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October 14, 2012 4:16 pm

Maryland’s Model for U.S.-Israel Economic Alliances

avatar by Jeffrey Barken / JNS.org

The radar for Israel's Iron Dome missile defense system. Elta, the manufacturer of that radar, this year received a conditional $300,000 grant to open a new office in Maryland. Photo: Efi Elian.

In May of 1988, Maryland Governor William Donald Schaefer visited Israel to sign the historic Maryland-Israel Exchange agreement. The document listed financial incentives authorizing and supporting significant future collaborations between Israeli and American companies, benefiting both economies.

Today, the Maryland/Israel Development Center (MIDC), the group responsible for organizing Schaefer’s initial visit, continues to enlarge on its original vision of U.S.-Israel collaboration.

More than 20 U.S. states have bilateral partnerships with Israel, according to the Jewish Virtual Library’s records—but while most of those organizations are designed to promote a positive cultural exchange, the MIDC offers serious financial assistance. As other states focus on diplomatic ties with Israel, Maryland’s program proactively finds partners for Israeli companies and provides a mechanism for both inspiring start-up investment and collecting venture capital resources to enable overseas collaboration.

“We’re not only good intentions,” MIDC Executive Director Barry Bogage tells JNS.org, “but also the money behind good intentions.”

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Maryland’s initiative is unique in the sense that it proactively finds partners for Israeli companies, and provides a mechanism for both inspiring start-up investment and collecting venture capital resources that will enable the overseas collaboration. Other U.S.-Israel trade organizations are not directly concerned with creating investment opportunities, but instead focus more on diplomacy.

In response to the Soviet Union’s collapse in the late 1980s and the resource-straining influx of Jewish refugees then fleeing to Israel, members of Maryland’s Jewish community sought a means to help Israel absorb immigrants.

“We recognized early on that the best aid we could provide was a mechanism for job creation,” MIDC Executive Director Barry Bogage tells JNS.org.

Once the trade agreement had the governor’s support, the MIDC could recruit business partners for Israeli companies seeking entry into the American market. Additionally, the center served as both a diplomat and a consultant—identifying potential markets, hosting networking events, connecting researchers in both countries in collaboration on groundbreaking projects, and facilitating the registration of new company offices in Maryland. The program was a win-win opportunity, promising a legacy of growth that has been validated over the last 20 years.

One of the group’s first successes was a joint research program in aquaculture conducted at the Christopher Columbus Center for Marine Biology in Baltimore Harbor. The relationship initiated by the MIDC brought Israeli fish farming experts together with leading Maryland biotechnology developers, ultimately leading to the creation of a company, Advanced Bio-Technology, in 2001, and production of a new health-enhancing feed for farmed fish.

Likewise, MIDC helped connect the Israeli biopharmaceutical company, BioCancell, with scientists at UMD medical center, enabling clinical trials of BioCancell’s targeted cancer therapies and providing access to American doctors and researchers who had experience enduring the rigors of FDA testing.

“It’s usually too expensive for a small company in a small country to set up the infrastructure to succeed,” Bogage says, explaining Israeli companies’ desire to access American markets and to consult directly with business professionals in the U.S.

When asked what makes partnering with Israeli companies attractive to Americans, Bogage references the popular book Start-Up Nation by Dan Senor and Saul Singer, reiterating their point that “Israel is a culture of innovation.” Since its inception, Israel has faced daunting crises, but the country remains a rare example of how creativity and risk-taking can be combined to help a small nation surmount large problems. Americans marvel at Israeli speed and success at development, and find Israelis to be the perfect allies in creating new products.

“Unlike Israel, in the U.S. there is no reason to take risks,” Bogage laments, reflecting on the current state of the U.S. economy. “If we could package Israel’s initiative up and ship it here, that would be great.”

The MIDC currently utilizes grant money from the Jewish community and the Maryland Department of Economic Development to invest in promising ventures. Additionally, in March of 2011, the group established a venture capital fund, raising $4 million. Those funds already have seeded 11 Israeli start-ups, early-stage companies with strong potential to ultimately set up offices in Maryland, collaborate with top American researchers, and create new jobs in both economies.

Looking beyond its successes in biotech and aquaculture, the MIDC is embracing Israel’s defense and security industry. In April 2012, Elta, the manufacturer of the radar component in Israel’s Iron Dome missile defense system, received a conditional $300,000 grant to open a new office in Maryland. The project is expected to create 100 new high-technology jobs over the next four years.

Similarly, the Israeli defense and security company Controp has maintained an office in Bethesda Maryland since 2005. “We introduced Elta to the MIDC,” James Dotan, Controp’s U.S. director, tells JNS.org. “Mr. Bogage understood our desire to engage the American markets. He emphasized the advantages of being located in Maryland, close to Washington DC and the government branches that buy defense and security technologies.”

For Dotan, opening Controp’s Maryland branch was essential. “Now we can compete with other industries to develop better, cheaper products with more features,” he says. “Also, we are more accountable, providing around-the-clock customer support.”

Transplanted in the U.S., Controp and Elta are now customizing their state-of-the-art security systems to meet the specific needs of American contractors.

In recent years the MIDC has also encouraged American companies to take advantage of the large research and development grants provided by the Bi-national Industrial Research and Development Foundation (BIRD). Established in 1977, BIRD allocates funds to collaboration between Israeli and American companies, covering up to 50 percent of development and production costs on the condition that the grant is repaid if the end product is successful.

20/20 Gene Systems, an American company specializing in innovative diagnostics and personalized medicine, recently participated in BIRD, partnering with the Israeli company ImmunArray. At the time, both companies were competing to develop a new method for detecting lung cancer. BIRD provided a $1 million incentive for them to collaborate.

Unfortunately, “in this case, the combined science did not pay out, but it was still a worthwhile pursuit,” Jonathon Cohen, president and CEO of 20/20 Gene Systems, tells JNS.org. “BIRD created a runway for discovery,” with both companies profiting from the exchange of information and the opportunity to innovate.

If anything has changed since the MIDC’s inception in the 1980s, it is the group’s understanding of its service to Israel.

“Israelis don’t want to be approached on solidarity measures,” Bogage says. “They want to be approached based on the essential business opportunity.”

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