user in the total design process.

Some Israeli software companies have joined with foreign ﬁrms. In 1987, Medicom Computer Ltd., which produces Toolcase, a computer-aided design (CAD) software development system, partnered Hunter & Ready, an American producer of real-time operating systems and embedded microprocessor tools, to provide a complete development environment. Medicom, whose l986 turnover was $2 million, is also seen as a valu- able R&D resource center for new-generation software tools and for customer-speciﬁc applications. The Israeli company is especially appreciated for its expertise in integrating embedded computer systems in applications at the upper end of the software market. The world embedded-software market is some $l.5 billion.

Israeli software companies are continuing to supply innovative software programs for major mainframe producers. GTM Information Technologies Ltd. has developed software that simplifies file transfer between different IBM mainframe systems, minicomputers, and personal computer terminals. Trade-named APPLink, the software supports a wide range of functions. It enables receiver-initiated file transfer from another mode as well as sender-initiated file transfer to one or more modes. It is also possible to initiate a procedure at a remote mode. Message switching between modes to request or acknowledge operations is also facilitated, as are combinations of these procedures.

Trilogue is the trade name of a very smart multi-microprocessor computer system. When linked to a user’s existing telephone or data-processing facilities, Trilogue offers users a range of automated communications-management services. Its modular architectural design allows for flexibility and it can easily be adapted to the specific usage and capacity requirements of the individual user. Trilogue can be used in conjunction with specially developed software tools. One of these is Voicelogue, which is an electronic “voice mail” application enabling the user to receive, store, and retrieve voice messages and to redirect or distribute messages to multiple recipients simultaneously, regardless of location or availability. This is done by issuing commands through the buttons of a telephone. After receiving a message, Voicelogue will hold the message for pickup by the recipient and alert the him by telephone or by activating a pager or light on his telephone. At the heart of Trilogue is the multi-microprocessor computer system which processes, stores, and retrieves the massive input/output streams of sound and image data which are generated by digitized signals. Compared with the handling of standard data processing for text and graphics, much greater processing and storage resources are needed to handle sound converted into digital form. For example, the word “hello” in textual form requires only 40 bits of digital representation, but over 30,000 to represent the speech sound. To accommodate the sensitivities of the human ear to modifications in speech, the computer must work at a fast and efficient rate to produce a form of digitized speech acceptable to the human ear.

The processing and storing technologies employed in Trilogue provide the end user with a cost-effective way to include the medium of speech within the scope and capabilities of a computer. Trilogue possesses modular interfacing, making it compatible with a wide variety of telephone and private branch exchanges. It is also compatible with local and global data communication networks and fac- simile standards. Trilogue systems are available with a number of software applications, according to customers’ needs. Its military system has found application in communications monitoring and interpre- tation as required to monitor a large number of voice communication channels. Such a system is in use by the Israeli Ministry of Defense.

Commercial applications provide Trilogue users with a broad range of communication services, among them electronic voice mail, electronic text mail notiﬁcation, and automated receptionist services. Trilogue and its applications systems were developed by the Is- raeli ﬁrm Efrat Future Technology Ltd. Trilogue is being marketed in the United States and worldwide by Converse International Inc.

Robotics: Mechanizing Tedious Tasks

One of the most vexing problems facing automobile manufacturers is the need to design a standard car body that can accept a large variety of options. To meet market requirements today, car manufacturers prepare the body by cutting out openings for possible options, providing positions for antennas, a sunroof, and other accessories. Subsequently, unused openings are plugged up. Robomatix, a partnership of Koor Industries and Clal Industries, has created a workable solution to the problem of unused openings based on the integration of lasers and industrial robots. It is the first company in the world to develop, market, and install a robotic laser cutting system to be used on the automobile production line of a world-class manufacturer. The Robomatix system, called JIT (Just in Time), combines articu- lated-arm robots with industrial lasers. The unit consists of a dual-axis moving laser with a fixed three-mirror beam-delivery system, allowing it to make cutouts on auto bodies only where they are needed, eliminating the expense of plugging unused openings. The cutting process is carried out in four stages: the system introduces the optical system into the car body; measures the area, establishes tolerances and positions the laserhead; performs the cut and collects the cut plate; and withdraws the optical system, removes the cut plate, and releases the car body. The first unit, installed in West Germany, recorded performance over a period of 13 months far above the guarantee extended to the user. The method also saved DM2.08 per cut-out, or DM1.6 million each year. Re- turn on investment is expected within two years. Robomatix has also installed and integrated one of its systems into the production line of Ford’s Arrow Star automobile plant in St. Louis, Missouri. Ford is giving active consideration to ordering several additional Robomatix systems. Gen- eral Motors and Chrysler are also showing interest in the Israeli system. The Robomatix system’s performance is the basis for a major expansion of sales. In the automotive industry alone, pre-press cutting and blanking operations cost between $500 million and $1 billion a year. An additional market consists of trimming operations, estimated to cost between $500 million and $1.5 billion. These company estimates are based on an analysis of automotive manufacturing procedures of 50 to 70 car production lines worldwide.

Eshed Robotec Ltd. manufactures Scorbot-ER- III robots to instruct users in robotic industrial applications. So far, it has sold more than l,000 of these units, 80% of them to overseas markets. Its latest product is Viewflex, a hardware/software IBM-, Apple-, or Radio Shack-compatible system allowing the user to design and apply complex vision tasks. Driven by a DC motor with an arm capable of five axes of free- dom, a gripper, and a controller which serves as a communications link between the robot and a microcomputer, the robot simulates industrial robotic applications for educational purposes. It has a high capability for object recognition: Viewflex’s camera and digitizer takes a frame from the camera and stores it in the computer for analysis. Response time: less than one second. Resembling a miniature industrial robot, Viewflex can be used on a table- top--with the mechanism and arms visible--to facilitate the learning process. Potential users include vocational and technical high schools, universities, and certain industries requiring industrial robotics teaching systems.

Savin R&D Ltd. has addressed its robotics efforts to the diamond industry, producing Robo-Gem, a prototype of a totally automated system employing robotic techniques for cutting and polishing all precious gems. It is expected that this method will save up to l0% of the costly rough diamond; At present, 60-85% of rough gemstones are lost in cutting. Robo-Gem can also process those less expensive stones that are currently not considered commercially viable.

Magnetic Resonance Imaging: An Oil Driller’s Dream

Magnetic Resonance Imaging (MRI), which utilizes large magnets cooled to low temperatures, as well as computers, represents one of the most outstanding imaging technologies. It allows doctors to view internal organs, including the brain, with an amazing degree of clarity. As the use of MRI spreads throughout the different parts of the medical world, researchers are seeking to ﬁnd applications for this unusual technology in other areas. The technology of Magnetic Resonance Imaging is well advanced in Is- rael. The work of Numar, a Rehovot-based company, is an example.

Numar was incorporated in 1983 in Pennsylvania with a view to utilizing Magnetic Resonance Imaging technology in the medical and oil industries. Prior to its incorporation, Numar was financed by its founder, Dr. Melvyn N. Miller. In May 1985, Numalog Ltd. was formed in Rehov- ot, Israel, as a wholly-owned subsidiary. It was established in Rehovot to take advantage of Weizmann Institute scientific experience, and has applied this expertise to building an innovative oil well logging device. Existing oil well logging techniques consist of combining data from various sources to determine the type of rock and the amount of oil present at various depths in oil wells. Expensive “cores” are being used to estimate permeability, but most industry analysts point towards the need for a more definite well logging tool. MRI technology is aimed at finding a more accurate way of measuring the effective porosity and permeability of rock formations. It is viewed as having the ability to improve the measurement of the movement of oil through rock strata. MRI prototype systems have been developed jointly by Shlumberger (a major oil well logging company), Chevron, and Los Alamos Labo- ratories. The current state-of-the-art of this technology is not considered practical. The signal-noise is insufficient to allow these systems to operate at practical logging speeds and usable accuracy levels. Numalog scientists have developed and patented a technique which has led to a major improvement in signal-noise rates.

This innovative technique includes a powerful magnet and a radio frequency antenna system. Numar’s downhole prototype is intended for a series of oil well evaluations. A live trial was carried out at Jericho and has given encouraging results. Numar has entered into a joint MRI logging tool development agreement with a major oil company, which will provide consultation services and furnish cross samples and logs and run Numar’s experimental tool. The company’s development strategy is to enter into licensing agreements with one or more of the four major oil well logging companies: Shlumberg- er, Dresser, Gearhart, and Wellex. Numar hopes to manufacture Numalog systems for sale to the prospective licencees. Numar’s income would come from revenues from the sales, plus a usage royalty. The availability of the MRI technology is expected to increase the licencees’ share of the logging market. Strategy is also aimed at a segment of the geographical- ly dense oil well activity in the Southwestern United States.

Numar intends to provide direct measurements, as well as log in- terpretation support, for oil exploration companies in the area, and intends to license one or more of the major oil well logging service companies for the remaining part of the potential business. It is understood that the company was initially funded by a private place- ment of $2.2 million in 1985. The company has also received a grant from BIRD, the Israel-U.S. Binational Industrial Research and Development Foundation. A second round of ﬁnancing of $3 million has been completed. Geothermal Energy: Creating Elec- tricity from an Unexpected Source The dedication of the world’s largest bi- nary geothermal plant took place recently in California. Ormat Turbines Ltd., based in Yavneh, considers the American installation its most outstanding achievement to date and further proof of the viability and ﬁnancial feasibility of geothermal heat as a source of electricity.

The Ormesa I and Ormesa II power plants have a total capacity of 50 MWs and are supplying electricity, around the clock, to 50,000 residents of Southern California. Ormesa I is a modular plant which uses 26 Ormat designed and produced power units and 11 geothermal production wells which supply hot water. A modular power plant includes one or more turbines, trade named Or- mat Energy Converters (OECs). This technology is known as a bina- ry system, whereby a primary ﬂuid, such as geothermal water, is used to vaporize a secondary working ﬂuid, which is contained in the power plant heat exchanges. These, in turn, drive a turbogenerator, which produces electricity. Other aspects of the system are production wells, reinjection wells, and a source of cooling water. Geothermal water is pumped up through the wells; the heat is taken out and used in the OEC; and the cooled water is returned to the earth, without negatively affecting the environment. After the operation of the turbine is completed, the vapor is condensed and recycled in a closed loop system.

The process is repeated as long as a heat source is applied. Ormat was responsible for the total engineering and drilling operations in the Southern California project. Construction work at the site was carried out by Harbert International Inc. Bankers Trust Compa- ny of New York arranged for the construction financing of the plants. An investment group was led by Constellation Investment Com- pany, a subsidiary of Baltimore Gas and Electric Company, and included LFC Financial Corp. and a number of insurance companies. Ormat already has to its credit South America’s first geothermal power plant, in Argentina. The company has an order from Ice- land for the installation of power units and an agreement with Mexico for an electricity-producing geothermal power plant. The company’s accumulated technological experience is finding increased outlets in applications which allow for the use of low- to moderate-temperature geothermal sources. A more traditional manner has been to generate electricity from high-temperature geothermal steam. A step up on this technology is the use, for the same purpose, of low- to moderate-temperature water found in underground pock- ets. Before now it was not useful because it was inaccessible and because of a lack of appropriate technology to utilize this source of energy.

CHAPTER FOUR Offek-I Satellite: A New Member in an Exclusive Club

On September19,1988, Israel’s first satellite was launched into space and was completing its orbit every ninety minutes. Offek-I was put into orbit by a rocket launcher developed by Rafael, Israel’s Ar- mament Development Authority. The satellite was the result of the highly dedicated effort of Israel’s Space Agency, and the cost of the program so far has been put at a relatively low $200 million. The ISA chairman has stated that Offek-I is of major scientific importance. Israel Aircraft In- dustries, which was the contractor for the development and building of the satellite, has indicated that Offek-I’s subsystems collected data on space environmental conditions as well as the earth’s magnetic field. Other important scientific findings involved the evaluation of the satellite’s transmission sytems, the use of solar power, and the determination of operation capabilities in a vacuum and in the condition of weightlessness. Israel’s achievement in orbiting a satellite is not as surprising as it otherwise might be, because of its proven scientific infrastructure and technologically oriented engineering and scientificpersonnel. Thisachievementaccordsthe country entry into a highly exclusive space club, whose membership includes Russia, the United States, Japan, France, China, Great Britain, and India. Charter members were Russia and the United States. Both these countries entered the space age within one year of each other, in the late 1950’s, with the Sputnik I and the Vanguard 1. The American Vanguard and Israel’s Offek-I were developed independently by their national space programs. The scientific benefits from data gathered by the Israeli satellite undoubtedly will lead to improved understanding of space and associated phe- nomena. It also provides Israel with a new “seeing” dimension of major strategic and political importance. Israel has achieved a highly developed expertise in the field of optical lenses, and a leading-edge position in infrared detectors. Both of these technologies are prerequisites for reaping the benefits of optical telescopes that can focus light from objects on the earth onto highly sensitive detectors that, in turn, can provide real-time information. These abilities are critically important in terms of strategic information-gathering capabilities. They also form an underpinning for advance-warning defense systems and are therefore a deterrent to potential aggression on the part of Israel’s neighbors. The high technology required for the development, launching, and orbiting of the satellite is a multifold blessing. Practitioners of the technology have earned for their country the prestige accorded to such successes and have elevated its standing in the international arena of science and technology. Israel’s four million people have gained an additional feeling of pride and a heightened sense of capability in this unstable region of the world.

At the time of the placing into orbit of Offek-I, Isra- el Aircraft Industries, together with the Israel Space Agen- cy, published the ﬁnal technical details of the satellite.

Shape Octagonal Height 2.3 meters Lower base diameter 1.2 meters Upper base diameter 0.7 meters

Weight breakdown (kg)

Structure 33 Power supply system 58 Computer 7 Communication system 12 Thermal control system 5 Wiring 9 Instrumentation and balancing weights 3 2 _ _ _ Total 156 kg. Electrical System Details

Power supplied by the solar panels 246 Watts Average power consumption 53 Watts Battery capacity 7 Ampere-hour Voltage, unregulated 25-42 Volts

Communication System Details

Communication 3 Band Telemetry transmission rate 2.5 Kbits per second On-board memory 128 Kbytes.

CHAPTER FIVE Defense Industries Move From Conventional to Sophisticated Weaponry

It is easy to perceive the strengthening links between Israel’s high- technology sector and the military establishment, which must continue to prove itself capable of producing highly effective weaponry. This has given rise to a new generation of technically skilled personnel, re- sponsive to the challenges of sharpening the very specialized knowledge required to produce new and sophisticated military products.

In April 1987, Lieutenant General Dan Shomron was appointed as Isra- el Defense Forces Chief of General Staff. The new CGS brought with him a strong technological orientation and has said that he plans to turn the IDF into a “technological and agile” fighting force. Lt. Gen. Shom- ron clearly considers security and technology as synonymous. His view is that technology worldwide has matured to the point where it can offer an answer to the defense needs of a small population. Even more important is his confidence in Israeli industrial ability to provide technological solutions to the country’s difficult defense problems. But dealing with security requirements is not the only issue. Since the mid-1980s, the dominant trend of Israel’s defense policy has been to keep developments within clear budgetary limits. Not since the early days of the State have financial considerations served as such important guide- lines. Dr. Zev Bonen, former managing director of Rafael Armament De- velopment Authority, has pointed out that the post-1967 war period, “driven by the trauma of the de Gaulle embargo, resulted in an all-out policy of trying to develop and produce almost all of Israel’s needs, including major platforms such as aircraft, tanks, missile boats, and other weapons systems.” Dr. Bonen points out that this “all-out policy had a very major weakness, namely, a complete disregard of the economic imperative.” Shimon Peres, Prime Minister in 1984-86, together with Finance Minister Yit- zhak Modai, succeeded in stabilizing Israel’s economy. Moshe Nissim, the next Finance Minister, concerned himself with the implementation of a new economic plan, which set about maintaining the newly acquired economic stability.

With this in mind, the country’s political leadership convinced the Israel Defense Forces that economics, including strict budgetary belt-tightening, must be one of the policies for all future defense planning and spending. This determined approach to slash the military budget was responsible for the government’s decision--passed by one vote in August 1987--to discontinue the development of the Lavi combat ﬁghter plane. This decision was a blow. When Israel Aircraft Industries rolled the ﬁrst Lavi prototype out of the hangar in July 1986, it was a major achievement--a combat aircraft designed to meet the needs of air warfare in the Middle East. The plane, which in itself was an airborne integrated-weapon system, was par- tially funded by the U.S., with some $1.5 billion invested. The American aerospace industry also pitched in, producing more than half of the Lavi’s parts, the most important of these being the wings and the turbofan engine. But the most stunning achievement of the Lavi was its avionics (electronic control) system, which some have suggested was the most advanced in the world.

