Israel’s startup scene – which boasts of the world’s largest number of NASDAQ-listed companies per capita, is headquartered around Tel Aviv. Tel Aviv area is the host of pillar companies — local, publicly-traded companies that supply talent and capital to startups such as security software maker Check Point Software which spawned many other publicly-traded companies – creating the flywheel effect mentioned above. Haifa, 52 miles north of Tel Aviv, hosts the Technion which is known as the MIT of Israel. However, most people who graduate from the Technion do not want to live or start companies there after they graduate. Though the Technion has licensed technology to companies that have gone public, most are not located in Haifa and are not pillars. Instead they operate around the world.
One former Technion professor does not seem troubled that Haifa does not host many Technion startups. As Shlomo Maital, an emeritus professor of economics at the Technion, explained in an August 6 email, “Israel is a very small country. Tel Aviv is less than an hour from Haifa, by train. It is not clear that there are insights to be gained by looking at individual cities or neighborhoods — instead of viewing Israel as a whole ecosystem.”
He does think Haifa has some strengths. As he said, these include “the presence of Intel Israel Development Corp. (IDC), established in 1974, which employs several thousand people. IDC employs star Technion students even before they graduate. IDC is located in merkaz ta-asiyat mada (MATAM). In addition, Haifa Science Park — a very strong cluster of high tech companies, including startups, and includes global giants Elbit and Microsoft. Intel spins off startups, when its engineers become bored and leave to launch their own firms.”
He continued, “In addition, there is the new Haifa Life Sciences Park — its first building is completed and others are on the way. The Haifa Economic Corporation has partnered with MIVNE Real Estate Group, to establish the Haifa Life Sciences Park, intended for companies with a clear affinity towards medicine and science, initiating and developing technological solutions and platforms for scientific breakthroughs. Leading companies, from medical device developers and digital healthcare development companies to technological incubators are calling the Haifa Life Sciences Park home, thereby placing Haifa at the forefront of research and development of a wide spectrum of fields. This is a field of dreams project – if you build it, they will come. GE Healthcare is the first major occupant – we’ll see if startups come here. The main life sciences incubator/accelerator is in Rehovot, near the Weizmann Institute. The Park’s management invests a great deal in creating unique opportunities for the industry, while promoting integration of the biotech and medical equipment industries in Haifa, to enable strategic cooperation between academic institutions, medical centers, research institutes and commercial entities in Israel and abroad.”
With the exception of Elbit Systems, a $6 billion (September 8, 2017 stock market capitalization) aerospace and defense company, Haifa does not have pillar companies. But it does host satellite offices for Silicon Valley pillar companies such as Intel, Google, Apple, Yahoo, Philips, GE Healthcare, Cisco Systems and Flextronics, according to Maital who believes that the Technion is not eager enough to license its IP. As he said, “Hossam Haick, a Technion chemical engineer, developed an electronic ‘nose’, which became the basis of several startup ventures. I have a personal beef. Universities in general, Technion in particular, in my view, cling too tightly to IP developed within the university. This deters investors like citronella deters mosquitos. MIT let Bose use his Ph.D. results to launch a speaker company — later, Bose willed the whole company to MIT! Technion does not following this model. I regret it. Technion is a public university, funded in part by government (at least, the operating budget). IP developed within Technion belongs to the people and should be more freely released. (Not everyone agrees).”
Among those who might challenge Maital is the CEO of the Technion’s technology transfer office. In an August 30 interview, Benjamin Soffer, CEO of Technion Technology Transfer, said, “We have 90 companies in our portfolio near Tel Aviv and Herzliya. Except for pharmaceuticals-related IP which we license directly to established companies, we license Technion IP to startups that do the technology transfer. Technion keeps half of the licensing revenue and the other half goes to the inventor. Our annual licensing income of $35 million covers a third of Technion’s research budget. Technion scientists can consult one day a week to the startups – we don’t want to turn brilliant scientists into mediocre business people.
Our technology has found its way into 10 companies that went public and were worth about $7.5 billion in stock market capitalization on September 8 including:
- Waltham, Mass.-based vascular surgery robot maker Corindus Vascular Robotics with $3 million in sales, a $33 million 2016 net loss, and a stock market value of $305 million;
- Caesarea, Israel-based orthopedics and neurosurgery medical device maker Mazor Robotics with $36 million in sales, a $19 million 2016 net loss, and a stock market value of $1.1 billion;
- St. Helier, Jersey-based Medical Systems developer Novocure with $83 million in sales, a $132 million 2016 net loss, and a stock market value of $1.8 billion ; and
- Miami, Fla.-based diagnostics and pharmaceutical company Opko Health with $1,222 million in sales, a $25 million 2016 net loss, and a stock market value of $3.5 billion .
Maital is not optimistic about Haifa’s startup scene. As he said, “The Haifa startup scene will decline in the next five years. Why? Tel Aviv is a magnet for startups and for young people is ranked fifth in the global list of ‘best startup cities’ — and it’s getting better. Haifa has a reputation of being a boring city, no night life, mediocre schools, and the sidewalks get pulled in at 8 pm.”
“Even Jerusalem is ascending — now, there’s a paradox — the high-tech park in Jerusalem, with Mobileye, is right in the midst of an ultra-Orthodox neighborhood — the contrast is stark. But Jerusalem’s mayor, Nir Barkat, was a successful entrepreneur, and then helped fund Check Point. Haifa’s mayor Yona Yahav, is very far from that world. Haifa is asleep. A new high-tech area, nearby, about 20 minutes away, is called Yokneam Illit, and it already has over 100 high tech companies in an area known as Startup Village. It’s close to a major highway (Route 6), has good schools and ample space,” he concluded.