US states woo Israeli companies

‘Israeli companies are creating jobs and economic growth wherever they go.’Mid-sized cities and states across the United States have been realizing something that bigger states like New York and California have known for a long time: Israeli high tech and …

‘Israeli companies are creating jobs and economic growth wherever they go.’Mid-sized cities and states across the United States have been realizing something that bigger states like New York and California have known for a long time: Israeli high tech and industrial companies can be a boost to local economies.

North Carolina, Ohio, Alabama and Indiana and a number of other states and cities have sent high-level delegations to Israel to encourage Israeli companies to headquarter their US operations in their backyards.

The Americans benefit from the prestige in hosting groundbreaking technology, medical innovations, pioneering manufacturing and in many cases, a boost to the local economy.

According to Anderson, Indiana’s mayor Kevin S. Smith, Israel’s business climate has produced terrific results for his city.

“I can’t overemphasize the value of the competitive drive I discovered in Israel,” says Smith, who led a trade mission to Tel Aviv and Ra’anana in March. “Companies are developing quality products and services to compete in the global business arena. It’s a winning combination.”

Anderson already serves as the US home for two Israeli companies: Taditel, which produces advanced microelectronic technologies for the automotive and hi-tech industries, and HDP, a local subsidiary of Israeli plastics giant Keter. Together, they employ more than 120 people in Anderson (HDP employs another 85 at its factory in nearby Alexandria), accounting for well over $4.8 million in wages. In 2005, HDP alone paid $223,800 in property tax, all in a town of less than 60,000 residents.

While in Israel, Smith said he represented the state of Indiana at a trade seminar, and was shocked to find that close to 50 businesspeople attended his presentation to pitch Indiana as a potential US home for their companies.

“I was absolutely energized,” he told ISRAEL21c. “Indiana is a state looking for growth, and we believe the electricity, the ideas and the business ethic flowing out of these companies would do a lot to lead us in that direction.

Anderson is not alone. A quick browse of the numbers shows that Indiana towns are part of a steady trend. States like Delaware are veterans: 90 percent of the Israeli companies doing business in America are incorporated there; in Atlanta, Tom Glaser, Regional President of the American-Israel Chamber of Commerce says there are no less than 45 Israeli firms doing business in metropolitan Atlanta.

In North Carolina, 15 Israeli companies have set up operations in recent years. Companies such as Albaad Massuot Yitzhak Ltd. (TASE: ALBA), NR Spuntech Industries Ltd. (TASE:SPNTC), MA Industries (Makhteshim Agan Ltd.) (TASE:MAIN) have made such an impact that a delegation of North Carolina officials visited Israel last November to encourage other companies to follow suit and invest in building factories in the state.

There are similar stories in Alabama, Ohio, upstate New York, Maryland, Georgia, Oklahoma, Minnesota and other states. No less than 13 states maintain trade offices in Israel, and those that don’t, such as Utah, say bolstering ties with Israel would “make sense.”

Jon Medved, senior partner at Israel Seed Partners, a Jerusalem-based venture capital firm, says he’s not surprised by the phenomenon.

“Israel has proved itself to be incredibly resilient,” he says. “Even during the intifada, there was so much money here, people were looking for good deals – and finding them. People want to tap into that.”

According to Medved, Israel’s high tech industry was not hit as hard as the European and American sectors following the NASDAQ collapse in 2000, and in recent times has doubled its market share of investment dollars and jobs created. And he says the numbers are staggering:

** Israeli VCs raised $600 per capita in 2005, compared to $30 per capita in Europe.

** There were 378 deals involving Israeli technology companies in 2005

** Israel produces almost 40 percent of the number of technology deals that Europe does

** There are more engineers per capita in Israel than anywhere in the world

** Israel has over 60 active venture capital funds, with over $14 million under management

Medved says the phenomenon has changed the dynamic in US-Israel relations.

“It is a virtuous circle,” says Medved. “There’s no ‘nasty globalization’ here where a multinational corporation sets up shop in a foreign country and makes off with all the jobs. Israeli companies are creating jobs and economic growth wherever they go.

“The question is no longer ‘what can the US do for Israel.’ Israel comes to the table now with something very real to offer,” he says.

In Ohio, Tom Sudow, executive director of the Beachwood (OH) Chamber of Commerce, says the match between Israeli companies and US cities and states is a natural fit, echoing sentiments expressed by Anderson’s Mayor Smith.

“The plain fact of the matter is that Israeli companies need the US market if they want to sell their products,” he says. “At the outside, they’ve got a country with 5 million potential customers. Here they’ve got 300 million potentials.”

Sudow says that while his city’s current economic position is good – 3,000 businesses, more than 50,000 employees, in a city just over 5 square miles in area – local leaders want to plan for the future.

“Israel is high on vitality, but low on market,” he says. “Over the last 10 years we in Ohio have come to realize the vitality of Israel’s economy and of Israeli innovation, and decided to tap in.”

In order to ‘tap in,’ the City of Beachwood offers assistance with office location, recruiting services for professional and support staff. In addition, the city government has invested in a bridge fund to push bio-med start-ups, with an eye on opening research and development plants in Israel, and sales and marketing offices in Beachwood.

In addition, recent changes to the Ohio state tax code have made it easier for small companies to set up shop, While these changes were not enacted specifically with Israel in mind, they are certainly an added attraction for Israeli firms when considering a US base of operations.

Elsewhere in Ohio, the city of Columbus is actively trying to woo Israeli business. Akron Mayor Donald Plusquellic led a delegation of senior business leaders to Israel in January to focus on healthcare and polymers. There, he met with government and university officials, business leaders, and visited R&D centers. More than 60 Israeli companies met with the Akron delegation.

According to the Israel Export Institute, the visit resulted in a $1 million investment in the Netanya-based Targetech incubator in Netanya, the result of a public-private partnership organized by the greater Akron community. The institute report said the project is the first such partnership undertaken by any Israeli incubator and a US city.

Ohio’s push to do business with Israel has paid off. In 2005, Ohio exported more than $229 million in goods to Israel, a 32 percent jump from 2004. 23 universities hold grants from US-Israel binational foundations.

Richard Schottenstein, the state’s trade representative in Tel Aviv, says his job has changed significantly over the past 10 years.

“When we opened this office in 1994,” he says, “the vast majority of my work was to help Ohio businesses enter the Israeli market and set up shop here. Now, more than 50 percent of my time is spent helping Israeli high tech, bio tech, medical technology, and other businesses get set up in Ohio.”

Why is Ohio so aggressively trying to lure Israeli companies?

“Easy,” says Shottenstein. “Israel’s got cutting edge technology, but no real market for it. Here, we’ve got some of the country’s top hospitals and Israel is a main source of biotech and high tech investment in the world.

“In short,” he says in conclusion, “We are investing in Israeli brains.”