This Israeli innovation was the handiwork of native engineers, in cooperation with Israel Air Force pilots. The Lavi’s grounding also dealt a blow to political and military leaders as well as the ordinary citizen. Is- raelis had learned to look up into the sky in appreciation of the grace- ful plane undergoing its running-in tests. It was a source of pride and unity for a country that has had precious little to cheer about in the 1980s. The Lavi’s demise was but one in a series of events over the past five years which have had a profound effect on the internal structure of the military industries sector. In that period, the downward trend in spending has been glaringly obvious, with some $1 billion in defense cuts. In 1982, according to published reports, defense expenditures represented 16% of GNP; l988 estimates have it running at less than 14% of GNP--still the highest in the world. Concurrent with defense cuts, some of the same measures used by the National Unity Government of1984-88 in achieving economic stabiliza- tion have created more challenges for the military industries. The freeze (from January 10, 1987) in the shekel-dollar exchange rate, coupled with a 16% rise in gross real wages during the first six months of 1988, played havoc with anticipated export profitability. These factors forced personnel layoffs in key companies in the field. Israel Aircraft Industries laid off hundreds of its personnel and Rafael also released many employees.

The economic signiﬁcance of an extended shrinkage in this sector bears closer inspection. Defense budget cuts and the diversion of funds from conventional military production to the Lavi lowered the overall amount available for the country’s defense needs. If the military industries are to regain the prosperity levels of the late 1970s and the early 1980s, they will have to expand exports drastically. Israeli-produced weaponry is well received by many foreign customers. Major selling points are the reliability of the weapons and the fact that they are battle tested. How- ever, unlike countries like Brazil, which produce primarily for export, Is- rael produces weapons and military systems mainly for its own needs; export clients’ requirements are not necessarily given top priority.

It will be up to concerns such as Rafael to orient themselves to the export market rather than to cater exclusively to the needs of the IDF. The degree to which managers adapt their planning and production to the sophisticated needs of overseas customers, military and civilian, will determine the viability of these concerns and their contribution to Israel’s economy and security. The greatest challenge, however, in increasing exports, is to do so without having to depend on governmental assistance in the form of enhanced export incentives, subsidized loans, or a devaluation of the shekel.

This is not to say that Israel’s defense technologies are not sophisticated, or that efforts are not being made to adapt military technology to civilian use. Following are some examples.

One of the state-of-the-art military technologies is that of infrared detectors, discussed in Chapter Three. Like many other technologies speciﬁ- cally tailored to the country’s defense system, only in the secondary stage of development has consideration been given to non-defense applications. The technology of thermal imaging, which utilizes IR detectors, in due course will ﬁnd its way to such diverse areas as human and animal health care and domestic surveillance. Prospects for developing non-military IR products are especially promising in Israel. Medical imaging, for example, is highly developed in a country with one of the highest doctor- to-patient ratios as well as an advanced medical and hospital care system eager to absorb new technologies. The resulting interaction between developer and user shortens the time span from the development to the prototype product stage. The needs of modern warfare have spurred the development of another system that can provide a useful service in civilian life. The mini remotely- powered vehicle, or RPV, is capable of day and night tactical real-time reconnaissance, damage assessment, communication relay, artillery ranging, and other highly critical missions. These vehicles, produced in Israel,were highly successful against Russian-built SAM-6 Missiles in the Beka’a Valley during the War in Lebanon. They have subsequently been adopted by the American Navy. The mini-RPVs can either take off from short improvised strips or be catapulted into the air by a pneumatically operated launcher.

The next development is related to vertical takeoff and landings, allowing the RPVs to take off from very small areas, such as small boats. For civilian use, Mazlat Ltd., a joint Israel Aircraft Industries-Tadiran venture, has produced pilotless aircraft with equipment for surveying the Negev desert for various mineral deposits, including uranium. These RPVs come with a gyro-stabilized, remote-controlled TV camera. Mod- els used for surveying mineral deposits transmit real-time pictures of the surveyed area to the ground-control station and to other mobile receiving units up to 60 miles away. Mazlat’s vehicles, which can be used with sensors developed to user specifications, are considered among the most advanced and cost-effective systems of their kind in the world. By the same token, avionics systems which are being developed for use in fighter aircraft will enter the field of commercial aircraft. There are some 30 firms engaged in the production of defense materials. Representative firms and some of their products are listed below:

Israel Aircraft Industries IAI is the country’s largest high-technology industry, with approximately 18,000 employees.

Products include: Military and civilian aircraft (Kﬁr combat aircraft, Arava transport planes, Astra and Westwind I & II business jets); Gabriel and Barak missile systems; systems and components for mini-RPVs; combat vehicles and patrol craft; electro-mechanical, electronic, and optronic systems; navigation and engineering equipment; and industrial systems software.

Rafael Armament Development Authority Rafael is Israel’s largest research and development house for weapons systems, including missiles, guided and unguided weapons, electronic warfare systems, simulators, and thermal imaging. Galram Ltd., a company that evolved out of Rafael, seeks civilian applications for Rafael’s military technologies.

Products include: Python-3 air-to-air combat missiles; Barak-1 point defense missiles; Blazer add-on reactive armor; Toga add-on armor; Rattler radar jammer; Simugun tank- gunnery trainer; as well as LRCR and SRCR rockets. New products recently introduced include airborne infrared targeting and navigation pods and the Pyramid TV-guided, low-cost, precision glide bomb.

Elbit Computers Ltd. Elbit is the leader in Israeli defense electronics, with a staff of more than 1,700. Sales are on the order of $200 million a year; the company’s order backlog currently reaches $300 million, nearly three quar- ters of which represents export orders. Since the early 1970s, Elbit has been supplying weapons-delivery and navigation systems. The company equips all Kﬁrs and Phantom F-4s and F-16s of the Is- rael Air Force. (For further information about Elbit, see the Appendix.) Products include:

Dash, a display and sight helmet system representing an important advance in air-combat capabilities, enabling pilots to aim weapons by simply looking at the target. Opher, terminal-guidance kits that trans- form “dumb” general-purpose bombs into “smart” weapons which allow point target hits. Halo Night Vision Goggles.

Astronautics CA Ltd. Astronautics is a subsidiary of the Astronautics Corp. of America. Nearly half of the company’s products are exported. Products include: Digital air-data computers, airborne computation systems, and sohisti- cated display systems for cockpits. The company supplies the Israel Air Force with parts and systems for its ﬁxed-wing aircraft and helicopters, including the Kﬁr, F-15, F-16, F-4, and A-4, and various Bell helicopters.

Cyclone Aviation Products Ltd. Cyclone is a subsidiary of Etz-Lavud. The company is certiﬁed by aerospace manufacturers, including General Dynamics, Boeing, Bell Textron, Sikorsky, McDonnell Douglas, Teledyne Ryan, and Is- rael Aircraft Industries. (For further information, see the Appendix.) Products include: Components for aircraft, such as defense-ﬁghter horizontal stabi- lizers, fuselage sections, access doors, and external fuel tanks.

El-Op Electro-Optics Industries Ltd. El-Op is a division of Tadiran, Israel’s largest electronics concern. Products include: Tank ﬁre-control systems, laser systems, thermal-imaging systems, avionics systems, infantry sights, and night-vision equipment.

International Technologies (Lasers) Ltd. ITL, a technology-driven emerging growth company, has products that reflect a unique basket of advanced-technology applications. ITL is owned by Clal, Israel’s largest investment company. In 1988, ITL’s sales were on the order of $2.5 million and, for the first time since its founding in 1982, some profits were realized. If projec- tions are reached, sales should top the $10 million mark by 1990.

Whether ITL can expand its market depends on its ability to transfer some of the unique experience of Israel’s crack defense and anti-terror units to other potential users. Products include: Projectors, laser aiming lights, laser light sources, and laser-augmented video cameras. ITL specializes in a line of targetting products and systems based on the latest technological achievements in the ﬁelds of lasers and optics for night use. (For further information about ITL’s products, see Chapter Three.)

