Few would dispute that Dr. Orna Berry is the first lady of Israeli high tech. At age 67, when she could retire and spend time with her family (she says her family is her top priority), she is still working. She is currently VP and General Manager Center of Excellence Dell EMC Israel. It could be said, however, that Berry has done almost everything in the Israeli high-tech and venture capital industry. We asked her what she thought about this industry now. Berry has never been one to hesitate about expressing her opinion, even if it is not pleasant to hear. Her strengths are particularly evident in view of the tough year she has had. The word "obstacle" is not part of her vocabulary.
The interview with Berry took place two weeks after the announcement of Intel's acquisition of Israeli company Mobileye (NYSE: MBLY) for $15.3 billion in cash - the biggest deal in the history of the Israeli economy.
Another Israeli company realized that it would be unable to break through the glass ceiling by itself, and handed the keys to a bigger US corporation. Does that make you sad?
Berry: "Business transactions don't make me sad. The only things that can make me sad are irreversible things in the life of a person or the country, such as nursing insurance and coalition agreements. These are things that can make me feel bad. The fact that there is a government commitment to develop the Negev, but development is being delayed, makes me feel bad. The fact that active measures aren't being taken to leverage Israeli economic growth, among other things in order to facilitate a dignified life for everyone in the Israeli labor market, because they do deserve it, makes me feel bad.
"The fact that an Israeli company was sold to a foreign company, after its management decided that it should be sold, doesn't make me feel bad. Who am I to tell them, 'For patriotic reasons, you should have gambled your growth and tried to grow alone, like Check Point Software Technologies Ltd. (Nasdaq: CHKP) or Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA)' - and even Teva has reached a glass ceiling, whether because of management problems or geographic location is unclear. When a company like Mobileye is sold to a major corporation like Intel, which knows Israel well and is familiar with the components market, and that's a developing market, they probably both realized that this market could be conquered more quickly and in a bigger way together."
For Berry, it does not matter that by definition, Mobileye is no longer an Israeli company. "Mobileye hasn’t been Israeli since it held its IPO in the US. In general, most Israeli technology companies aren't Israeli, because most of their shares aren't owned by Israelis," she says.
On the morning of the interview, "TheMarker" published a report that the Israeli venture capital funds' returns did not justify the investments in them by investment institutions. As a former venture capital executive, Berry says, "This is slander. 30% of Israel's economic growth in the past 30 years was generated by knowledge-intensive industries. It may be true that a specific fund didn't have a good return, but the fact is that international funds are coming here, and are even located here. Uber wasn't created in Israel, but Mobileye was, and that means that as long as we focus on specific technologies, we'll succeed. I'm referring to very deep technologies, not those designate for the consumer market. In the case of Mobileye's exit, let's be proud of this achievement, and make others like it."
So you don't think that this exit is bad.
"No. Is Intel in Israel a bad thing? Even without starting its acquisitions. On the contrary - Intel is the best thing that has happened to Israel. Not only is it the biggest exporter in Israeli high tech, but it’s also the biggest private employer in Israel. What should I complain about? That the shares are owned by someone who isn't an Israeli? That there are transfer prices? That's nonsense. Every Israeli technology company, public or private, is owned by foreign investors. It's not an Israeli game at all. When the know-how stays in Israel - that is important, as you can see from what happened in Kiryat Gat and the surrounding area because of Intel's fab. It's simply great. I only wish that what happened to Kiryat Gat will happen in places like Beersheva and Karmiel - that an economy will be built around them. So I say - don't complain. Reinforce what works. If it doesn't work, figure out why it doesn't work, and deal with it."
When a young entrepreneur rushes into an exit, doesn't that make you regretful?
"Not at all. Let them do what they want. Everything that is productive is legitimate."
An exit at age 25 is productive mostly for an individual, not the nation.
"In addition to military service, why does everyone have to do national service that contributes to the country if it doesn't interest him? Everyone has to do what he wants legitimately and positively. As long as he obeys the law, pays taxes, and hires employees, that's good enough for us. That's already difficult enough. Israel isn't a police state or a Bolshevik country that forces its citizens to act in a certain way. Everyone has to do something he's good at. He can't think all the time that he's doing army reserve duty for his whole life."
