By any barometer last week was a banner week in Israel when measured by foreign direct investment inflows.
In just one seven day period, foreign purchases of Israeli tech companies included: Amazon’s purchase of Annapurna Labs for $370m; Connecticut’s Harman International Industries purchase of Red Bend Software for $200m; DropBox’s purchase of CloudOn for $150m; and Microsoft’s purchase of Equivio for $50m. Add to that $130m invested by an assortment of multinationals in local startups and it becomes apparent that the week represented $900m of foreign investment into the country. Not a bad weeks’ work at all.
What is it that drives these large companies to Israel to access these tech development companies? Plain and simple, smart forward-looking business development executives of companies like Amazon, Harman, Microsoft and DropBox are looking 2-5 years into the future in order to define what they will need to keep their companies competitive and stay in front of the pack in their respective industries. Once they have defined those needs, they know that Israel’s tech platform is, if not the best source, then certainly among the top five sources worldwide of potential options to meet those needs.
And the statistics support that. In 2014, a thousand new startups were generated in Israel, a country of 8 million people. With the exception of the US, no country in the world can match that record. Warren Buffett recently defined Israel as “the leading, largest and most promising investment hub outside the United States.” He should know, having invested billions in Israeli tech companies to date.
While the largest multi-nationals have recognized these facts for some time and employ full time scouts on the ground here, firms with annual turnover of less than $25 billion who may not be able to justify a full time scout “in country” can still access technologies they need by using local consultants who are tuned in to tech developments across multiple sectors.
In addition, a visit to the country to see developments first hand can be an eye-opening experience. Witness the comment made recently by William Ruh, VP of General Electric’s Global Software & Analytics Center: “I’ve been here for two days and I’m enormously impressed both with the venture-capital firms we’ve met with as well as the start-ups, and I fully expect that in the coming months we’ll be able to talk to you about some interesting things….I’ve just been amazed by how inventive these start-ups are and how they develop mind-blowing technology. I came here not knowing what to expect, and I walk away knowing this is the place I’ve got to be.”
For those companies worldwide who have not yet made the effort to tap the incredible resource that is Israeli technology, the time is now.
Too often news about Israel is overwhelmingly politically oriented. But the real strength of the country is the breadth and depth of tech development that has made this young country one of the world’s top R&D centers in just a few dozen years of existence.
Sherwin Pomerantz is president of Atid-EDI Ltd., an economic development consulting firm with 26 years’ experience in assisting overseas companies and public entities in their export promotion and foreign direct investment attraction efforts.