El-Or Optronics Ltd. El-Or sells its munition quality-control systems to European manufacturers. Though less than three years old, it possesses the technological base, the personnel, and the ﬁnancing to establish a niche for its three major systems, which could take it from $2 million sales in 1988 to $6 million in 1989 and double that in 1990. Products include: The Vidi, Vina, and Viga systems, which, utilizing lasers, employ vision techniques for precision measurement of a variety of machine and manufacturing parts. (For further information about El-Or’s products, see Chapter Three.)

CHAPTER SIX Israel’s Future Lifeline: Exports

Israel’s electronics industries fall into the category of high-tech enterprises. More and more funds are being poured into the development of semiconductor devices. The country’s electronic and computer engineers, as well as software specialists, are capable of developing and producing the world’s fastest computer chips--as has been done at the Intel Development Center in Haifa. A study done by the author and presented here, demonstrates that Is- rael’s electronics industries export a very high percentage of their total production. These ﬁndings make the industry an important area for outside investment, and should be a green light to the government to provide more funds for the education of the country’s electronic engineers. The total output of Israel’s electronics industry in 1987 was valued at $2.25 billion, which represented just under 10 percent of the Gross National Product. Electronics is a growth industry in terms of annual sales. In 1987, sales increased in dollar terms by 12.3% over 1986. Over the past decade, the industry has had an annual growth of 20%. The major areas comprising Israel’s electronics industry include communications systems, computers and peripheral equipment, tactical electronic equipment, medical electronics, image processing, electro-optics, semiconductors, and computer-aided systems for technological training. The table below indicates that the annual output of the Israeli electronics industry has grown by more than 140% since 1981 and that exports have more than tripled. Until1984, electronics exports were traditionally less than 50% of the total electronics output. Since 1985, annual exports have grown from $985 million to $1.35 billion. In 1987, exports accounted for 60% of all electronics production.

Sales [in millions of dollars]

Year Total Exports Exports as Sales % of total sales ______

1987 2,250 1,350 60% 1986 2,003 1,113 56% 1985 1,908 985 52% 1984 1,783 895 50% 1983 1,415 678 48% 1982 1,160 520 4 5 % 1981 930 400 4 3 %

Number of Employees Since 1981, the number of employees in the electronics industry has increased by nearly 40%, to a total of 35,500 in 1987. Over 50% are technicians, engineers, and scientists. More than 4,600 employees are active in research and development.

High Added Value The electronics industry in 1987 included 68% added value, which is considerably higher than the 42% added value for all other industries taken together.

Profitability Profitability has been poor among the participants in Israel’s electronics industry. At the beginning of 1988, an analysis of seven major science-based and high-tech companies, carried out by the Israel High-Tech Report, indicated that low profitability is a major problem of the industry.

Industrialists blame the government, claiming that its economic policies, aimed at curbing inflation and maintaining the rate of exchange, have put a major crimp in profitability and on dollar denominated sales. The industrialists also correctly point out that profits were hurt as a result of drastic reductions in the defense budget. The government, for its part, calls on the industry to increase efficiency and productivity.

Our analysis indicates that by the early 1990’s, the annual output of Israel’s electronics industry should exceed $3.03 billion, and increasing penetration of international markets by its products should result in annual exports of $2 billion.

Proﬁtability should improve with a more manageable level of inﬂa- tion in Israel, a stronger dollar on the international currency markets, and a streamlining of many of the country’s electronics companies. Uzia Galil:* Missionary and Visionary

J. M. Many important things are happening in light of the cancellation of the Lavi project. What effect do you think it will have on education--this question is relevant because of your long association with the Tech- nion--and what effect will it have on the country?

U. G. Let me give you, in a few words, my philosophy in the broadest sense. I believe that the only way to make Israel a Jewish State and keep it that way is by making the country very attractive for immigrants. We must increase the population of this country by a million or two. That’s it. In Israel today there are a large number of convictions held by a variety of sectors of the population about the future course of the State. I simply do not believe, the way Israeli society is structured today, that we are going to attract immigration. It is something I really want to see, but I cannot imagine that we are able to convince the right kind of people needed to build up this country to settle here. A religious upbringing or even a Zion- ist background is not enough. We live in a competitive world and we are competing for the. top people, the top people from the Jewish world. To make immigration attractive, beyond the obvious, means providing a certain standard of living, a ﬁnancially attractive situation. This does not mean that one has to say, “Well, you’ll make $100 more here than you would there.” Professionals--engineers and physicians, lawyers and writers, CPAs and artisans--travel. They must be able, more or less, to maintain a reasonable standard of living. I am not talking about

*Uzia Galil, who was interviewed by the author, is chairman of the Board of Directors of Elron Electronic Industries Ltd. afﬂuence. I am talking about a normal standard of living. My perspective on the problem departs from the social point of view and focuses on the economic. Economics is the area in which we must concentrate. I maintain that the real solutions to Israel’s defense problems do not lie in a large army but in a sound economic infrastructure. You cannot, generation after generation, send people to serve in the armed forces and not provide a way of life that they can really be happy with. I put aside those sectors of the population whose only motivation is religious. They are a minority. We are back to the old question of relative advantages. One of our most signicant relative advantages is our educated population. For years we have trained people. The number of students studying in Israel’s universities is very impressive. But one of the major mistakes that was made during the past two or three years has been that insufﬁcient emphasis was given to education, especially technological education. This is going to hurt us.

J. M. What is the solution for the future?

U. G. We must move very quickly to correct the situation. If I knew that there was a plan whereby in three years time things would improve, I would rest easy. But what’s happening is dangerous. In another year or two we will be beyond the crisis into a quagmire.

J. M. Are you talking about the Technion?

U. G. I am talking about the Technion and all the other institutions in which we educate people to be entrepreneurs--starters. I mean the kind of talent that attracts companies to open up here.

J. M. Is there raw material here to be educated?

U.G. Certainly. If you ask semiconductor manufacturers anywhere in the world, they will tell you that there are only two places in the world where there are good chip designers: Silicon Valley and Israel. And we are not limited to Haifa; there are good people in Tel Aviv and other places. I was really impressed when I talked to people in the semiconductor industry. I didn’t have to sell them on this point; they were well informed already. There are a number of other disciplines in which we have reached excellence. But we must be careful and not overextend ourselves by trying to be specialists in everything. We must develop those spheres in which we are strong. J. M. Where is the Board of Directors of the Technion placing the emphasis? Where will the assets and the personnel be invested?

U.G. We are placing more and more emphasis in the direction of computers, electronics, and industrial management; and physics--because it is related--is also being given priority. Recently, a decision was made to go more into biotechnology. We can live with that. But the cutting of resources is preposterous. This is a question of surviv- al. The universities are no longer talking about development or expansion; they are talking about subsistence. In this respect, the Technion has done an excellent job. It has not given in but has continued with its declared task. We are teaching people how to build up business.

J. M. Can the Technion afford to continue accepting every deserving and potentially capable student?

U. G. Certainly not. It is obvious that the limiting factor is budgetary. In order to expand the student body, you need more staff. If you don’t have money, you can’t take on staff. This distances us from such things as subsidies for worthy students. It is dangerous to take the short-term position. You hear people saying, “Why educate more engineers when the market is flooded?” We must take a broader attitude toward education, particularly toward the education of engineers. We cannot build for the future by basing ourselves on the demands of tomorrow morning. If we have a core of capable engineers and leaders, five years from now we will have a need for even more engineers, and then more. If we didn’t have that core, then there would certainly be no demand for more. It is a self-fulfilling prophecy. This is an extremely important point to grasp.

There is a further facet to this scenario--the drag effect. If a kid is raised on computers from the age of ﬁve and he grows up within an environment that is familiar with systems and software, this kid will want to study at the Technion. And what will happen if there is no room for him? That’s it; it’s as simple as that! We are looking for areas of relative advantage. And this leads us to the defense industries in Israel. Here I want to reiterate one point. Israel may be a small country, but when it comes to military equipment, it is not small at all.

The defense market is no small market either. It is only normal that Is- rael should take advantage of all the military development that has been undertaken and reap economic beneﬁt from the research and development being done now. This is really the only way we are going to get a pay-off from the enormous investment made for local defense. The international military market is a very difﬁcult business to succeed in. Elbit is a good example of international marketing. They raised exports from 30 percent to 60 percent of total sales. And people complain that they don’t want this business coming out of Israel. There is a constant fear that once you start doing meaningful export of military equipment, people begin to have second thoughts, and you hear things like: “Let’s get out of the defense industry and switch to the civilian sector.” This is nonsense. We have every right to establish ourselves in this market.

