‘Start-up Nation’ Exporting its Businesses to American Shores
JNS.org – The “start-up nation”—a nickname Israel earned due to its population’s knack for innovation—is increasingly exporting its culture of entrepreneurship to America.
A 2012 Pew Research Center study showed that as many as 330,000 native-born Israelis were living in the United States, while other estimates peg the total current population of Israeli Americans—including the descendants of those born in Israel—at between 500,000 and 800,000. There are a number of reasons why an Israeli might decide to come to the U.S., but for those who are innovators, entrepreneurs, or businesspeople, the move is often based on necessity. The relatively small market of Israel, a country that is roughly the size of New Jersey, leaves Israeli companies thirsting for opportunities outside of the Holy Land.
“Israel is great place to nurture new ideas. But when they want to scale up, they have to go to the U.S. or Europe,” Benjamin Soffer, head of the Technology Transfer Office at the Haifa-based Technion – Israel Institute of Technology, told JNS.org.
Soffer explained that Israeli companies making the move to the U.S. usually “need to follow the money” and go wherever their top investors are. Others, he said, think more about vertical market opportunities (in which vendors offer their goods and services to a group of customers with specialized needs) or the community and infrastructure that will be available for their families when they arrive in America.
There are now a dozen Israeli American chambers of commerce around the U.S. to assist companies arriving here from the Jewish state, according to a list on the website of the Association of American-Israel Chambers of Commerce. These organizations try to make the Israeli companies’ landings softer, but also understand that recruiting Israeli thought leaders is beneficial for their U.S. states’ economies.
“Israel is one of the world’s leaders in innovation and there is a competition to get them to your state,” said Vered Nohi-Becker, head of the Philadelphia Israel Chamber of Commerce. “We want them to come here to create good, innovative jobs here, and to help our economy grow. It is extremely lucrative for local companies to explore collaborations with Israeli companies.”
“We need to market ourselves to attract those companies,” she told JNS.org.
Ayal Vogel—vice president of business development for RADiflow, a New Jersey-based Israeli company that creates secure communication networks for infrastructure such as transportation systems—said there are three major factors that influence where Israelis decide to do business in the U.S., and none of them have to do with tax rates or event cost of living. They are the estimated vertical market, meaning the customer base; flexibility of the location, meaning how close its proximity to an international airport with a direct flight to Israel; and the people—are there other Israelis living there, and will the Israeli entrepreneur’s family be happy while he or she focuses on developing the company?
“We look to be away from home but at home,” said Vogel. “Your friends turn into family, so we look for well-established cities and towns that have Israeli people like us.”
In the “beltway” area (Washington, DC, and Maryland), Barry Bogage heads the Maryland/Israel Development Center (MIDC), a partnership between the local Jewish federation, the state of Maryland, the Montgomery County Departments of Business and Economic Development, and the Israeli Ministry of Economy and Trade. MIDC serves as “an energetic hub of people and activities engaged in promoting Maryland/Israel trade and investment,” said Bogage.
“It assists both Israeli and Maryland businesses and entrepreneurs in successfully accessing each other’s markets,” he told JNS.org.
Bogage said Israeli companies will choose to set up shop in the beltway because of its close proximity to the U.S. government and its accessibility to defense and cyber-security contracts. He uses a network of preferred providers to assist Israeli companies in finding investors and partners, but also all the service providers they would need to help their businesses come alive and sustain themselves.
“Real estate, employee benefits, accounting, bookkeeping, regulatory questions, taxes—with one phone call to us, we can set all of that up [for the Israeli companies],” Bogage said.
Outgoing Maryland Governor Martin O’Malley (who could not run for re-election this month due to term limits and will be succeeded by Republican Larry Hogan) has taken many trade missions to Israel over the last two decades to recruit cyber-entrepreneurs to his state. Bogage said MIDC has helped 20 Israeli companies open offices in Maryland, and dozens more to establish development and sales partners in the area. Yet Technion’s Soffer did not name Maryland or the DC area in his list of the top U.S. destinations for Israeli innovators. Instead, he cited Boston, California and New York.
A 2010 study released at the New England-Israel Business Council’s 2010 Life Sciences Summit at Brandeis University in Waltham, Mass., revealed the scope and impact of Israeli-related businesses on the Massachusetts economy—a striking $2.4 billion annually. The study also showed that nearly 100 companies in Massachusetts are founded by Israelis or offer products based on Israeli technology, and that Israeli industry has created 5,920 jobs in the state.
Talia Cohen, executive director of the California Israel Chamber of Commerce, said some 300 Israeli companies are working in Silicon Valley and across the rest of the state. She thinks that one of the reasons Israelis have chosen the area is its high level of multiculturalism. Not only can they forge U.S. partnerships, but they can also connect with leaders and funders from across the globe.
Additionally, there are fewer cultural roadblocks for Israelis in regions with diverse populations. Vogel said Israelis struggle to understand American culture or how enormous and complex the U.S. market really is, and that being in a place with others who have the same challenges can make the transition easier. On the flip side, Americans are not always accustomed to Israelis’ business style. Bogage said that Israelis’ “frankness and passion” often shocks Americans.
“Americans think it is an argument when really it’s just that for Israelis, there’s no equivocating, no beating around the bush,” he said.
The attraction of innovation, however, usually wins out. The Philadelphia chamber’s Nohi-Becker said that while Israeli market penetration is rising in America, there is the simultaneously growing presence of U.S. research and development centers and venture capitalism in Israel. All the while, both Israeli and American innovators are looking to scope out the “next big thing.”
“There’s a lot that’s thriving here [for Israeli companies in the U.S.],” said Nohi-Becker.
Maayan Jaffe is senior writer/edit at Netsmat (ntst.com) and a Kansas-based freelance writer. Reach her at [email protected] or follow her on Twitter, @MaayanJaffe.