Conference on Israel’s High-Tech Industry Draws Packed Audience

February 15, 2012

Israel’s high-tech industry, a strong player in the global marketplace, took center stage Feb. 1–2 at a conference organized by the Berkeley Institute for Jewish Law and Israeli Law, Economy and Society.

“Israel Through the High-Tech Lens” drew more than 350 participants, including faculty and students, as well as business leaders, entrepreneurs, scholars, and policymakers from Israel and the U.S. Co-hosted by the Berkeley Center for Law & Technology, the event tackled topics such as challenges for Israeli entrepreneurs, cross-border collaboration in the Middle East, and clean-tech growth.

“We tried to do what Berkeley Law does best: bring our academic lens to bear on policy issues that are important to our broader community,” said professor Kenneth Bamberger, the institute’s faculty director. “By bringing students and faculty from Haas School of Business and the law school together with local and Israeli business and legal leaders, we were able to address a critical issue for the Bay Area tech community—the future of Israel’s high-tech sector and its deep collaboration with Silicon Valley.”

A panel on the legal challenges to U.S.-Israel business alliances examined the pros and cons of vital decisions facing Israeli high-tech companies. Top priorities: where to incorporate and how to garner funding.

Sizing up Strategy

For example, a company that incorporates in Delaware gets an advanced system of corporate law, a straightforward mergers and acquisition process, and trusted, efficient courts. However, companies that incorporate in Israel get a lower corporate tax rate and better investment incentives, according to leading Israeli high-tech and tax lawyer, Ayal Shenhav.

Israeli high-tech innovators must also decide whether to pursue funding from the country’s Office of the Chief Scientist (OCS). In an effort to keep promising companies in Israel, OCS issues grants that fund up to 50 percent of their technology program in return for royalty payments of only 3 to 3.5 percent of their revenues.

“The catch is that it’s very difficult for the company to move its operation out of Israel—not just the technology, but the know-how behind it,” Shenhav said. It was legally forbidden until 2005, and “still requires a complicated buyout system.”

Offering a foreign investor perspective, panelist and corporate executive Sharon Segev said lawmakers “have made progress but still have a long way to go…. If we can’t share the know-how between our subsidiary companies in different countries, that’s a problem.”

Pushing for Inclusion

A separate panel explored how to expand opportunities in Israel’s tech, labor, and investment markets for Israeli Arabs, who comprise less than 0.5 percent of the nation’s high-tech professionals. Panelists described the factors that contribute to this challenge, including a dearth of networking opportunities, limited access to capital, and geographic obstacles.

“Most Arabs live in the north, two to three hours away from Israel’s business center,” said Kheir Abdel Razek, deputy CEO of a nonprofit that promotes equal employment opportunities for Arab university graduates in the Israeli labor market. “As a culture we want to be close to our families and preserve our heritage, which means simply owning a car isn’t the solution.”

Fellow panelists Zika Abzuk and Jimmy Levy also spoke about ways to expand opportunities for Israeli Arabs—an economic and social imperative.

Abzuk, Cisco’s head of corporate social responsibility for Europe, the Middle East, and Africa, said that “the mindset is changing within Israel’s high-tech sector and within Israeli society at large.” She coordinates a Cisco initiative to create more high-tech jobs for Israeli Arabs. The program was launched a year ago with Israeli President Shimon Peres and involves a range of tech companies operating in Israel.

Levy is the founder of Galil Software, the largest high-tech company operating in the Israeli-Arab private sector. He also manages Al Bawader, the first fund launched to invest in Arab companies to help fuel their growth and actively support Israeli-Arab entrepreneurs. Arabs make up 20 percent of Israel’s population, but account for only 8 percent of its gross national product.

“Our Arab population is well-educated but under-employed and we need to reconcile that,” Levy said. “Most Arab companies only do business in the Arab sector. Also, this is the first generation of Arab entrepreneurs. Few have experience in managing research and development, sales, and budgets, and that makes it hard to raise capital even if they have a great idea.”

Other conference panels considered the legal and business issues surrounding Israel’s clean-tech sector, the scope of its technology investments, and changes in the country’s intellectual property law.