On October 30, Israel will host a cleantech conference cosponsored by the Cleantech Venture Network, Ernst & Young, Morrison & Foerster, and my firm Israel Cleantech Ventures, as part of the larger WATEC water technologies week event. Ahead of this event, here are a few thoughts on why Israel is emerging as an important hub of cleantech innovation.
Fueled by acute constraints in natural resources, Israel has spawned a number of successful water technology and alternative energy companies, including recognized names in drip irrigation (Netafim), desalination (IDE), geothermal energy (Ormat), fuel cells (Medis), and solar thermal energy (Solel/Luz). These successes, a wave of immigration from the former Soviet Union, and the inherent strength of Israel’s academic institutions in these areas have led to world class cleantech capabilities and more than 350 active cleantech companies in Israel today. The roots of this growing community of cleantech entrepreneurs can be traced to (1) established or “legacy� industrial companies active in energy, water, chemicals etc., (2) academic institutions with long histories as research leaders in energy and water sciences, and (3) “crossover� initiatives or entrepreneurs moving into cleantech from traditional areas of Israeli technology leadership such as power electronics, semiconductors, and even biotech and agritech.
Many of the ‘startups’ that are emerging from the first two constituencies are the fruits of years or decades of research in industry or academia, that now feel the pull of markets actively seeking technological solutions. We are also seeing a growing stream of ‘crossover’ serial entrepreneurs launching their newest companies in the cleantech fields, motivated not by a desire to the planet, but rather by a conviction that these markets offer opportunities that dwarf those of enterprise software or semiconductors. As just a small snapshot of what’s happening in this respect, we’ve seen founders or key members of some of the most recognized names in Israel’s high tech world (Checkpoint, Comverse, Chromatis, Scitex, and many others) now involved in launching cleantech companies.
Israeli cleantech companies must overcome the same challenges faced by counterparts in other countries, including the challenge of penetrating often risk-averse customers in the energy and water markets, managing cash burn rates against long sales and adoption cycles, etc. However, Israeli companies do operate under some unique constraints, starting with their distance from and historical lack of familiarity with many of the key customers and channel partners for their products and technologies. Just as an earlier generation of Israeli entrepreneurs had to learn the hard way how to partner with and sell to Cisco, Nortel, IBM and Microsoft, the cleantech entrepreneur must learn to navigate and fill critical technology gaps for GE, Siemens, Sunpower, Alsthom or ABB.
On the positive side, Israeli companies have a number of factors working in their favor. The global nature of the water and energy opportunity plays to the strengths of Israeli entrepreneurs that seem equally comfortable pursuing business in New Delhi as they are in New York. Israeli companies also benefit from the existence and effectiveness of a number of entities that have emerged as key enablers, including Israel’s national water company, Mekorot, the BIRD (Israel-U.S. Binational R&D) Foundation, and the Ministry of National Infrastructure which is working on development of domestic incentive programs for alternative energy modeled on precedents like the German EEG.
When speaking with investors and other funds outside of Israel, we are frequently asked what we see as the most attractive niches in the Israeli cleantech landscape. There are a number of areas in which we have seen a greater quantity and quality of companies emerge in Israel, including a broad spectrum of water efficiency, quality and treatment technologies, power electronics and energy storage, as well as some aspects of solar energy. However, the simple truth is that Israel’s most important resource is its entrepreneurs – a seemingly inexhaustible supply of talented business people and technologists who excel at looking beyond traditional ways of solving market problems and inefficiencies. That, coupled with the truly colossal demand for technologies to address the world’s insatiable need for clean, accessible energy, water and air, is what is already putting Israel on the map as a global cleantech player.
