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Silicon Valley 2.0

High-Tech Holy Land

Morton Landowne
December 17, 2010
(Morton Landowne/Len Small/Tablet Magazine)
(Morton Landowne/Len Small/Tablet Magazine)

Start-Up Nation, the surprise best-seller about Israeli innovation, provided the theme for my four-day “Israel Innovation Summit,” sponsored by Beit Issie Shapiro, an Israeli non-profit organization that provides innovative services for children with special needs. It’s a sort of Birthright for people curious as to why Israel is second only to the United States in the number of companies listed on NASDAQ and why its currency is one of the world’s strongest.

On our final day, Dan Senor, co-author of Start-Up Nation, convened a panel of five of the key players in Israeli technology, all of whom had featured prominently in his book. The panelists included Meir Brand, who heads Google Israel; Scott Tobin, a U.S. venture capitalist and general partner at Boston-based Battery Ventures; and three Israeli venture capitalists: Chemi Peres, Eddy Shalev, and Tal Keinan. The discussion took place in the striking new Shimon Peres Peace House, overlooking the waterfront in Ajami, Jaffa’s mixed Arab-Jewish neighborhood. “It’s not a book for Jews,” Senor told us. “In Barnes and Noble, it’s in the Business section, not Judaica.”

In keeping with the book’s emphasis on innovation, the authors have licensed its name to a travel agency which will run Start-Up Nation tours. They are also at work on a sequel. And Senor’s wife, former CNN anchor Campbell Brown, intends to produce a Start-Up Nation film. (Earlier in the week, our group was addressed by Stanley Fischer, governor of the Bank of Israel, and the former Massachusetts Institute of Technology economics professor whose policies many credit for the stability that has characterized Israel’s economy over the last decade. Even Fischer commented on Start-Up Nation, calling it “a little too enthusiastic, but essentially correct.”)

The discussion focused on what the “next big thing” to come out of Israel will be. Tal Keinan, an Israeli with a Harvard M.B.A., spoke of the coming boom in financial services. He pointed to recent changes in Israel’s securities laws that will allow government retirement funds more flexibility in where they can invest. “That move,” he stated, “will free up at least $400 million per month for equity investment.” In addition, he noted, tax laws have been liberalized for new immigrants, allowing them to avoid paying taxes on money earned outside Israel for up to ten years. “Israel is liberalizing while the U.S., Europe, and much of the rest of the world is tightening,” Keinan said, and he sees the day when Tel Aviv will compete with Hong Kong and Singapore as a world financial services capital. Already, he added, “traders from London and Paris are flocking here.”

Panelist Eddy Shalev added that people in the Asia-Pacific region have little of the negative baggage possessed by European and Middle Eastern investors. In those parts of the world, he argued, “Israel is on equal footing with America.”

Chemi Peres, a former air force pilot and founder of the Israel High Tech Industry Association, also spoke of the growing relationship between Israel and Asia. “A number of Chinese companies are setting up [research and development] centers here,” he reported. “Our ties are strong, and growing; they relate to the fact that there is an entire economy here that is based on innovation, and want to take advantage of it.” Scott Tobin added: “Israel has a culture of innovation. We are really good at what we do.”

To prove the point, the morning concluded with ten-minute presentations by some of Israel’s most promising start-up companies in the fields of medical devices, biotechnology, homeland security, clean tech, alternative energy, and robotics. Earlier in the week, we had seen a presentation by PrimeSense, a cutting-edge technology company founded five years ago by five Israeli army veterans. PrimeSense invented Kinect, a gaming technology that uses a patented 3-D sensor to capture human movement, enabling, according to its marketing director Adi Berenson, a “natural interaction with computers, freeing the user from reliance on pads, buttons, or paddles.” Microsoft licensed Kinect and incorporated it into its new Xbox accessory. It proceeded to sell over a million units in its first two weeks, becoming one of the “most successful hardware launches in the history of consumer electronics,” according to Berenson. Kinect’s potential extends beyong gaming, to robotics, automobiles, telephones, disabilities, and rehabilitation.

Surveying the Israeli high tech scene, Scott Tobin concluded the discussion by predicting, “In the next ten years, Israel will create it own Apple.” After being exposed to companies like PrimeSense and Better Place, the proud prophecy didn’t smack of hyperbole.

Morton Landowne is the executive director of Nextbook Inc.