The Israeli-American high-tech connection

High-tech executives from Israel say their scientific skills have been augmented by the business-building skills found in the United States.There’s a strong and still-growing symbiosis between Israel and the United States in building high-technology businesses as evidenced by the high …

High-tech executives from Israel say their scientific skills have been augmented by the business-building skills found in the United States.There’s a strong and still-growing symbiosis between Israel and the United States in building high-technology businesses as evidenced by the high numbers of businesses and executives with roots in Israel who live and work in the United States.

Companies operating in California’s Silicon Valley, such as BackWeb Technologies in San Jose, Check Point Software Technologies in Redwood City, Electronics for Imaging in Foster City, Mercury Interactive in Sunnyvale, BridgeWave Communications of Santa Clara and others are based in Israel or have strong Israeli connections.

Some of the executives and workers at these companies started their business careers at the Israel-based operations of such U.S. companies as National Semiconductor and Intel and moved to the United States with those businesses. Some then left to start new businesses here. Others helped start businesses in Israel before those businesses moved most of their operations to the United States to be closer to a larger market for their products. Still others work for businesses headquartered in Israel with significant operations here.

Many of these executives and entrepreneurs say that the presence and numbers of Israeli companies and workers at high-technology companies is no coincidence. The confluence of talents and skills that has made the
Israeli-U.S. high-tech connection a success has its roots in the strengths of the two countries’ cultures and talent pools, they say.

What has become almost a cliché to participants in and observers of the Israeli technology business is really true, these cross-cultural business leaders say. The strength of Israelis in scientific development is being balanced by the business-building skills of Americans.

In addition, the most attractive market for products that are developed in Israel is the United States. Few Israeli high-tech companies can survive without gaining a strong foothold in the American market, executives say.

“In Israel, the technology precedes the market,” said Danny Biran, the Israel-born chief executive at Silverback Systems in Campbell. “Companies in the United States are more market-driven. Before you do anything, you have to make sure you can sell it.”

“What you have in (Silicon Valley) is the knowledge of how to build great companies and what you have in Israel is the knowledge of how to build great technologies,” seconded Eli Barkat, chief executive officer of BackWeb
Technologies. “If you’re looking for the Israeli-Silicon Valley link, that is the best way to explain it.”

So, what are the strengths that foster this symbiosis from the Israeli side?

Amon Agassi, director of business development with Consulate General of Israel in San Francisco, says Israel’s technical expertise begins with its universities, such as the Technion-Israel Institute of Technology, where training in engineering and the sciences is highly prized. More than a million new immigrants from Russia, where technical skills are also emphasized, have also bolstered the strength of Israeli science.

In addition, the Israeli government has an important role in sponsoring high-tech research with generous investments in civilian research and development, government grants and tax holidays.

Mandatory military service has also played a role in Israeli high-tech development. It’s no coincidence that Israel is strong in the security and telecommunications industries, since much of the technology of both industries was developed through government-funded military projects, Agassi said.

On the human side, the military can also help build strong leadership, said Barkat, who served four years in the Israeli army in Lebanon in the early ’80s. Although not all Israeli military alumni are successful in transferring their skills to the private sector, Barkat said, the experience of being tested under battle conditions can help make responsible leaders.

“In the military, you really learn the hard way that everything in the end is about results,” he said.

But behind these strengths are a few weaknesses that are balanced by corresponding strengths of the American workforce that have helped some Israeli businesses thrive here, said Yuval Scarlat, general manager of Mercury Interactive’s testing business, who was born in Israel.

Israelis can pursue a technological challenge to the point of refusing to give up on something that might not be worth pursuing, Scarlat said.
Americans tend to be more pragmatic, focusing on “moving through phases of growth, process, culture.”

Mercury was founded in Israel in 1989 and still does research and development for its software systems there, but actually sells most of its software in the United States. The company began, naturally, by focusing on engineering and product development. As it ramped its sales up to $360 million by 2001, though, the company concentrated more and more on refining its marketing, “the soft skills, not related to engineering.” That’s where the learning curve started about approaching the U.S. market, said Scarlat who began his career working for the Israeli-based operations of Sunnyvale’s National Semiconductor as a software engineer. He started with Mercury in Israel in research and development, later moving into sales and sales support, which is what brought him to the United States.

“Customer-driven activities versus the ‘we know it all’ mentality was a challenge for us,” Scarlat said. “Process means you bring in five customers, but how do you scale that up to 2,000? We’ve been blessed with being able to do that and (Americans) showed us the way.”

In creating bi-cultural workforces and tapping into the strengths of both cultures, executives say they’ve found differences between the way Israelis and Americans operate, but nothing that forms an insurmountable barrier. “There are gaps, but they aren’t huge,” Barkat said.

Israelis say American businesses tend to be less democratic in their outlook and more oriented towards taking orders from the chief executive. Israelis have fewer qualms about questioning authority and also tend to be more skeptical of official pronouncements.

Barkat offered an anecdote about how his employees in the United States and Israel treated information he gave them about the range of investment that the company’s 1999 IPO could yield. He said the experience was an example he’s drawn on in communicating performance expectations.

“I said (the range) could be from $150 million to $300 million,” he said. “Everyone from Israel was expecting $150 million, while the Americans were expecting $300 million. If you’re dealing with expectations-setting, you have to be careful with these cross-cultural issues.”

As much as there are urgent business reasons for Israelis and Israeli businesses to cross the ocean, not every case fits the stereotype. Eli
Pasternak, senior vice president and chief technical officer of BridgeWave Communications in Santa Clara said he’s in Silicon Valley primarily for lifestyle reasons.

Pasternak followed his wife from Israel to St. Louis when she was doing post-doctoral research. Later, he and a partner, Amir Makleff, who had been in the same unit of the Israeli army as Pasternak, founded a company called Telestream and later founded BridgeWave. BridgeWave makes wireless systems that allow high-speed Internet access similar to that offered by cable modems and DSL in areas, such as business parks, where cable modem and DSL aren’t available.

Pasternak said he fell in love with Northern California after making his first visit in the early ’80s.

“I arrived in San Francisco in February and I saw blue sky and palm trees,” he said. “I looked at that and said ‘This is a fun place to be.’ It’s not the technology, it’s the ambiance of Northern California.