Mass. rolls out red carpet for Israeli start-ups

Links between the Commonwealth and the Start-Up Nation grow with visit by largest US business delegation ever

US Ambassador to Israel Dan Shapiro (L) greets Massachusetts Governor Deval Patrick at the King David Hotel last Wednesday (Photo credit: Courtesy)
US Ambassador to Israel Dan Shapiro (L) greets Massachusetts Governor Deval Patrick at the King David Hotel last Wednesday (Photo credit: Courtesy)

Ten Israeli start-ups have been selected to set up shop in Boston, where they plan to compete for as much as a million dollars in funding, courtesy of the State of Massachusetts. The MassChallenge competition awards over $1 million in cash prizes to winning start-ups, with no strings attached, along with top-tier mentoring, training, free office space, access to funding, legal advice, media and over $15 million of in-kind support.

While Israeli start-ups compete in tech challenges around the world, MassChallenge is different. The MassChallenge program is five years old, and is being run in Israel for the second time. It is the only place outside Massachusetts to be so honored.

So high a regard does Massachusetts have for Israeli tech that this year’s MassChallenge finalists were announced last Thursday by MassChallenge CEO John Harthorne, together with Massachusetts Governor Deval Patrick, at an event in Tel Aviv. Patrick led a delegation of over 120 Massachusetts business and academic leaders representing nearly 60 companies and institutions in IT, healthcare, energy and water technology, cyber security, academia, financial services and life sciences. It was, said the New England-Israel business council, the largest-ever economic trade mission to visit Israel from the US, far bigger than the delegation Patrick led here on his last visit in 2011.

Massachusetts has good reason to embrace Israeli tech. According to a study released by the New England-Israel Business Council (NEIBC) last December, Israeli businesses operating in Massachusetts have contributed significantly to the economy there, providing jobs and investments and revitalizing key components of the state’s economy, helping it to rise from the doldrums of the recession that still plagues the United States.

The study, the first in-depth analysis on the impact of Israeli tech on any US city or state, showed that in 2012, the 211 Israeli-founded businesses that set up shop in the state, most of them start-ups, accounted for 2.9 percent 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, including technical support, janitorial services and banking. 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.

Job growth at the Israeli companies grew five times faster than the state’s overall employment growth rate between 2010-2012. 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 the state’s most important IT and professional services sectors, including life sciences, the study showed.

The million-dollar MassChallenge winners will be chosen after the four-month program, set to begin in June, concludes. Start-ups that don’t win the big prize could already be considered winners, according to program officials. The 10 Israeli firms are scheduled to travel to Boston in June for an intensive one-week boot camp program, getting educated on how to build a bigger and better business, how to develop their technology and how to grow a sustainable company. At the conclusion of the four-month program, the million-dollar winners will be announced, but all the companies will have built up substantial ties with the Massachusetts high-tech and funding communities, giving them a valuable foothold in a state that has been very welcoming of Israeli start-ups, said Judit Sharon, CEO of Onset Technology, based in Waltham, MA, maker of OnPage and a member of Patrick’s delegation.

“Massachusetts is home to an amazing array of start-ups and our entrepreneurial ecosystem is one of the strongest in the nation,” said Governor Deval Patrick, announcing the finalists. “Through programs like MassChallenge, Massachusetts is able to extend an open invitation for the world’s highest-impact, highest-potential start-ups to grow their ideas in our commonwealth.”

Besides the MassChallenge finalist selection, dozens of deals emerged between Massachusetts-based companies and Israeli organizations and firms. One of the most important involved a deal between MIT Massachusetts Institute of Technology and Ben-Gurion University to create a seed fund to promote and support early-stage collaborations between MIT researchers and their counterparts at BGU. It’s the first seed fund in Israel for MIT, which has been working with Ben-Gurion and other Israeli universities since 2007.

Under the deal, students from both institutions will work together on collaborative ventures and develop ideas based on the research being done at both BGU and MIT. Ideas will be submitted to a panel for review. Those found worthy of further development will receive seed money from the fund.

Among the technologies Massachusetts is most interested in is water tech. In 2012, Massachusetts held a water tech competition especially for Israeli companies in the field, called the W.E.T. (Water Export Technology) Revolution Competition. The winner of that event, TACount, developed a technology that detects and counts microorganisms in food and water in minutes, instead of the days that are usually required for scientists to test for bacteria using the usual methods. TACount was invited to Massachusetts last year to meet business leaders and investors.

On his visit last week, Patrick attended the inauguration of a wastewater treatment plant project in Ra’anana developed by a company called Desalitech, an Israeli start-up now located in Massachusetts. “Israel is the world’s No. 1 home for water tech start-ups, in fields such as water reuse, wastewater treatment, desalination, energy efficiency and drip irrigation,” said Shai Bazak, consul general of Israel to New England. “By working closely with the strengths in Massachusetts in research and academia, venture capital, engineering and equipment, the two geographies together can develop the innovations necessary to satisfy global needs for clean and abundant water.”

Life sciences is another important area for Massachusetts-Israel cooperation. On Wednesday, Patrick and members of the Massachusetts-Israel Innovation Partnership mission met with top executives from Israeli life sciences companies to discuss opportunities to create and grow their business in Massachusetts. The panel discussed the impact of the 10-year, $1 billion Life Sciences Initiative that Patrick signed into law in 2008 and how Israeli life science start-ups can get involved in the program.

With all the meetings, Patrick found time to give the keynote address at the US-Israel Connected Summit on Wednesday, where top Israeli and Massachusetts executives got together to meet and make deals.

“Collaboration is key to serving the common good of our citizens and the commonwealth is thrilled to expand our partnership with Israel, one of the most dynamic innovation economies anywhere. By shaping and reshaping each other’s ideas, concentrating on what’s meaningful and providing the tools needed to get the job done, we are building on a strong foundation,” said Patrick. “Israel and Massachusetts have many things in common. We place an emphasis on education and innovation. We look outwards, not just inward, for opportunities to partner. We want to do good while also doing well. We are optimists, with a determination to invent our own future.”

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