Mr. Uzia Galil is the founder of Elron, its president and CEO since 1962 and its chairman since May 1985. He serves on the various boards of directors of the Elron afﬁliates. He studied engineering at the Technion and at Purdue University in the United States. Since 1980 he has been the chairman of the International Board of Governors of the Technion.

CHAPTER EIGHT Fred Adler*: On Nurturing High-Tech Seedlings

J. M. Fred, your relationship with Israel--and ﬁnancing Is- raeli companies--goes back 25 years. What does your portfolio in Israel look like today, aside from BioTechnology General?

F. A. I presently retain somewhat over 250,000 shares of Optrotech, 200,000 shares of Fibronics; my family and I hold somewhat over 200,000 shares of Scitex, nominal amounts of Elron--not very much--and I took a tax loss on Elscint last year to offset capital gains. Actually, I am probably on my last round with Elscint, even though I lost money (although over the years I made money). My private portfolio has been up and down; it’s hard to say. I have reinvested another $2 million in Israeli-linked ventures, in situations which I would term as highly speculative. But if they work, and they are very long shots, they could be of major signiﬁcance to Israeli technology. Part of my personal philosophy over the years has been that the best contribution that somebody like myself can make is putting risk capital into technology situations that have a great deal of potential but that might otherwise not be funded.

J. M. You know, I have followed BTG from its inception. Would you like to relate the Israeli side of it , which began at the Weizmann Institute?

F. A. There were the three basic areas we were looking at: pest controls, fertilizers, and growth ho rmones. I went over to Israel and visited the Weizmann

*Fred Adler, who was interviewed by the author, is one of America’s best-known venture capitalists. Institute. I met with Sela, a leading Institute researcher, and decided--frankly, against the advice of almost everybody I knew--to go ahead. Interestingly enough, the reason that people advised me not to do it was that they felt that the same money, invested in the U.S., would get better results. It would be hard to maintain control in Israel. I experienced feelings at several levels. As a Jew I was concerned with the development of the biotechnology industry in Is- rael. Secondly, I felt that Israel’s particular expertise in the area of agricultural research might end up as being signiﬁcant.

Thirdly, I felt, as I usually feel, that the extraordinary academic climate in Israel--the Weizmann Institute and the Hebrew University, in particular--might yield some substantial results. There were researchers in both institutions who were doing particularly good work in cloning, vectoring, and some of the other important areas which would be the very heart of the biotechnology industry in Israel.

I felt that the downside risk to my investors was actually minimal because of the agricultural content of the process. In fact, the analysis I finally ended up with was that it would be a totally safe investment. I don’t believe that Israel is going to blow up that easily. I am not worried about the country being over-run or nuclear bombs making it a waste- land or everybody being thrown into the sea. That’s the same thing as an earthquake taking Silicon Valley into the Pacific. Onecannot bet on disaster. Given the agricultural content of the process involved, I felt that the real question was the degree of the upside. From an investment viewpoint, my investors would come out with a very decent profit. In fact, we sold or distributed all of our fund shares. They averaged $2.50 a share and cost roughly 20 cents. Now I, by the way, have not sold a single share. My funds have increased their value eight or nine times.

J. M. How did the company get into growth hormones?

F. A. What occurred was that as we moved into the agricultural area, we found that the growth hormone was far more significant than the pest control or the fertilizer and that, in fact, it was the major product. The next step- -the move from plant growth hormones to human growth hormones--was not substantial, and we had a product. As time moved on, we also carried out some basic studies and decided there was potential interest in a product called superoxide dismutase (SOD), or free radical oxygen. The original research was done in Germany, and the product is intended to reduce inflammation in the knee and hip joints. I, in fact, had a problem with my hips, and the superoxide dismutase has helped to keep me working. The pain was so severe that without the medication I would have been on my back. Continuing the research on SOD, our team reached some very interesting conclusions in the field of heart attack research. Superoxide dimutase cuts down the flow of oxygen and therefore reduces damage to heart tissue following an attack. That has become a major area of focus within the company.

J. M. What is the time frame from laboratory through to approval by the American regulatory authorities for a product like SOD?

F. A. We started SOD a good three years ago. It will be 1989 or 1990, if all goes well, before we obtain FDA approval. It can be six, eight, or sometimes ten years from start to ﬁnish, from discovery to approval. This is unfortunately a highly misunderstood point within genetic engineering. Many shareholders expected us to perform like the electronics industry, where an idea can be translated into a viable product within three or four years or even less. This is certainly not true for pharmaceuticals. It is a long and expensive process.

J. M. From a venture capitalists’s vantage point, how do you evaluate Israel’s technology and its personnel?

F. A. Israeli technology, Israeli engineers, Israeli intelligence--they are all first class. In BTG, there are areas where knowledge is lacking. There are areas in which we have great difficulty recruiting people. The field of cell biology is really problematic. In electronics, particularly hardware, they are brilliant. In the software area, they have been good and are getting better. Some of the software people are magnificent. The productivity of the better groups, if they are well led, is at the top of the heap. Israel was founded in 1948. It really didn’t achieve even a minor industrial stature until 10 or 15 years later. It is essentially, in many ways, a developing country. Israel has managed to make an extraordinary effort in the civilian sector of business and industry and, at the same time, carry the bur- den of a defense establishment appropriate to countries 20 or 30 times its size. It’s a very slow process to develop a management infrastructure in a situation like that. It’s a slow process in the United States, where we have an infrastructure for development that is many times greater than that of Israel. The willingness to make necessary changes in management, which is critical, is not found in Israel. They are afraid to change management. There is such a shortage of managers that there is almost a ransom effect.

J. M. Does the job security structure, where people remain at the same job for decades, inﬂuence the management structure?

F.A. What happens is that it becomes self-defeating. Its first obligation is to maintain the maximum number of jobs. This is in opposition to a major management position: You must be free to trim the company down so that the work force will always meet company needs. The peerless leader, the utilization of every intelligent resource that is available, the value of bright young minds, key management operating with a lack of self-doubt--these are things that Israelis have just begun to learn about. My basic operating philosophy in the companies that I run is that I run them, even when they are successful, as if they are in a state of turnaround every day. The first question I have is “What are we doing wrong?” I won’t let management brag about what we are doing right. I don’t knock my competitors. I am afraid of them. A basic operating theory is that if I am doing something and it’s successful, somebody else can beat me at it. I have got to figure out how they are going to move and quickly implement a strategy which in effect will defeat that strategy now--not later. That’s sometimes tough going. Israel is slowly learning that there is a core of good managers, but it’s a tough ball game. Absolutely first rate people operate in venture capital. Tolkowsky is perfect. Uzia Galil will never be recognized as the national hero that he is. He is more interested in the future of Israeli technology--the success of Israeli technology--than of the future of his own pocketbook and his own personal success. You have the Discount people; I know some of them who break their backs for their companies. I have been terribly impressed with that. And goodness knows how many other do the same. You have entrepreneurs, like Stef Wertheimer. But Israel is nevertheless a small country. It’s a tough road for a venture capitalist. If you are selective and if you can findgood Israeli partners at the board level as well as at the company level, and if you can put in the controls and systems that you would in the U.S., you can make a go of it. Probably better than anywhere else in the world outside of the United States.

CHAPTER NINE The Venturesome Capitalist by Dan Tolkowsky*

In the mid-1950s, Israel embarked upon a strategy of accelerated industrial growth. It was a very wise decision. The government enacted a series of measures, including aid to approved enterprises, the creation of the industrial-development bank, and low-interest working capital loans for exporting companies. Later came the introduction of R&D grants. The strategy was very successful in boosting the country’s industrial production, which increased by 8 to10 percent annually. During Israeli industry’s rapid growth, Israeli investment corporations, af- ﬁliated with the country’s major banks, were a primary engine of expansion. In the mid-1970s, the country unintentionally moved into a different phase of slower industrial growth, which required a new strategy. To this day, the fact has not been recognized by the government. The escalat- ing oil prices following the Yom Kippur War were only partly to blame; other economic factors also contributed to the slowdown. The era of government-induced accelerated industrial growth had come to an end. If a system grows organically, you do not need someone with his shoulder at the wheel pushing like mad. During accelerated growth, that is what the government was doing. In the mid-1970s, the time had come to expand at a slower rate, primarily through entrepreneurial action and not through government wheel pushing. But the government has not realized that its role now should be to encourage entrepreneurial action by getting rid of obstacles in the way of

* Dan Tolkowsky is a partner in Tolkowsky Associates, general partners in Athena Venture Partners, a U.S. registered venture capital limited partnership. entrepreneurial activity. Everybody in government is talking about re- newed economic growth, but when you ask them what they are talking about and how to achieve it, you ﬁnd that many don’t know what is involved. The fact is that the ball is in the entrepreneurs’ court, not in the government’s. When I say “entrepreneurs,” this includes private individuals, kibbutzim, and the labor federation holding company (Hevrat Ha’ovdim). The entrepreneurs can function effectively, but only if the government clears the mineﬁelds it created over the years. Mine is a limited perspective:

I am involved in venture capital for high-technology businesses. Why? Venture capital is directed towards high-risk opportunities, but can mean high return. The only intelligent way to promote a high-risk venture is to aim for one that, if successful, can bring in rewards that far exceed the expectations of normal businesses. The only way to do this is by seeking opportunities that will eventually lead to successful companies going public in the United States. Israeli activities that have gone public in the States are high-technology-based enterprises. In the United States, some of the most successful venture capital activities in the world have nothing to do with high-tech, but Israel does not have these kinds of options. I don’t know any retail chain in Israel, for example, that could bring a glint to the eye of a U.S. investment banking house. It is not entirely surprising then that the only practical application of venture capital in Israel is in high technology. This does not mean that the only investment opportunitites in Israel are in high technology. There are many other options, such as buy-outs of existing companies, and equity investment in non-high-tech business, in less risky business, in agriculture and in retailing. However, in choosing investment opportunities, you (or your representatives) have to spend quite a bit of time analyzing the economic landscape here. First, you must understand the lay of the land. Then you can apply your business sense and see what happens. A respected businessman called me a few weeks ago and said, “Somebody I know well in Israel told me that there are all sorts of interesting opportunities. I want to come in for a week, do a lot of negotiating, and leave.” I said, “My friend, that’s not the way to do it. The right way is to ﬁnd a counterpart in Israel you can work with. Spend enough time with him to be absolutely certain that you agree on the sort of opportunities to invest in. Have him thoroughly prepare the ground for you and identify two, three, or four opportunities. He should do a lot of work on them so you can march in and ﬁnalize the deals you want,” I explained. It is ridiculous to expect somebody to pick up the paper, read about some opportunities in Peru or wherever and make up his mind to get involved based on inadequate facts.

One has to spend a lot of time and energy tuning into the business environment. However, that is a job many potential American and Europe- an investors have skipped. They have a number of incorrect assump- tions about Israel. One is that Israel is a socialist country. Another is that the trade unionists control everything, making it impossible to do business. These beliefs are undiluted rubbish and have been rubbish for 20 years. However, beliefs die hard. You will ﬁnd that the socialist- nation and union-tyranny images are very deeply rooted in the minds of many business people abroad. But they are wrong. Witness the fact that industrial unrest in Israel’s private sector is almost unknown. The business world holds another incorrect image of business life here: “You can’t do anything in Israel because of bureaucracy.” My answer to that is, given the inertia in business, in government, or wherever, if bosses expect action, their subordinates will provide it. But the bosses have got to make up their minds in the ﬁrst place. Until now, it has been the bosses who have not correctly sized up the situation in Israel. Yet, I’m sure they have it in them to do so, provided they make up their minds.

Our strategy at Athena Venture Partners is to address ourselves to high-technology-based opportunities in Israel and the United States. We are progressing steadily, thanks to our investments in both countries. This two-legged structure is a unique feature of our fund. This structure means that we have access to venture capital investor Fred Adler’s vast data-base ﬁles, experience, consultants, and network. These are invaluable resources for our doing homework on deals, because they enable us to obtain very vital information regard- ing the U.S. market, competition, technology, market trends, and so on.

Dan Tokowsky, prior to forming Tolkowsky Associates, was the managing director of Discount Investment Corp, the main investment arm of the Israel Discount Bank Holding Corpora- tion, a major Israeli ﬁnancial institution, which he joined in 1959. Mr. Tolkowsky was commander of the Israel Air Force from 1953 to 1958 and is a major general (reserve).

CHAPTER TEN A Bird of an Altogether Different Species by Dr. Ed Mlavsky*

When business people start thinking about expansion, the most important points to consider are their capabilities, their limitations, and the size of the market for their products. In addition, they must recognise three other factors: cash flow, cash flow, and cash flow. That is true in any country, but in Israel it is even more so. Poor cash flow is the greatest obstacle to the startup of any business, especially a high- technology company. Because of the paucity of risk capital for starting investments, it is essential to generate cash flow as early as possible. And firms should plan on doing only what is doable with the resources available. I recently met a small group of engineers who had developed a couple of products that sounded quite interesting. They have sold well in Israel and have attracted some orders from France. Now the group wants to market a new product, unrelated to those they are currently manufacturing. I tried to explain to them that the worst thing that could possibly happen now would be for an investor to accept proposals. They would simply go under trying to finance them. Along with many others who come to consult me, these engineers have to recognize what they can and cannot do in the market, and to understand that the potential investor and the potential customer measure performance by tangible achievement, not by the ability to conceive of yet more sophisticated products. These fre- quently cost more, and require completely different marketing networks. And so we have the phenomenon--probably unique to Is- rael--of small companies simultaneously working on several projects or tentative projects, each one of which,

*Dr. Ed. Mlavsky is the executive director of BIRD--Israel-U.S. Bi- national Industrial Research and Development Foundation. if successful, would require a totally different marketing organization. Companies in the United States with $20 or $30 million in annual sales would not even contemplate a development, no matter how promising, that would force them to create an entirely new infrastructure to support it.

In Israel, there is a wide gap between creativity and reasonableness. This is the problem which I, as a consultant, try to solve. I ask small-scale, high- technology businessmen what their ambitions are. I then explain to them what goals are attainable, given the resources they have or have access to. Since BIRD’s slant is binational, geared to Israel and the United States, I also explain to prospective exporters what will interest an American company. Israelis talk about the need for marketing. Unfortunately, the terms “marketing,” “sales,” and “product development” are used interchangeably and incorrectly. At BIRD, we try to make it clear that “to market a product” and “to sell it” are not the same thing. And if the order of march is to develop the product first and then decide how to sell it, the company will come unstuck. The experience that companies gain in Israel is very useful on the one hand and very misleading on the other. It is useful in the sense that a company here can develop a product and sell it locally. This is extremely helpful in that it enables companies lacking financial support to generate some income. The Israeli market, however, is about the size of Philadelphia’s. It is big enough for a company with three people in it, for a while. Local companies often believe that if they only had the right person to sell their product for them, they could market it in other countries. What Israeli businessmen don’t realize is that their success in Israel is in no small way due to their proximity to their customers and to the flexibility of these customers. Domestic consumers sometimes manage without manuals or even completed products. They buy a sub-system first and later purchase the rest of the system. Because business works on a very free and easy basis, Israel is almost one gigantic beta site where prototypes can be tested.

This is especially true in software. I don’t know how many Israeli products, developed in Israel and sold in Israel, are fully documented or will ever be fully documented. But because software companies are able to sell here, they get the impression that they have a ﬁnished product. They then try to sell it in the United States and discover that the market is emotional and capricious. American customers are used to getting exactly what they think they want, even if it is not what they need. And they have lots of options, including European and Japanese imports. Israeli customers do not have as many options, unless they are willing to pay import prices for everything. So when an export-hungry businessman tells me “You know, we are selling this in Israel,” I have to reply, “Very good. It proves you have the capability to develop something useful and novel, and this is very important. But it isn’t enough. If you start the project with only that in mind, you are destined to fail.”

