Fueled by venture-capital investment in industries like communications, IT and green technology, Israel’s high-tech industry has in recent years become a worldwide leader, and more U.S. companies are eyeing the Middle Eastern nation for prospective investments.
Israel’s technology sector, which has been expanding at a 10-20 percent clip since 2003, has played an important part in the longest period of rapid economic growth in Israel’s 60 years of existence, according to Bloomberg.
The increasing prevalence of high-tech industrial parks, dubbed “Silicon Wadis” (from the Hebrew word for “canyon”), has contributed to that boom. Today, those parks host hundreds of foreign companies and long-standing Israel success stories such as Teva Pharmaceutical and defense technologies maker Elbit Systems.
Those parks—considered by many to be the world’s second-most important tech cluster—are also home to Intel, Microsoft, IBM and Google, which have all set up large local research and development facilities aimed at tapping the Israeli talent pool, Bloomberg said.
And just like its U.S. counterpart, Silicon Valley, there are plenty of well-funded venture-capital firms providing cash, The Economist pointed out. In 2007, VC firms invested $1.76 billion in Israel, which is less than one-fifth of the $10 billion or so invested in Silicon Valley. Although local funds make up more than 50 percent of the deals, nearly all the money comes from the United States, The Economist said.
Seeing potential profits in the Israeli high-tech market, Cisco Systems Inc. several years ago bought P-Cube Inc., a Tel Aviv developer of network-traffic-management hardware. But Cisco’s love affair with Israeli high tech had begun much earlier when in the late 1990s it purchased Class Data Systems, a maker of quality-control software. Shortly thereafter, Cisco also spent nearly $1 billion for seven Israeli startups.
“[The Israelis] have a strong tradition of innovation in engineering and a strong technical tradition. It’s similar to what we see in Silicon Valley,” Ned Hooper, senior director for corporate development for Cisco, told Bloomberg in an interview.
With the buzz surrounding cybersecurity, Israel has also positioned itself as a leader in Internet defenses. Earlier this month, Deputy Prime Minister Dan Meridor said “the cyber world … becomes more important in the conflict between nations. It is a new battleground, if you like, not with guns but with something else.”
Although there are reportedly tens of thousands of attempted cyber attacks on Israeli systems each week, experts say Israel is “well equipped“ to fight off an assault of viruses. Tal Hanan, CEO of Israeli security firm Demoman, told Israel National News the country has funneled large amount of money and effort into avoiding these kinds of attacks, and its cybersecurity is “among the best in the world. We’ve become very good at cyber defense ““ and offense.“
Ernst & Young is one firm that has taken note of those claims. In January 2011, Kost, Forer, Gabbay & Kassierer, the organization’s member firm in Israel, acquired the professional services arm of Hacktics Ltd., an Israel-based cybersecurity company.
And with the worldwide attention on Silicon Wadis and investment opportunities in the Promised Land, it shouldn’t take long for other U.S. firms to follow.