High-tech incubation

High-tech incubationWhen it comes to promoting high-tech, the UK could do worse than study the Israeli experience. The past decade has seen it become the country’s primary export. Tania Hershman finds out why
One of the last of Peter Mandelson’s initiatives before he resigned in December was to launch a ?15.5m joint UK/ Israeli government initiative to promote high-tech research and development.
The link up with Israel’s renowned high-tech industry fitted in nicely with the former Trade and Industry Minister’s drive to put ‘knowledge-based’ industry and entrepreneurialism at the heart of his strategy for Britain’s economic development.  
  INCUBATORS AT A GLANCE The guide to the ideas under development in Israel’s technological incubators often reads like science fiction, from fruit-picking robots to novel body-odour combatants. However bizarre, they are getting the chance to prove their worth.
Israel’s incubators scheme attracts many foreign government visitors, says Rina Pridor, manager of the project at the Office of the Chief Scientist. “They come from Hong Kong, Australia, Argentina, Cyprus and the US to see what we are doing. There is great interest.”
There are 26 technological incubators In Israel, housing 200 projects. Some incubators are directly linked to academic institutions, others have closer ties to industry. A company is accepted based on the export marketing potential of its concept. For two years, it is given space and government funding of up to 85 per cent of its approved budget. Incubator staff assist in raising the rest and provide business advice and guidance.
When it comes to promoting high-tech, the UK could do worse than study the Israeli experience. The country has the largest concentration of start-ups outside the US, and the steady stream of foreign interest shows no signs of abating.
Motorola and Intel are just two of the big names taking advantage of what Israelis call their only natural resource: brainpower. However, the situation is not all milk and honey.
Although Israel has been developing technology for years, primarily for military use, the past decade has seen high-tech become the country’s primary export. In great part this is due to the influx of highly-skilled immigrants from the former Soviet Union and from the improved political climate in the mid-90s following the signing of peace accords. To employ the hundreds of thousands of immigrant scientists and engineers, the government set up the technological incubators programme. (See Incubators at a glance.)
One thousand start-ups are currently in incubators or have recently left to go it alone. Another 2,000 or so fledgling companies were established without government support, often with the help of foreign investors.
The incubator project currently has a 51 per cent success rate: just over half of the companies survive after leaving the nest. Another mark of the initiative’s success is the fact that foreign investment in ex-incubator companies has reached $200m and now exceeds government investment, one of the project’s primary aims.
Foreign investment in Israeli high-tech comes in several forms. There are venture capital funds, which bring together private and corporate investors lured by Israeli technical skills and by government grants and tax breaks. Acquisitions and mergers between start-ups and larger multinational concerns are also becoming more common, such as the acquisition of Biosense, a medical sensor start-up, by Johnson and Johnson in 1997.
Another more hands-on form of foreign investment is proving popular, especially in electronics, the largest high-tech industry sector covering telecommunications, components, defence and medical technology.
Motorola, Intel, Rockwell, National Semiconductors and Vishay have all opened design centres and fabs here, employing local graduates. Motorola, for example, has seven subsidiary companies in Israel engaged in R&D of semiconductors and communications devices.
Although the electronics industry employs 45,000 people in a country of only six million, electronics start-ups do not grab headlines like the Internet wunderkinds. However, the industry is flourishing: Electronics sales rose by 12 per cent from 1997 to over $8bn in 1998. Some examples of start-up success include two-year-old Verisity, a player in the electronic product verification market, and Mango Computers (see box).
However, despite the fact that Israel has more scientists and engineers per head of population than the US, not all is smooth sailing for start-ups.
First, there is rarely a local or regional market for the technology, which is a disadvantage from the outset. Then there is the manpower shortage: science and engineering just does not pull in young Israelis like business studies and law.
While there is nothing to be done about the first, the situation is changing on the second point, according to Professor Yehoshua Zeevi.
Zeevi recently finished a five-year term as dean of the Technion University’s electrical engineering faculty, which provides the industry with most of its employees. The turnaround, he says, is thanks to a government program called Education 2000, which is persuading young Israelis that science is sexy.
“Israelis love action, they love taking risks. Look at the way they are drawn to army combat units and the air force. Education 2000 shows them that in high-tech they can take risks, make their mark and prove themselves,” he said. It seems to be working. Applications to the Faculty are up by 30 per cent this year.
There is another problem, though, which worries Professor Zeevi more. While the standard of R&D in Israel, much of which has military origins, is high, the level of business know-how and long-term vision is not.
Israelis are often too eager for the quick buck, and rather than holding on to their innovations and building large, profitable companies, they sell up and move on. “There are hardly any billion-dollar companies in Israel,” says Zeevi. &quot ;In the long term, this is simply not good for the economy.” Mango Computers…
Baruch Peled and Mike Berlin met in 1988 while working on the radar system for the Phantom fighter jet. Peled was a Technion-educated colonel in the Israeli Air Force, and Berlin an American immigrant working with a US company participating in the military project. They became friends. Eight years later, they decided to set up a company.
Mango Computers, which now has 26 employees, including five in the US and one in the recently-opened UK office, has developed a new multiprocessing architecture based on multiple DSPs on a single board. The company, which left the HiTec Incubator in Jerusalem less than a year ago, has made over $1m dollars in sales, with $5m worth of orders up to the year 2000.
“We are not looking to sell the company,” says Peled. “We have tremendous technology. There’s no need to give it away.”
High-tech temple… The Beck Science Centre in the Hi Tech Park in Jerusalem where Mango Computers is based.
Tania Hershman is a science and technology writer based in Jerusalem.

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