BIRD insists more and more, as we get older and wiser, that the choice of a U. S. partner--not the product itself--is the crucial point for Israe- li companies seeking to break into the American market. A partner is the best way, possibly the only way, of achieving a presence there. Whether one partner ends up owning the other is irrelevant to the good of the enterprise. What matters most is having people who speak the language, figuratively as well as literally, and who are willing to indulge customers. If you wish to sell a suit and a customer wants plaid, turn on the plaid lights. That’s what the customer wants; give it to him. In the last eight years, local businessmen have become far more sophisticated about exporting. It is no longer hard to sell our arguments, even to quite small Israeli companies. I can illustrate this in the following way. A group of high-powered business leaders from Norway, several with back- grounds in heavy industry, visited us recently. They came because Nor- way is contemplating setting up a BIRD-type organization with the United States. The Norwegians arrived at our office on what happened to be a very slow day. There were only three of us in the office at the time, and the phone didn’t ring very much. One of our visitors kept saying to me, “I don’t understand this. We have seen your record. You started 37 projects last year. But you have the same number of people working here that you had five years ago. You have no physical presence in the United States. I don’t even hear the phone ringing. How do you do it?” The Norwegian’s question made me wonder about the same thing for the first time. For the last few years, we have been increasing and improving our activities. How do we do it? The guy’s right. It doesn’t make sense. Then I realized that we had made so much progress in recent years because the Israelis we deal with are much easier to work with than they were at first. They are much better at seeking associates in the United States and at implementing their plans.

Being export-oriented is not just a slogan for them but a real drive. Yet, we still get new businessmen who are reluctant to recognize the dif- ference between proposals and plans. A proposal is courtship and a plan is marriage. A plan is doable when it is consistent with the resources available and does not assume that “the Lord will provide,” because the Lord, in this case, is not a very good provider. The businesses which do succeed in Israel succeed despite the most appalling disadvantages one could possibly imagine. If a council of Israel’s enemies had wished to create a system to ensure our failure as an industrial power, it could not have come up with anything better than what currently operates. But successful firms re- sist creating extra obstacles for themselves, by pursuing doable projects. BIRD has steered young companies toward the doable by using what has turned out to be one of our finest inventions, the “mini-project.” In one case, the head of a small business proposed an $800,000 project for designing medical systems with a U.S. partner. The partner was a public company, but it had just a few hundred thousand dollars in sales. The Israeli firm had never sold products, but had sold services. I told the starry-eyed businessman that BIRD supplies 45 percent of the funds on projects of that kind. Where would the rest of the money come from? He said that of total sales of $500,000 to $600,000 for services, he and his U.S. partner were going to generate $400,000 to $500,000 in order to support their new product. He should have known better. I explained that his project was totally unreasonable because neither partner could afford it. I suggested that he pick one particular part that could stand on its own and might be suitable for integration into a bigger system. It would be a project requiring more development than research and more engineering than development. It would fit a very specific market and be highly complementary to that which the American company was currently serving. This small part, nonetheless, would expose the firm to the same customers it would be seeking for its grander designs. In addition, the Israeli and U.S. partners could see how well they would cooperate. It would be the corporate equivalent of a trial weekend before committing themselves to living together. And there is no moral stigma in trying something on a small scale with another company before trying something big. Finally, a small project provides a reasonable chance of success, even if not a great success.

You can’t develop a $20 million market with an investment of $150,000, the limit BIRD set for the project. However, developing a $2 or $3 million market is certainly worthwhile. Some positive cash flow begins to come in, and the relationship between the companies is tested in the field. And important questions are answered: Is it viable? Are the transfer prices reasonable? Can the companies trust each other to do what they are sup- posed to do? Does the project continue to maintain the same priority in the companies as was originally intended? Do they diverge in interests? The firms came up with a project that sounded good.

We are keeping our fingers crossed, because these companies are almost too small for any kind of project. But with a mini-project there is a possibility of success. We put in $75,000, they put in $75,000. It will not be a catastro- phe if the project fails, but if it succeeds, it will be excellent. The irony is that mini-projects between companies with common ownership or partly common ownership are usually flops. However, the most successful big projects are those in which the companies involved have some other contact. The mini-project idea is really a way of telling small firms, “Crawl before you walk, and walk before you run.” Even in the course of a mini-project, there must be several visits by the Israeli company’s representatives to the American company. They will visit customers with their American col- leagues, but they will not conduct market research, because market research is nonsense. It tells you that, based on population growth, this, that, and the other thing will happen. But it doesn’t tell you what the products are, who the customers are, or how to develop a product for that market. We recommend that small businessmen ask potential customers pointed questions about their concerns, their problems, and the solutions they are looking for. We tell the heads of fledgling firms to hold up their gadgets and say: “This is what we are trying to sell to you. Does this do what you want?” The reply they can expect is: “Yes, but. . . .” It immediately gives the firms something tangible on which to act. We fund projects that have clear product goals and a good chance of achieving a saleable product within a budget and within a year, prefer- ably less. We’ve been extremely successful. When companies pros- per, they come back to us with other proposals. They have done well and made some profits. The income is perhaps not enough to pay for a new project, but there is a positive trend. Since they have had actual sales, they are better able to predict the outcome of future projects.

CHAPTER ELEVEN S.N.Eisenberg: A Big Busisnessman Flirts With a Miniature Laser

International business tycoon Shoul N. Eisenberg has offices or representative offices on five continents. Some of his projects, generally in low- tech fields, have run into hundreds of millions of dollars. He has played a role in the construction of power plants, railroads, steel mills, telephone systems, edible oil plants, cement plants, an atomic energy installation, coffee processing plants, and desalination plants. The value of his worldwide activities has been estimated at an average of $2 billion annually. Eisenberg is something of a mysterious figure, but it is no secret that he considers Israel a good place to invest. Asia House in Tel Aviv, where the offices of the Eisenberg Group of Companies are located, was built by Eisen- berg in the late 1970’s and is one of the most prestigious office buildings in the country. He controls 75% of the Israel Corporation, a public company with a market capitalization, in 1988, of more than $100 million, and he has investments in Israel in shipping, oil refining, construction, hotels, cold storage, and high-tech industries (the latter discussed also in Chapter Two). Aware of the high level of skills in physics and electro-optics, and attracted by the existing R&D capabilities in Israel, Eisenberg decided to invest in such fields as medical and industrial lasers. His R&D investment company, T.M.D. (Industrialization, Science, and Technology Ltd.), has invested in two technologically oriented companies. Ilan Tehila, T.M.D’s general manager, states that sales and exports have grown by 200% and that profits are being ploughed back into the respective firms. Throughout his business career, Eisenberg has maintained a veil of secrecy around his activities, making him a controversial figure. However, issues related to doing business in Israel and, more specifically, his backing for Israeli high technology, were discussed by Eisenberg in an interview--only the second time he had spo- ken directly to the press or, indeed, to any writer for publication. In this interview, Eisenberg emphasizes his impatience with what he calls the interminable period of time it takes R&D companies to offer a product for sale. “No one wants to buy research, but everyone wants a product. Re- search is just not a saleable commodity, but once a prototype is available, there is an opportunity for large sales. I have no problem in selling a workable prototype, because my connections are with the world’s largest companies.

They are not interested in sponsoring research in Israel, but they are interested in buying a product,” states Eisenberg. In describing his rationale for maintaining an investment in Is- raeli R&D, running into several million dollars, he states that one must have “Sitzfleisch,” a German term literally meaning “a well padded backside”--in other words, perseverance and patience. He is critical of the government’s involvement in business, which, he says, makes things more difficult than necessary. But he speaks with an almost paternal pride about the development of his investments in high technology. “Recently, the head of a major German investment company told me that, of their high-technology investments, only one out of twenty-fivehassucceeded.

