Representatives of the Israel Venture Association (IVA) and the Israel Association of Electronics and Information Industries will take part in the business delegation leaving today for China, headed by Minister of Industry, Trade, and Labor Ehud Olmert. The delegation will attend sessions of a high-tech and venture capital conference in Beijing and Shanghai.
On the eve of the trip, and following last month’s visit by a venture capital funds delegation to India, a number of representatives from the planned delegation gathered yesterday, including IVA chairman and Pitango co-founder and managing director Nechemia (Chemi) J. Peres, Tamir Fishman co-CEO Eldad Tamir, Israel Seed Partners general partner Jonathan Medved, Vertex Management Europe president Yoram Oron, and India economic counselor to Israel Satish Mehta. The idea of the meeting was obvious Israel and India are eager to cooperate, with the eagerness on India’s part being far greater. Those not present missed out.
Peres said that initial attempts had been made during the trip to India to extend cooperation between Israeli and Indian high-tech companies. “The purpose of the delegation’s visit to India was to create connections for new markets for our portfolio companies. The upcoming conference in China has similar goals, and I hope that we’ll soon see greater involvement in these two countries. We believe that there are enormous opportunities, particularly for technology companies in Israel. India and China are markets in which things are happening, and they must not be ignored,” he explained.
According to Peres, the idea that India is a large manufacturing center is already passé: “India is becoming a major entrepreneurial center. Many Indians who have worked in key positions in companies and funds in Silicon Valley in recent years are returning home and founding companies. They know the entrepreneurial spirit, and work according to models familiar to the venture capital industry in Israel. Both they and we have studied these models in the US. India is becoming very competitive. Unless we’re able to cooperate with them, we’ll be left behind.”
How do we do that? No one really knows just yet. Peres says that first of all, prevailing concepts must be changed. He explains, “Setting up companies in Israel, and leaving other markets to later stages, is no longer the right plan. I think that the model of a start-up that is multinational from the first day of activity is more correct. Some of the R&D stages of young companies will take place in India, both because at a later stage, the products will be channeled to these markets, and because it’s already cheaper to do some R&D there than it is here.
”One Infosys Technologies (NASDAQ: INFY) senior executive told me that they get a million CVs every year from software engineers looking for work. That’s an inconceivable number. Certainly Israel, which trains 7,000 engineers a year, won’t be able to compete with those numbers, nor does it have to.”
All the participants in the meeting believe that Israel can make a unique contribution to these cooperative efforts. “We’ll see that Israelis and Indians will find it easy to work together. It’s true that work remains to be done on developing models for cooperation, but it’s clear that India is becoming a significant global technological entrepreneurship center. Quite a few Israel companies already have such cooperation, and not just big ones like Ness Technologies and Check Point (Nasdaq: CHKP). There are already start-ups with some kind of operation in India or China, and I don’t just mean manufacturing, but also R&D centers.”
Mehta seconds Peres as to the attraction that Israel has for India: “India is definitely interested in cooperation, because Israel has outstanding technological and entrepreneurial capabilities. We’re interested in leveraging both sides’ abilities and advantages for our mutual benefit. It’s true that India’s venture capital industry is not yet equal to Israel’s, mostly because it focuses primarily on financing commercial companies, but the field is developing.
”In 2003, venture capital funds invested about $1 billion in companies about the same amount that was invested in Israel. The Indian industry is developing rapidly. The software and services industry had revenue of $190 million in 1991. This jumped to $16 billion in 2003, and international research companies predict that revenue will reach $160 billion in 2008. The growth rate in telecommunications is just as high as in IT. Every month, another million wireless subscribers are recruited in India. We believe that $25 billion will be invested in this industry over the next five years.”
Mehta adds that India’s level of interest in Israel is just as great. “There is great interest in Israeli technology companies. We’ll hold a conference in Israel in October. Many Indian companies have already expressed interest in participating. Indian companies admire Israeli companies, because it doing business together feels natural. Most Indians and Israelis in the industry are graduates of Silicon Valley. There is no language barrier. Many Israelis have visited India, and are familiar with it, so we definitely expect cooperation to grow.”
Tamir regards expanding Israeli activity in India and China as the order of the day. “ I think that the real challenge is to realize that the world has changed. Only a few years ago, we regarded the US and Europe as the markets for us. It’s now clear that the situation has changed. The large and growing economies are India and China. There is therefore a real need to build cooperation between companies and funds in India and Israel. Israel’s advantage is its high level of technology and entrepreneurship.”
Medved also says that India and China cannot be ignored. “Anyone who ignores these regions will be punished for it later, and not just because these markets are already dominant, and will become even more so. The world is developing, and if you don’t join the game, you’ll be left out.”
Medved says that Israel has to realize that cooperation is essential, because Israel cannot compete with the cost of labor in India: “We have to find where our added value lies. Sometimes we forget it, but all over the world, Israel is considered the second most important technological power. We’re on the map, and both India and China realize this. India regards Israel as a model for imitation, and I believe we can exploit that to our benefit. We don’t have to compete head-to-head in areas where we’ve already lost, such as manufacturing.
”I believe that 20 new start-ups in Israel are much better than having Intel (Nasdaq: INTC) opening another factory here. We’ve got something to offer in other fields. All over the world, there is a search for entrepreneurial ability. We’ve got to focus on what we’re good at.”
Oron predicts that cooperative efforts in China will be primarily in hardware, while cooperative efforts in India will deal more in software and communications. He says, “China is already one of the leaders in microchips and semiconductors. China is also increasingly interested in the Israeli model, technological capabilities, venture capital funds, and start-ups. Like India, China also has a large community of ex-Silicon Valley managers. I don’t see yet any mutual investments in companies in the early stages, but I definitely think extensive cooperation is possible. Many Chinese companies visit Israel. 400 Chinese companies have registered for next weeks’ meetings, which are mostly one-on-one meetings with representatives of Israeli companies. A Chinese investment entity named China Torch High-Tech Industry Development Center already expressed interest a year ago in establishing a joint venture capital fund in Israel. We think it’s too early.”
The large delegation to China includes heads of Israeli companies, high-tech industry, and venture capital. The list of participants includes Dr. Yossi Vardi, Israel Association of Electronics and Information Industries chairman and Motorola Israel general manager Elisha Yanay, Elron president and CEO Doron Birger, Comverse CEO Zeev Bregman, Bezeq CEO Amnon Dick and chairperson Miriam Mazer, Alvarion CEO Zvi Slonimsky, Gilat Satellite CEO Oren Most, Peres, IVA general manager Etan Hillman, Israel Association of Electronics and Information Industries director Uri Har, Pitango managing general partners Isaac Hillel and Rami Beracha, Oron, Giza group founder and chairman Zeev Holtzman, Tamir, Platinum Neurone Ventures managing partner Dr. Yehoshua (Shuki) Gleitman, Carmel Ventures cofounder and general partner Avi Zeevi, Gemini Israel Funds principal Jonathan Saacks, Jerusalem Venture Partners managing partner Erel Margalit, BRM Capital managing director Menashe Ezra and Infinity Venture Capital Fund managing partner Amir Gal-Or.
Published by Globes [online] - www.globes.co.il - on June 17, 2004