Fewer Israelis opening US start-ups, new study shows

Fewer Israelis opening US start-ups, new study shows

Entrepreneurs from Israel were responsible for only 3.5 percent of new American tech businesses — but that might be because more are launching start-ups at home

The Herzliya Pituach industrial zone, home to many Israeli high-tech companies (photo credit: Moshe Shai/Flash90)
The Herzliya Pituach industrial zone, home to many Israeli high-tech companies (photo credit: Moshe Shai/Flash90)

Fewer foreigners, Israelis among them, are opening new businesses in the United States, a new study shows.

But according to Israeli sources and US investors, that’s because there were enough opportunities for success in Israel itself, enabling Israeli entrepreneurs to open start-ups at home.

A new report by the Kauffman Foundation suggests that technology is suffering most from a “reverse brain drain,” in which foreign talent is leaving the US. In a random sample of new engineering and technology companies established in the US in the past six years, only 3.5 percent were started by Israelis, the study said.

Founders of US tech companies who are foreign-born are most likely to hail from India — about one-third.

According to the study, which looked at a random sample of 1,882 companies, about a quarter of the 107,819 tech companies established since 2006 throughout the US had at least one foreign-born founder.

The Kauffman Foundation, one of America’s largest, is dedicated to encouraging entrepreneurship in the US. In its report, the group said the numbers were a bad sign for future US growth.

“For several years, anecdotal evidence has suggested that an unwelcoming immigration system and environment in the US have created a ‘reverse brain drain.’ This report confirms it with data,” said Dane Stangler, director of Research and Policy at the Kauffman Foundation. 
”To maintain a dynamic economy, the US needs to embrace immigrant entrepreneurs.”

According to Vivek Wadhwa, director of research at the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering, Duke University, and an author of the study: “The US risks losing a key growth engine just when the economy needs job creators more than ever.”

While the number of Israeli entrepreneurs opening businesses in the US is relatively modest, more entrepreneurs are opening start-ups in Israel itself, according to a study by financial expert George Leong, publisher of the influential newsletter Investment Contrarians.

Israeli entrepreneurs may be relatively rare in Silicon Valley, at least compared to Indians, but Israel is no stranger to Wall Street, said Leong.

“There are over 120 Israeli companies listed on US exchanges, including about 60 on NASDAQ, which makes Israel second only to China on this index,” said Leong. “However, a major difference is that Israeli stocks are more trustworthy than Chinese stocks.”

While Israeli entrepreneurs often seek partnerships and investments in Silicon Valley and in New York, the environment for start-ups in Herzliya and Tel Aviv is more than sufficient to ensure success, said Chaim Relnick, a high-tech entrepreneur. “Members of the high-tech community in Israel know each other and work well with each other. They have the same mentality, and they know where to find the resources they need. I can understand why entrepreneurs from other countries would seek to find their fortune in the US, but there’s little reason for Israeli entrepreneurs to do so.”

Meanwhile, a group of Israeli entrepreneurs who have worked in Silicon Valley for years have begun a program specifically to encourage business contacts between Israelis and US entrepreneurs. UpWest Labs, co-founded by Gil Ben-Artzy and Shuly Galili, both of whom have worked extensively in Silicon Valley — Ben-Artzy as a VP of Operations Management at Yahoo!, and Galili with the California Israel Chamber of Commerce — run three-month programs that take promising Israeli entrepreneurs and set them up in business in Silicon Valley.

UpWest Labs provides up to $20,000 in seed funding and arranges for mentors and for access to investors. The point of the program, say the founders, is to encourage more Israelis to open their start-ups in Silicon Valley. “We are passionate about helping Israeli entrepreneurs realize their dreams,” they said. “Being part of the Silicon Valley ecosystem, we believe that early exposure to the innovators that congregate here is a key ingredient to the start-up’s success, and UpWest Labs provides Israeli start-ups this critical early exposure.”

read more: