Tel Aviv, located on Israel’s Mediterranean coast, is the economic and technological center of the country. The city has some 444,000 residents and annually attracts 2.5 million international visitors.
The first time Trevor Pawl went to Israel, he taught American sports to kids. This time, traveling in May, Pawl accompanied a delegation sponsored by the Michigan Israel Business Accelerator (MIBA). Delegates received an immersion into the commercial culture that bubbles and brims in the Mediterranean nation of 8.8 million.
Pawl — who heads the Michigan Economic Development Corp.’s PlanetM initiative to develop mobility technologies — remembers the zeal of the Israelis he met. “Despite everything going on there, the lasting images aren’t necessarily physical images,” Pawl says. “It’s all the smiles, the light they have in their eyes when they talk about innovation, and the smiles when they talk about the opportunity ahead. They really want to make a difference in the world in a positive way.”
The Detroiters delivered a message of their own. People and businesses are moving downtown from the suburbs. Campus Martius, for example, where MIBA has set up at 1001 Woodward Ave., buzzes with activity. A transformation is occurring in the Motor City, the verve is undeniable, and among the next steps for the business community will be penetration by high-tech companies — auto suppliers included — that spring from Israel’s impressive startup culture.
The MIBA delegation saw firsthand Israel’s vibrant entrepreneurial and innovative landscape from Haifa, where Intel took root in the 1970s, to the HiTech Park at Be’er Sheva, on the edge of the Negev Desert. Pawl compared the latter to the American Center for Mobility (ACM) in Ypsilanti Township, but rated it “a little more advanced.” Overall, he says, the delegation “spent enough time to have hit all different types of influences.”
An equally broad and enticing pitch came from the Detroiters. As MIBA’s CEO and delegation leader Sandy Selinger put it, “We talked about coming to Michigan and testing on our roads and using the ACM to test.” Selinger himself was just getting up to speed, having only been named leader of MIBA a few weeks before, but he’s very familiar with Michigan because of family connections through his wife, Sandy Fershee, who’s head of global experience design at Ford Motor Co. in Dearborn.
“We were also selling the phenomenal advantages that we have in Michigan, having a location closer to OEMs and Tier 1s,” Selinger says. “We want to get startup companies to consider Michigan first to establish their businesses.”
For a small country, Israel produces a disproportionately high number of startups. One example, OrCam, makes the MyEye 2.0 device to assist people with vision impairment. Another, Argus Cyber Security, was acquired last fall by Tier 1 auto supplier Continental AG — which has its North American headquarters in Auburn Hills — for about $400 million. A real attention-getter was Google’s 2013 purchase of Waze, the crowd-sourced navigation app that was then five years old, for more than $1 billion.
OrCam’s MyEye 2.0, developed in Israel, helps improve vision.
Israel’s vigorous and almost irreproducible startup culture emerged in the 1990s from a combination of factors, originating decades ago with the national emphasis on building a knowledge economy.
The Israeli military imparts unique training that has often translated into innovations to benefit civil society. Israel is also known for its anti-hierarchical social structure, which allows soldiers to challenge officers and junior engineers to interrupt board members. Oh, and Israelis have the zeal and grit of pioneers.
Some figures help illustrate the business culture’s fertility. Israel’s Central Bureau of Statistics reported 625 startups in 2016, and 4,029 between 2011 and 2016. The pace of startup formation has slowed somewhat in recent years, but over the last two decades Israel has been so dynamic that other countries have awakened.
Last year, France — population 67 million — surged ahead with 743 deals for startups and total investment of some $3 billion. If anything, the Israeli economy has been criticized for overreliance on the high-tech sector, but there are strong companies ranging from Netafim, maker of irrigation equipment, to Compugen, a pioneer in genetics.
— Times of Israel
For a country that started in 1948 with agriculture and a collectivist emphasis, Israel’s growth can’t be understated. As venture capitalist Erel Margalit explained to the authors of Start-up Nation: The Story of Israel’s Economic Miracle, the founders held socialist beliefs and disdained profit. High-tech changed that.
“(Now) there’s a legitimate way to make a profit because you’re inventing something,” Margalit says. “You’re not just trading in goods, or you’re not just a finance person. You’re doing something for humanity. You’re inventing a new drug or a new chip. The new pioneering Zionist narrative is about creating things.”
In the most recent Bloomberg Innovation Index, Israel led the world in R&D intensity and concentration of researchers per capita, and was fifth overall in high-tech density — described as “the number of domestically domiciled high-tech public companies” — trailing the United States, France, Germany, and South Korea. Since the 1980s, more than 250 Israeli companies have had IPOs on the NASDAQ exchange. The characteristic ingenuity is distinguished by the way innovators have turned problems into opportunities. Netafim, for instance, which developed ad-vanced irrigation systems, arose after settlers were dispatched to the southern Negev. “The country’s disadvantage of having some of its area taken up by a desert was turned into an asset,” the authors of Start-up Nation wrote.
With a population of around 9 million people, Israel leads the world in R&D intensity and the concentration of researchers per capita, and was fifth overall in high-tech density — described as “the number of domestically domiciled high-tech public companies” — trailing the United States, France, Germany, and South Korea, according to the 2018 Bloomberg Innovation Index.
While Israel’s progress in high-tech and venture capital started to take off 25 years ago, the trend of companies becoming auto suppliers is much newer. An example is Karamba Security. One of four founding partners at this cyber-security provider, Ami Dotan, served in the Israeli air force in the 1970s, and then came to New York to earn a degree in electrical engineering at Polytechnic University in Brooklyn (now NYU Tandon School of Engineering). Dotan spent 17 years with Rafael Advanced Defense Systems Ltd., the Israel Ministry of Defense’s R&D arm.
But even as he rose to vice president of strategy, he dreamed of rolling up his sleeves and making a mark in the private sector. “I wanted very much to be a venture capitalist — that’s why I left Rafael,” he says. “It was just the overall emergence of Israeli high-tech and venture capital sectors in Israel. It intrigued me, and I wanted to get more familiar and then involved.”
Dotan started his first VC fund in 1997 and, during the past 21 years, he has been a serial entrepreneur. Karamba is his most recent creation. One of his partners is David Barzilai, whom he met during an intermediary stint at Sun Microsystems Israel. The other two, Assaf Harel and Tal Ben-David, are veterans of the Israel Intelligence Corps’ renowned Unit 8200, the outfit that has the first pick of science and math prodigies emerging from high schools across Israel.
Karamba, recipient of Gartner Inc.’s citation as Cool Vendor 2018 in IoT (Internet of Things) Security, has benefited from significant investment by Fontinalis Partners, the Detroit venture capital company whose partners include Bill Ford, Ralph Booth, and Chris Thomas. “They’re one of the pioneers in smart mobility and transportation,” Dotan says. “They had the vision — realizing how big a boom it’s going to create — way before autonomous vehicles were discussed. They’re absolutely experts in their domain.”
At first, in 2016, Karamba’s office was in Ann Arbor, but Dotan found that “commuting in wintertime was challenging.” Last fall the five-person office moved to Bloomfield Hills. Besides, he wanted to be closer to the company’s 17 OEM and Tier 1 clients.
“The main purpose of the office in the U.S. is to support customers on the last leg of engagement doing integration and testing,” Dotan says. “The beginning of this commercial engagement is the business development itself. We have the two ends taking care of North America from Bloomfield Hills. We also have one salesperson in Silicon Valley, and the rest of the team” — he counts 32 people — “is R&D and marketing based in Israel.”
Haifa in Northern Israel is home to Matam, one of the oldest and largest high-tech parks in the country. It’s also a center of heavy industry.
He explains Karamba’s technical mission by laying out a striking comparison. “Just to throw some numbers (to illustrate) the big problem, if you take the Boeing 787, the Dreamliner, in all its computers it has 50 million lines of code. A premium car like a Cadillac or a Lincoln, it has 130 million lines of code. Autonomous vehicles, those cars already have close to 1 billion lines of code. Why is that so significant? Because the rule of thumb has it that in every 1,600 to 1,800 lines of code, there’s an embedded bug in the (overall) software.”
And, as he elaborates, every car has three or four entry points for hackers. With electronic control units (ECUs) sending commands to every onboard system, and with electric motors operating the steering and other systems, vehicles are alarmingly susceptible to remote takeover. Karamba’s products are designed to harden them against hackers and prevent interference during over-the-air updates. “Our purpose in life is to prevent those connected ECUs from being compromised,” he says.
Eventually, Karamba will employ about 15 people in Bloomfield Hills. But beyond the mere numbers, Dotan — who was with Gov. Rick Snyder on his latest mission to Israel — spreads the news about Michigan. “I see more and more Israeli companies coming to conduct their business and be close to the customers, because the time difference and cultural differences make it difficult to conduct business any other way,” he says. “You have to be here in Michigan.”
One of the originators of this developing trend of Israeli tech startups to the U.S. was Plasan Sasa Ltd., which manufactures and assembles armor systems for military trucks and aircraft. Plasan started 33 years ago on a collective farm in northern Israel and still operates there, but since 2012 it has also been in Grand Rapids, where there are two divisions: Plasan North America and Plasan Carbon Composites.
Plasan Sasa Ltd. manufactures and assembles armor systems for military trucks and aircrafts. The company opened Plasan North America and Plasan Carbon Composites in Grand Rapids.
A noticeable emblem of Plasan’s endeavors is the imposing International MaxxPro MRAP (Mine Resistant Ambush Protected) war truck built on the International 7000 chassis by Navistar Defense with Plasan armor. A full MaxxPro model lineup has been developed.
The DXM, for example, features independent suspension, which makes it suitable for ambulance duty. The XL model can transport 10 soldiers. The MRV recovers damaged vehicles on the battle lines. Another of Plasan’s innovations is the Sand Cat, a smaller tactical vehicle based on a modified Ford F-550 chassis and assembled by Oshkosh Defense. Numerous variants have been produced for customers located from Azerbaijan to Ukraine.
Adrienne Stevens, CEO of Plasan North American and Plasan Carbon Composites, says locating in Grand Rapids made sense considering its proximity to customers like AM General, Navistar, and Oshkosh. But Stevens, a Detroit native, also recognized a strong work ethic.
Before she came to Plasan in January 2017, after two decades in the aviation industry, Stevens had never been to Israel. Now she’s a regular. “I’m going next week, and I think that will be my seventh or eighth trip,” she says, chuckling about the flight crew from JFK International Airport starting to recognize her.
She gives some facts she’s discovered: Israel would fit in Lake Michigan, it’s 70-percent desert, and the populace is very concentrated. Among business connections, she sees “significant interest” in setting up in Michigan, adding that Israel was a startup nation but now is scaling up. Coincidentally, she’s well aware of OrCam’s MyEye 2.0: her mother has macular degeneration and uses the app. “It’s really fantastic how technology is evolving, and how Israel in particular has so many cool things to create efficiency and make the world a better place,” she says.
A final example of the integration between Detroit and Tel Aviv, aka the Nonstop City, is Harman International, which in 2016 moved into an 188,000-square-foot brick-and-glass automotive headquarters in Novi. More than 1,000 people work there; another 250 close affiliates are at Harman Israel. Harman has been on the move, making three key acquisitions since 2012.
An Israeli digital firm developed iOnRoad, a free augmented reality driving safety app that monitors a vehicle’s position on the road.
After TowerSec — an alumnus of the Ann Arbor SPARK program — won the “Hottest Startup” award at the 2015 North American International Auto Show, Harman snatched it up for $70 million. But before that the company had acquired Israeli startups iOnRoad (“Turn Your Smartphone into a Personal Driving Assistant”) and Red Bend Software, which writes code for connected devices and over-the-air upgrades.
The iOnRoad deal cost $8.5 million; Red Bend was more expensive at $99 million in stock and $71 million in cash. Today, the hot project is Harman X, an innovation effort that will be, in part, based at a new R&D center in Kfar Saba, a northeastern suburb of Tel Aviv.
“Even though Israel doesn’t manufacturer automobiles, we have a vibrant ecosystem of companies which provide technologies for the automotive industry,” says Dvir Reznick, Harman’s senior marketing manager for cybersecurity.
The list of specialties covers everything from autonomy to user experience. Besides the startup companies, Reznick credits EcoMotion, a government-funded organization supporting the smart transportation sector, and the Israel Export Institute, with outcomes comparable to those achieved by the MEDC and MIBA.
iOnRoad, a free augmented reality driving safety app
It may sound as though the only thing Israel isn’t offering the world is the next Jimi Hendrix, but the Detroit-Tel Aviv nexus is still in its early stages. Who’s to say every acquisition will work out? Also, as Stevens can attest, the air travel connections between Michigan and Israel are poor. Nonstop service between the two cities would be a boon.
“That would probably be a Delta conversation,” says PlanetM’s Pawl. Otherwise, he sees “exponential growth” of Israeli companies in Michigan in the next five to 10 years. “There’s a great fascination with Detroit, with Michigan,” Pawl says, acknowledging there’s also competition from other states. “We have to make sure we remain relevant in their eyes.”
Or, as Selinger put it, “I anticipate that we’re going to have a significant presence of Israelis in Michigan,” as two natural growth areas beyond automotive include Fintech and health sciences. Selinger says Michigan State University’s new Institute for Quantitative Health Science and Engineering is a draw for Israeli biotech companies.
Yes, this is all unprecedented. But it appears the Israelis have taken to heart the words of the prophet Habakkuk, recorded more than 2,500 years ago: “Write the vision; make it plain on tablets, so he may run who reads it.”
Israel and AI
“Israel is becoming an artificial intelligence powerhouse,” blared a Times of Israel headline earlier this year. Indeed, foreseeing possibilities for AI, Israelis have vaulted to the head of the pack in developing applications. Here are portraits of five leading enterprises in various business sectors.
Mobileye: Last year Intel acquired Jerusalem-based Mobileye, the maker of artificial vision gear, for $15.3 billion. Mobileye’s EyeQ circuit board enables a high degree of self-driving and is found in millions of cars. The company, founded in 1999, briefly partnered with Tesla but experienced an unhappy result — a fatal Model S crash in 2016 that resulted from scene- interpretation failure. For the past year, Mobileye and BMW have tasked a fleet of autonomous vehicles for testing with production to occur by 2021.
Aquant: Aquant co-founder Assaf Melochna is a former Israel Defense Forces intelligence officer. The company obtained $2.6 million in funding last year by promising “We sell uptime.” Its technology helps to foretell impending equipment failure by aggregating telematics signals and contextual data. Other applications include inventory management and field-
Wibbitz: Zohar Dayan and Yotam Cohen launched this automated video-creation platform in 2011. Offices are in Paris, New York, and Tel Aviv. After analyzing scripts or articles, Wibbitz finds photos and video to amplify the story. Publishers like the quick turnaround, but Dayan told The New York Times, “There still needs to be a human, a process, to give it that personal touch.”
Twiggle: One of seven Israeli entries among CB Insights’ 100 most promising AI companies, Twiggle makes online search recommendations. It uses a semantic application programming interface sitting atop e-commerce search engines to read “unstructured” text from chat logs and surveys, and identify choices.
ZooZ: Founded in 2010, ZooZ finds a niche in Fintech with its “payments infrastructure of the future.” Co-founder Oren Levy describes ZooZ as a platform “that connects and merges online and in-store transactions.” It offers a single user identity and single-click checkout, whether online or in a store.