High-tech has had a profound impact on Israel’s economy; at this point, tech accounts for nearly half of Israel’s exports. Now, a new report shows that Israel’s technology companies are having a similar impact in other places.
According to a study released by the New England-Israel Business Council (NEIBC), Israeli businesses operating in Massachusetts have contributed significantly to the economy there through jobs and investment, revitalizing key components of the state’s economy and helping it to rise from the doldrums of the nagging, long-running recession that still plagues the United States.
The Massachusetts study is the first in-depth analysis on the impact of Israeli tech on any US city or state. But the positive effect is apparently evident to leaders in other places, as other US states are doing their best to woo Israeli companies to open operations in their locations in the hope that they, too, will be able to bring in the jobs, investment and innovation that Israeli companies have brought to Massachusetts.
The study on the state of Israeli businesses in Massachusetts was conducted by Stax Inc., a global strategic consulting and research firm, on behalf of NEIBC (with support from Combined Jewish Philanthropies), and was presented last week at an event attended by Massachusetts Governor Deval L. Patrick.
During 2012, the study found, the 211 Israeli-founded businesses that have set up shop in the state — mostly start-ups — accounted for 2.9% of the state’s GDP. Some 6,700 people — the vast majority Massachusetts residents — worked for these companies, with an additional 17,000 people employed in businesses supporting these companies (technical support, janitorial services, banking, etc.). Thanks to this multiplier effect, the $6.2 billion business that these Israeli companies did in 2012 had an overall economic impact of nearly $12 billion.
Overall, job growth at the Israeli companies grew five times faster than the state’s overall employment growth rate from 2010 to 2012. Over that period, revenue at Israeli-founded companies in the state grew three times faster than in the Massachusetts economy overall, with revenue growth double that of the state’s most important IT and professional services sectors, including life sciences, the study showed.
The data explains the rush of US states to set up deals with Israel, organizing partnerships with government and academic institutions. The study identified 16 governors and nine mayors who have conducted trade missions to Israel since 2010, all of them touting their state as the best destination for Israeli start-ups seeking to expand to the US.
Among them is the governor of Michigan, Rick Snyder, who several months ago led a delegation of government and business officials to Israel. Besides an advantageous tax system for businesses and a streamlined regulation system that makes it easier for businesses to set up shop in his state, Snyder told The Times of Israel, Michigan understands start-ups.
“I used to be in the venture capital business myself, so I know what concerns start-ups have,” Snyder said. “We are very strong on start-ups in Michigan, with many incubators in a variety of areas, from automotive technology to life sciences to water technology.”
Michigan, he added, is among the top 20 states importing and exporting to and from Israel, so the state knows the ropes when it comes to dealing with Israeli regulators. In addition, the state has a very active Israel-Michigan business lobby, the Michigan-Israel Business Bridge (MIBB). According to Pamela Lippitt, head of the MIBB, Snyder thinks so highly of the group that he has its phone numbers on speed dial, a fact confirmed by the governor himself.
Not to be outdone is Maryland, whose governor, Martin O’Malley, along with other top state representatives, have visited Israeli numerous times in recent years. There, the Maryland/Israel Development Center (MIDC) works to promote business relations between the state and Israel, working closely with the Maryland Department of Business and Economic Development and the Israeli Economics Ministry, as well as with Jewish community organizations in the Baltimore and Washington, DC, areas, and with Israeli business development groups.
“Our job is to help Israeli start-ups get a ‘soft landing’ in the US, providing them with an instant infrastructure that can save them time, effort, and money,” said MIDC chairman Abba David Poliakoff. “It’s like a one-stop service; startups call us up and tell us what they need, and we arrange the infrastructure, whether it’s an office, attorney, accountant, etc. At the end of the day they just move in and start to sell.”
Clearly, the states are competing with each other, at least to some extent — although, as Governor Snyder pointed out, different states can offer Israeli companies different things, and an Israeli company is unlikely to work in an area that does not have the resources, business opportunities, or contacts appropriate to its business.
By many accounts, Massachusetts has been more successful than most places in attracting Israeli businesses. Large companies, including security company CyberArk and patient care solutions company EarlySense, have their US headquarters in the state, as do a plethora of start-ups, especially in life sciences and water technology (a major industry in Massachusetts). In fact, said Chief Scientist Avi Hasson, “Massachusetts was the first US state to establish a collaborative R&D grant program with Israel, and has been one of the largest recipients of funds from the US-Israel grant program BIRD,” the US Israel Binational Industrial Research and Development Fund, which provides money to promising Israeli companies partnering with American businesses.
“Massachusetts has become a home-away-from-home for Israel’s innovation economy and I am proud that our 2011 trade mission and our strong public-private partnerships have laid the foundation for that success,” said Governor Patrick. “Strengthening our global relationships is central to our growth strategy because we know that in order to succeed in the 21st century global economy, we must be prepared to compete for jobs on the international stage.”