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Israel: Money in the Middle

Written By Brian Hicks

Posted May 21, 2007

In Gaza to the southwest and Lebanon to the north, rockets and bullets are flying. In the middle of it all, Israeli scientists are launching the companies of tomorrow.

That’s why I’m taking the initiative and heading to Israel for June’s Israel Venture Association conference, where hundreds of the country’s leading scientists and venture capitalists will be putting their heads together to maximize the country’s innovative footprint on markets in the U.S. and elsewhere.

How many companies do you think this New Jersey-sized Middle Eastern country has listed on the NASDAQ, the premier Wall Street market for the tech sector? Just a couple, like Germany? Maybe Israel is more in league with Japan and its whopping ten NASDAQ listings?

How about 75?

That’s right, there are 75 Israeli companies listed on the NASDAQ, proving the irrefutable start-up savvy that Sabras (as native Israelis are known) possess.

My Orbus Investor premium subscribers are already profiting this year from companies like Fundtech (NASDAQ:FNDT), a transaction technology provider that is already up 43% this year!

Fundtech YTD

But what is behind this zeal and extraordinary efficiency that brings Israeli ideas to market?

The government certainly plays a role by giving technical training to the majority of Israel’s citizens while they serve in the Israel Defense Forces (IDF). You know those U.S. military commercials, where young men and women are promised specialized skills to prepare them for lucrative careers?

While most Americans are busy with philosophy majors and keg stands, 18- to 22-year-old Israelis are forging practical experience, discipline, and lifelong contacts that will serve them long after their mess hall days are over.

And because the IDF and the government arms manufacturer, Rafael, created a technology transfer company in 1993 to bring military technology to market, soldiers can ditch their helmets and rank for suit and tie. Rafael’s transfer mechanism has created over a dozen companies in industries ranging from medical devices to satellite communications, and most of the companies established through this pipeline are now in the hands of private venture capital.

Last year, over 400 Israeli companies raised $1.6 billion in VC funding. The Financial Times reported an additional $406 million in Q1 2007, a 13% jump from the first quarter of 2006.

But you can’t just buy a country’s story, like the lunatics nowadays purchasing every Chinese share under the sun.

That’s why I’m meeting with dynamos like Dr. Orna Berry, the former Chief Scientist of Israel and current partner in Gemini Israel Funds, one of the country’s premier VC groups.

Given her background as Chief Scientist and head of the Industrial R&D Administration in the Ministry of Industry, Dr. Berry is in a unique position to tell me about the best of the best. And Red Herring, a major U.S. tech magazine that has focused heavily on Israeli ventures in recent years, will announce the winners of this year’s Israel Venture Association/Red Herring Start-Up Contest during the IVA conference in Tel Aviv while I am there.

Whatever company wins will certainly go public in the near future, and you can bet I’ll be there to strike when it does.

I urge you to sign up for Orbus Investor, my international investment publication, today so you don’t miss a beat. (By the way, I’m not putting all my eggs in the Israeli basket . . . the Orbus premium portfolio holds companies in 16 countries, with gains of 14% so far this year compared to the Nasdaq’s 7%!)

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Sam Hopkins