Israel has long been a world leader in water desalination. Increasingly, Israel is also being recognized for its cutting-edge solar technology. But the "Startup Nation" is just getting started when it comes to cleantech.

"Israel is blessed with a very high concentration of folks who are capable, experienced, knowledgeable, and daring enough to start something new," said Meir Ukeles, a partner at Israel Cleantech Ventures (ICV), the country's leading cleantech venture capital firm. In Israel, "in the areas of water, energy, and environmental technologies... there [are] very significant foundations and roots to technology capabilities and innovation."

According to the United Nations, Israel recycles a significantly greater percentage of its wastewater (70 percent) than any other country. Spain (12 percent) is the next most efficient. IDE Technologies, an Israeli developer of desalination plants and equipment, is a global leader. According to Deloitte, ICV-backed AqWise, an Israeli provider of wastewater treatment solutions, was one of the 30 fastest growing technology companies in Europe, the Middle East, and Africa during the past five years.

What prompted – and continues to prompt – Israeli innovation in the water sector? Scarcity.

"Water has been very strong in Israel for many years," said Gary Gannot, a partner at Genesis Partners, a leading Israeli venture capital firm focused on the technology sector. "Lacking water, Israel has put a lot of effort into developing water desalination [and] purification."

Conversely, Israel has plenty of sun. "It is a very sun-rich country," said Ukeles. "From the early days there have been [Israeli] efforts at various times in industry but consistently in academia to develop innovative capabilities in the field of solar energy."

As a result, Israel is now a hotbed of solar innovation. In Israel, Zenith Solar is pioneering concentrated solar, 3GSolar is developing third generation dye solar cell PV modules, and ICV-backed Pythagoras Solar is working on innovative optically enhanced solar platforms for Building Integrated Photovoltaic systems. Israel's solar innovations have not gone unnoticed. In October, Siemens purchased Israel's Solel, a market leader in solar thermal power.

The list of Israeli energy startups goes on and on. In the past three years, the number of Israeli cleantech companies and projects has increased more than fivefold.

"When we launched [Israel Cleantech Ventures in 2006], we profiled about 150 projects or companies in the country in cleantech. Today, our database is up to 800 companies," said Ukeles. "The pace of activity in Israel was good and it has picked up to be exceptional."

If Israel's track record in producing thriving information and communications technology companies is any guide, many of Israel's cleantech startups will succeed. As Dan Senor and Saul Singer notes in "Startup Nation: The Story of Israel's Economic Miracle" that Israel lists more companies on the tech-heavy Nasdaq than all of Europe, Japan, Korea, India, and China combined. Senor and Signer credit the military with helping Israelis develop the technical, teamwork, and problem-solving skills that enable successful entrepreneurship. These days, Israeli military veterans are excited about cleantech.

"You can tell what the new technological developments are going to be if you look at where people who came out of defense are in the technology space. I've seen these people move into the Ethernet world, then electronics, then IT and now into renewables and energy efficiency," said Craig Kugler, the former Director General of Israel's Ministry of National Infrastructures, at an early December forum at MIT sponsored by the Boston-Israel Cleantech Alliance.

For example, the management team of Genesis Partners-backed SolarEdge "left the military as a group and started a company," said Gannot. In October, General Electric invested in SolarEdge, recognizing the company's progress in increasing the efficiency of solar power systems.

The Israeli government's support for cleantech provides yet another reason to be bullish on the nation's cleantech future. For years, the government has supported cleantech innovation through its Office of the Chief Scientist and its Binational Industrial Research and Development (BIRD) effort with the United States Department of Energy. In late November, for example, ICV-backed Tigo Energy and California-based Architectural Glass and Aluminum Co. received a BIRD Energy grant to support their joint development of a BIPV system.

Earlier this year, the Israeli government went a step beyond direct investment in new cleantech technologies. It set a target of having 10 percent of the country's electricity come from renewable energy sources by 2020. To meet the target, Israel would have to add thousands of megawatts in renewable energy capacity, creating a domestic market and opportunity for Israel's cleantech startups.

Yoni Cohen is a currently pursuing a joint degree at Wharton School of Business and Yale Law School. He formerly worked for Fox Sports, among other jobs.

Photo via SolarEdge.

Tags: finance and venture capital, israel, solar, solaredge, startups, tigo