The state shouldn't force anyone, but it should think about the national interest.
"The role of the state is to set its priorities, and in my opinion, they are science, technology, and growth."
"The Chief Scientist's budget was halved"
You called the "TheMarker" story "slander." It sounds like it touched a nerve for you.
"It's the state's undoing that it gives more money to yeshivot (Jewish religious schools) than to research and development and creating infrastructure. Take the development of the high-tech center in Beersheva, the Gav Yam Negev Advanced Technologies Park. It should have happened many years ago, because the government is wasting its time on removing Sde Dov Airport, which has already been enacted as a law by the Knesset. It's simply ridiculous. The only ones who did what they said they would in the Negev is a small bureau, the National Cyber Bureau, and the Office of the Chief Scientist. Still, the Chief Scientist can't dictate to some company how to manage its center in Beersheva. So a second-rate person is appointed to the position, and the center works like outsourcing for the same company in the center of the country, and its managers don't even come to Beersheva, and are unaware of Ben Gurion University of the Negev's plans, from which they can recruit students.
"The problem is that there is no thinking on a large scale. When did the prime minister last talk about science, technology, and growth? When I was chief scientist, he spoke about this all the time (Netanyahu was prime minister in 1996-1999, when Berry was chief scientist, T.T.), but where does this stand now? The budget of the chief scientist, which is now called the Israel Innovation Authority, is half in nominal terms of what it was during my term. When there's no money for high tech, nothing can be done. An entrepreneur can be very smart, but without money, he won't succeed. At most, he'll stay in basic research, and there are countries in which basic research is very development and nothing economic comes out of it, such as Australia. With us, at least there's more awareness of commercializing academic knowledge. Another example is Finland, a country that plans for the long term, where there's a government pension through which it's becoming one of the largest shareholders in Europe. That country can therefore upset companies whose shares it holds, but it doesn't do that because it thinks about the long term."
So the Ministry of Finance should force investment institutions in Israel to invest more in Israeli high tech?
"I don't believe in compulsion by the Ministry of Finance. I do believe in regulation that makes it possible to create relationships between the two sides. What's the difference between Israeli investment and foreign investment? Israeli investment is subject to VAT, and so I say - fall in line. Simplify. Allow. Don't tell me how to do it. I know better than you do. You may understand finance and the laws you've made, and that's fine. In getting things done and building things, I understand better than you, and I've done more than you, so let me work.
When you say "me," who are you referring to?
"To the high-tech sector, and to myself as its representative. I, Orna Berry, can already get along with everybody, because I don't bow to anything. If they tell me not to go a certain way, I find another way. I'm an entrepreneur, whether I'm in a large foreign company or a small Israeli company."
What is the biggest problem in Israel's high-tech industry?
"That there's no government support. There's no government funding and no regulation supporting development of the industry, and VAT is just one example. You can lower it by 0.25% or 0.5%, and that will be enough to start with, but when everything is done with suspicion against excessive ownership by foreign investors, it's worthless. On the other hand, the existing conditions for foreign investors mustn't be eliminated, like waking up one morning and raising the corporation tax rate, and then cutting it the next day. In Singapore, Ireland, and even Taiwan, it works differently. When a government is committed to something, it has to be committed for the long term. Take the reimbursements for venture capital funds, for example. Since 2006, there has been no general agreement about it. There was for 10 years, starting in 1996, and it enabled foreign investment institutions to pay tax in their country of origin, instead of in Israel. Now there is an individual ruling for each company. Have you ever heard of anything like that? It's a situation that creates a lot of work for lawyers and accountants."
Benny Landa claimed in the past that tax on foreign investors should be eliminated in order to get them to invest in Israel
"Landa is right. Shortly after he resigned from HP Indigo, he wrote an excellent article based on comparing the viability of investing in HP's plant in Singapore and the one in Israel. He concluded that Israel was preferable. That's an article worth reading. Landa is a great entrepreneur."
Published by Globes [online], Israel business news - www.globes-online.com - on April 13, 2017
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