NGT: an incubator in Nazareth

Here we go! Today 24 April 2012 we moved to the north of the country, destination Nazareth. After a two hours trip by bus we arrived here to discover another reality of Israel, the incubator New Generation Technology (NGT).

Incubators are programs designed to support the successful development of entrepreneurial companies through an array of business support resources and services, developed and orchestrated by incubator management and offered both in the incubator and through its network of contacts.

There are around thirty incubators along Israel. They are created to stimulate the industry innovation and to create employment. Normally they host companies specialised in the same field, normally specialized ones, as pharmaceutical, biological or IT sciences.

NGT is an exception: even if concentred on pharma projects, it has been created and was developed around Arab companies, managed mainly by Arabs. It was born 13 years ago to solve an actual problem: very competent professors and researchers with Arab origins were excluded by the other incubators and remained unemployed. The aim of NGT is to change this situation. Here there’s not at all discrimination based on religion. In fact, also if just in minority, also Jewish companies are incubated there.

Companies desiring to enter the program pass through a very meticulous screening process where they have to demonstrate that their idea reaches some predetermined requisites:

• It is patentable
• It exists a market for it
• There are possible contractors relied to the Israeli context

How does it work? People come at the incubator demanding for the admission, once the project has been incubated, it’s the incubator itself that searches for the funding for the project. The majority of them are governmental funds, but rules depend on the single entity. NGT for example requires a minimum of 15% of private funds, normally provided directly by the entrepreneur. The incubator will owns a relevant quote of the stock that is in average greater than 50%, without in any case interfere in the strategy pointing on the shares control. Normally the incubation lasts two years. This limit has been set up by law and can be extended to three years in particular cases.

But why an incubator? Which are the pros for a company to be set up in an incubator? Here what we get of concrete:

• Funding
• Consulting and mentoring
• Connections with the other companies in the same field
• Externalisation of all the financial aspects
• Access to the shared facilities, from meeting rooms to advanced laboratories

Another good news for those who might be interested is that no exit strategies exist, in the sense that also once outside the two-years period, the incubator will maintains its stocks, granting a better financial stability and confidence with third parties. In addition, in case of success, only royalties will be demanded and in case of failure the invested capital will be considered as a grant.

European countries, why not to take example from our overseas neighbours? Welcome to Israel!

At Tel Aviv University with Prof. Waldman: why is Israel different?

We had the opportunity to meet Ron Waldman, professor at Tel Aviv University specializing in High Tech. He is from the USA and lives in Israel since 30 years. This first macroeconomic insight into Israel is a good introduction: Ron Waldman has introduced well-known companies representing the success of innovation in Israel, such as Given Imaging or Better Place (we will visit it in the coming days).

According to Prof. Waldman, Israel is “a small country but a vibrant economy”. Just a few figures:

• unemployment rate = 5.6%
• GDP growth = 3%
• 34% of the population holds a university degree
• there are 8 universities in the country
• Israel has the highest number of engineers per capita (more than in the USA or than in Japan)

So why is Israel so different?

First, what emerges are the economical and governmental logics which make Israel an innovative country. This translates into the ability to quickly introduce innovations to the market (role of Technology Transfer Offices to assist the commercialization of university research results), the ability to finance and sell innovative companies to reinvest, the diversity of innovative sectors (IT , Web 2.0, Health, Mobile, Games), incubators (the state is funding 85% of the initial startups capital), tax benefits, public support for R & D and the existence of a developed market for private funding (investment funds, business angels).

But what is striking in our meetings during this day is that, beyond the rational aspects, which can be found in other innovative regions in the world, culture, history and Jewish religion make Israel very special. These unquantifiable and elusive ingredients really make a difference.

First, the phenomenon “Jewish mothers”: every mother wants for her son, in exchange for the effort for his education, a career as a doctor or engineer. This gives a spirit of winning and a lot of confidence to young people. The fact that this is a multicultural immigrant society (multiple socio-economic backgrounds, and pioneering spirit “from scratch”), with no hierarchical relationship in business, promoting spontaneous critics regardless of the rank and where everyone is called by first name rather than using the usual marks of respect (sir).

Moreover, the role of the army, including compulsory military service for young people (3 years for men and 2 for women), is important. The idea is that if the student is bright, he will integrate a technology or intelligence center, allowing him to get a great network in high tech. Generally the army builds trust between the young soldiers who will be able to advise and maintain a network of strong relationships for future business. The army can quickly give high managerial positions to young people, so they gain confidence. Moreover, according to the speakers, the army learns to never give up and relativize during hard times. The army also teach to be constantly on alert so that Israeli people are eager to live, are not afraid and do not hesitate to try.

Finally, the role of the diaspora and the idea that every Jew in the world feels like being Israeli are important. Economic zionism stimulates innovation through numerous funding of universities, startups … Thus, the R & D centers of major companies have settled in Israel soon. This is the case of Google for example, whose founders are Jewish.

Tel Aviv University Campus

Tel Aviv University: the business school