My R&D company in Israel has already achieved a two out of twenty success ratio,” states Eisenberg. Eisenberg is upbeat about Israeli computer technology. Without being specific, he suggests that there are projects in the development stage in the field of language communications that would provide an answer to existing technical problems that have not as yet been solved by any of the world’s major computer companies. Accepting the inevitable fact that high-tech products require a lengthy R&D incubation period, Eisenberg concludes the interview by stating that he is allocating additional funds for further high-technology investments in Israel. Adler Fredrick 86, 108, 114 Advanced Products Ltd 13 Albeck Michael 11 Alumor Lasers Ltd. 114 American Cyanamid 115 American Israel Paper Mills Ltd. 111 Ampal--American-Israel Corporation 112 Arazi Efraim R. 140 Ares-Serono 132 Aryt Optronics Industries Ltd. 113 AS101 11 Astronautics CA Ltd. 76 Athena Venture Partners 94 Aviv, Haim 114 Barak, Shlomo 136 Bar-Ilan University 9 BARD 40 Baron Edmond de Rothschild 139 Ben-Gurion David 12 Ben-Gurion University 12 Beitner, Rivka 12 Bialkin Kenneth 108 BioTechnology General Corp. 114 Blonder Alain 121 Bonen, Zev 71 Brestel, Mordechai 44 Bristol-Myers Company 115 Carmel Container Systems Ltd. 117 Chet, Ilan17 Chen, Yona 16 Cyclone Aviation Products Ltd. 77, 127 Daniel Sieff Research Institute 29 Degem Sytems Ltd. 39 Diamond Electro-Optics Inc. 114 Diatech Diagnostics 57 Dinnar Uri 21 Dorper 13 Drexel Burham Lambert Inc. 119 Du Pont Critical Care 115 Donahaye E. 40 ECI Telecom Ltd. 118 Edelstein Shmuel 31 Efrat Future Technology Ltd 62 El-De Electro-Optic Developments Ltd. 121 El-Or Optronics Ltd 45, 77 Elbit Computers Ltd. 120 Elron Elecronic Industries Ltd. 122 Elscint Ltd. 124 Elul Group 113 Environmental Systems Ltd. 23 Etz Lavud Ltd. 126 Eshed Robotec (1982) Ltd. 125 Fass, Sim 115 Fibronics International Inc. 128 Fishelson, Lev 24 Galagraph Ltd. 130 Galil Uzia 108, 122 Geller, Ehud 131 Gill Emmanuel 120 Gitter M.B. 112 Greenwald, Theodore 21 Grossman, Shlomo 11 Gordon H. Wolfe & Company 109 Hagin, Joseph 22 Hazelkorn David 115 Hennes Yigal 16 Hurvitz Eli 142 IDB Bankholding Corporation Limited 138 I.I.S.--Intelligent Information Systems Ltd. 130 Intel Development Center in Haifa 78 International Technologies (Lasers) Ltd. 77 InterPharm Laboratories Ltd. 131 Israel Aircraft Industries 75 Israel Corporation 101 “Israel High-Tech Report,” 110 Israel Space Agency 68 Istec Industries & Technologies Ltd. 133 Kaplan Isaac 42 Karash, Michael 115 Katz, Yehoshua 21 Kramer, Marcia J. 109 Kremerman David 126 Kolitz David 113 Kuhn, Jonathan 23 Ladenburg, Thalmann & Co. Inc. 119 Laser Industries Ltd., 127 Laser Meir 118 Lavi 72 Leo Beiser Inc. 39 Lidex Corp, 22 Lieutenant General Dan Shomron 71 Low Arthur 108 Lubzens E. 41 Mazlat Ltd. 74 Meridor David 134 Medicom 60 Miller, Melvyn N. 65 Mlavsky, Ed 94 Navarro S. 40 Noff, Matityahu 24 Numar 65 Nissenson Haim 139 Offek-I Satellite 68 Olson, S. R. 22 Olswang Manny 119 Ophir Optics Jerusalem Ltd. 113 Optrotech Ltd. 136 Ormat Turbines Ltd 66 Oshap Technologies Ltd. 137 Oyster mushroom 18 Patt Gideon 1 PEC Israel Economic Corporation 138 Peled Benjamin 124 Peled, Emanuel 25 Pitaru, Sandu 24 President Ephraim Katzir 6 Prime Minister Shimon Peres 71, 122 Rada Electronic Industries Ltd. 139 Rafael Armament Development Authority 75 Ramot 25 Robomatix 63 Rosenberg, Lior 14 Rotem Shmuel 112 Rubinstein, Menahem 30 Sarov, I. 15 Sharon Uzi 42 Shwartz, Joseph 42 S.N.Eisenberg 101 S.P.I.--Suspension and Parts Industries Ltd. 142 Savyon Diagnostics 15 Scientific Diagnostics Inc. (SDI-USA) 10 Scientific Testing Inc. (STI-USA) 10 Scitex Corporation Ltd. 140 Semi Conductor Devices (SCD) 54 Sharplan Lasers Inc. 134 Silbermann, Michael 23 Snell T. W. 41 Suhami Avraham 108 Sredni Benjamin 11 Tandler A. 41 Technion 19 Tel Aviv University 24 Teva Pharmaceutical Industries Ltd. 142 The Hebrew University of Jerusalem 15 The Israel High-Tech Report Index 110 Trilogue 61 Tobias Glen 108 Tolkowsky Dan 91, 108 Ulitzur, Shimon 23 University of Haifa 27 Vardi Yossi 48 Vulcani Center 27 Weinberg J. Morris 128 Weisgal Meyer 29 Weizmann Institute of Science 28 W.R. Grace & Co. 143 Weihs, Daniel 20 Weksler, Meyer 42 Yeda 29 Yehudai Aryeh 126 Yehuda, Shlomo 11 Yissum Research and Development Company, 18 Zirin, Moshe 36 About the author:

Joseph Morgenstern In a career of more than 40 years, Morgenstern’s professional roles have spanned those of chemist, inventor, industrial manager, consultant, journalist, author, publisher and lecturer. Over the years, he has served as ﬁnancial consultant to leading hi-tech companies. His articles appear regularly in international publications including The Wall Street Journal and Business Week, and he has been quoted in Time Magazine, The Sunday Times of London, Bloom- berg Business, and Der Spiegel, among others.

A native of New York City, Morgenstern has earned degrees in chemistry from New York University and did and did graduate studies at Columbia University, and the University of Wisconsin. At the age of 29, he developed and manufactured Weldex, a “wonder material” which employed a novel chemical fusing process. This product revolutionized one segment of America’s garment manufacturing. After immigrating to Israel with his wife and two sons in 1963, Mor- genstern served as an executive in industry and helped to found Yarlona Ltd., a company that produced innovative textile filaments. Following a decade in banking, where he developed the international securities department for a major Israeli financial institution, he established his own financial management and consulting firm in 1978.

In 1975, Morgenstern turned to writing about Israel’s fledgling--and un- derreported--hi-tech sector. With the encouragement of then Israeli Presi- dent Ephraim Katzir--himself a scientist--Morgenstern focused his writing on basic and applied research in Israel’s institutes of higher learning and about science-based industries. The Jerusalem Post would later offer him the chance to initiate the first ever English language coverage of Israel’s high-technology industry in the pages of its local and international editions. A lecturer on Israeli technology and investments, Morgenstern is the author of four books: Science-Based Industries in Israel ; The Common Sense Guide to Investment in Israel ; Israeli Compa- nies on Wall Street and From the Laboratory to the Markeplace. In 1987, Morgenstern was conferred the title of “Loyal Friend” by the Asaf Harofeh Medical Center for a decade “of support and service and for concern for the advancement of medical sciences in Israel.” Financing Activities With three decades of successful experience in banking, financial asset management and capital raising. He established a multimillion dollar money management business, active to this day, with part of its assets invested in Israeli high-tech companies. He has a good working relationship with several of Israel’s venture capital funds and with private investors. Consulted to high-tech companies and for some raised equity and/or debt capital. Companies worked with include Laser Industries, Cyclone Avia- tion, Etz-Lavud, Aliroo Ltd., Community Network Systems Inc. (Versaware), LasGlas and Virtual Communities Inc. In 1991 raised $525,000 from Dis- count Bank Investments and Israel Economic Corporation (NYSE) for Pharmos Inc., a biotechnology company developing drug delivery systems. Also, served 1991-1992 as consultant to Prof. Haim Aviv , founder and CEO Pharmos. In 1997 he assisted in raising $200,000 for Aliroo Ltd. 1998-1999 he was instrumental in raising $3.9 million for Versaware an electronic publishing company. Served as a consultant to Virtual Jerusa- lem and introduced private investors to the company. In 2002 he became Financial Consulant to C2Cure (formerly Cbyond) He raised capital from private investors and accompanied the company until its buyout by an Americal medical product manufacturer. He is regularly quoted by the international media. He has lectured in the US, UK and Israel on finance and high-tech industries and has authored four books on Israeli high-tech and investing in Israel. He publishes (since 1985) the highly respected Israeli High-Tech & In- vestment Report , a monthly subscription-based “insiders” report. The newsletter serves as an international platform for news of Israeli companies to bankers, venture capitalists, individual investors, lawyers and all those who need to know about news and investment opportunities .