Israel and the Boston tech comeback

Veterans among us will recall the time when Boston had a central place in global high-tech, in the mid-1990s.

For various reasons, Boston’s star declined, and it gave way to Silicon Valley and New York on the high-tech stage. In the past two-three years, however, a welcome turnaround has taken place as far as Boston is concerned. Slowly but surely, it is regaining its place as a center of innovation and entrepreneurship.

An outstanding example of the new wind of innovation blowing from Boston that is felt even in these parts is the MassChallenge accelerator, which launched activity in Israel last year. Two weeks ago, the accelerator completed the screening stage for the Israeli companies competing for a place among the new cohort in the program. Ten Israeli companies have been accepted to the world’s biggest accelerator, which this year too opens its doors to 128 enterprises.

3, 928 jobs

The MassChallenge figures are impressive. Since it was founded, in 2010, graduates of the program have raised some $472 million for 489 companies that they founded. They have already generated about $194 million revenue, and the total value of the companies is over $2 billion. 3, 928 jobs have been created as a result of the accelerator’s activity, two thirds of them in the state of Massachusetts.

The decision makers in the Boston municipality deserve to be complimented on their vision, manifest in the fact that they gave the accelerator a floor of an office building free of charge. This building has created an economy of innovation around it.

I visited the MassChallenge building in Boston in September 2013. Amir Eldar, a high-tech entrepreneur who is the founder and chairman of the accelerator’s Israeli activity, hosted me on a tour, and introduced me to founders John Harthorne and Akhil Nigam.

It is hard not to be immediately impressed by these two energetic entrepreneurs, who walk around the huge open space and talk to the entrepreneurs, whom they know by name, about their projects, of which they demonstrate very detailed knowledge, and in between talk enthusiastically about the many connections formed through the program and their many plans for the future.

Among others, I met three representatives of Israeli enterprises in Boston who were then coming to the end of their stay there and were about to return to Israel as graduates of the program. The other week I spoke to them again, this time back in Israel, when they had acquired a broader perspective on the significance of the program for their start-ups.

Husni Abu Samrah, a Palestinian entrepreneur from Ramallah, has founded a company producing an application for pregnant women in the Arab world, where access to information for women is often restricted, to the point of being blocked completely. Talking by telephone from his office in Ramallah, Abu Samrah told me that his stay in Boston enabled him to develop a prototype of the company’s first product, to construct a business plan, and to test it through the connections that the program made available to him. On his return to Israel (or more precisely to “Palestine”, as he stressed to me), he managed to raise finance from US investors, and he is now readying for the launch of the application in about three months’ time.

Dr. Gidi Stein is the entrepreneur behind MedAware, which he founded after encountering a real case of a nine year-old child who died because a doctor prescribed the wrong treatment for him after choosing a prescription by mistake from a computerized menu. About a hundred million prescriptions a year are made out in Israel alone, and the possibility of receiving an erroneous prescription exists and is very real.

The aim of the company that Dr. Stein, deputy head of a department at Beilinson Hospital, founded is to use algorithms to analyze characteristics of patients, diseases, drugs and prescriptions, and to help avoid tragic errors that can cost lives.

His stay in Boston enabled Dr. Stein to hold dozens of meetings with customers and to focus the company’s products accordingly, to build a pricing model acceptable to customers, and to draft a detailed business plan. On his return to Israel, the company closed a first fund-raising round, and it is now in the throes of a further round. “It was an amazing experience, ” he told me.

Erez Livneh, founder and CEO of Vecoy Nanomedicines, which has developed unique technology for treating viral diseases, told me, “The MassChallenge program made available to us a wide network of connections with investors and professionals on the East Coast of the US. It’s important for me to mention that this is a highly unusual accelerator that, from a business angle, assists the entrepreneurs fortunate enough to participate in it for four months, and demands nothing in return, neither money nor a stake, and for this I am grateful to them.”

During its time on the program, Vecoy won a financial award from NASA, which also invited the company to conduct technological trials on the international space station. Since finishing the program, the company has raised a third funding round, and earlier this year Livneh was invited to present its technology to Google founders Larry Page and Sergey Brin.

High growth rate

Israeli participation in MassChallenge has been fairly modest so far, ten companies in all, but, as mentioned, this number will double in the next cohort. The advantage for Israeli entrepreneurs is clear: immediate access to international markets and the formation of connections in their industries, while expediting the development of their products, with potential customers influencing the design. The program’s managers stress the fact that they do not take stakes in the participating companies, and that the selection process among the many candidates is meant to identify enterprises that can become global leaders.

The reason that the accelerator looks systematically for Israeli entrepreneurs is presumably similar to the reason that brought the vice premier of China to Israel last month at the head of a 300-strong delegation. It is the same as the reason that Governor of Massachusetts Deval Patrick came to Israel the other week on an official visit, bringing with him 100 businesspeople from his state.

Figures published in connection with the governor’s visit show that the revenues of Israeli companies active in Massachusetts have reached over $6 billion a year, and that they employ some 6, 700 people there. The growth rate of Israeli companies in Massachusetts is five times the state’s economic growth rate. The governor also knows that every such company begins with a daring idea burning in the minds of bold entrepreneurs, perhaps the ones who have been accepted to the new round of MassChallenge. Time will tell.

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Izhar Shay is a general partner at Canaan Partners and manages the firm’s activity in Israel.

Published by Globes [online], Israel business news – www.globes-online.com