Guest post By Daniel Saunders
Britain and Israel are inextricably linked by a profound and intimate history. Common values and shared ideals have developed circumstance and a fledgling relationship into the close bond and firm friendship that we now enjoy. However, beyond the dazzling lights of the political circus, one can also clearly see a close and compelling partnership between Britain and Israel, specifically in business and trade, where both countries recognising their partner’s strengths, seek to use it to encourage and enhance their own potential.
In truth, the idea of growth through partnerships is nothing new to the State of Israel. It is something that Israeli industries have long since relied upon. With limited natural resources, Israel quickly turned to the potential of its human resource. Based partly on the diversity of its citizens, Israel sought to cultivate and develop the skills-base and expertise of its people to the fullest. This helped to build up the young country and has since developed into the entrepreneurial spirit, the products of which are highly sought after throughout the world.
One of the most notable partnerships in Israel is that between industry and academia. This partnership ensures that new talent has access to their industry of choice, which in turn secures a steady influx of new ideas, and indeed new companies, into Israel’s industries, which have become some of the most competitive in the world market. The rewards of this particular alliance have thus far benefited not just the people of Israel but the world over, with Israel having made a number of extraordinary breakthroughs in the fields of economics and chemistry. In the last ten years alone, no less than six Israelis have been awarded the Nobel Prize for achievements in these fields. This partnership is given every chance to succeed however, with Israel’s government solidly committed to backing civilian R&D projects to the tune of 4.5% of the country’s annual GDP which places Israel as the number one country in the world for R&D as a percentage of GDP.
The government also encourages the country’s entrepreneurial spirit by providing start-ups with micro loans (currently averaging $85,000), repayable upon the company turning a profit. If the company folds then the loan is written off in its entirety. Then add in to the mix the support Israeli companies receive from global and domestic VCs, who pumped in a total of $1.9 billion to the Israeli start-up scene in 2012. In fact, there is more venture capital investment per capita in Israel than anywhere else in the world. In the first 8 months of 2013 alone, high tech deals involving Israeli companies have totalled $4.9 billion so far this year, making 2013 a record year for Israeli high tech exits. Given such enviable returns, and with Israel boasting a robust and resilient economy that was able to weather the 2008 credit-crunch storm, this country’s start-up sector would seem to be a wise and potentially lucrative investment.
In a further doff of the cap to Israel’s talent for technological innovation, global technology firms such as Google, Microsoft, Apple, Facebook and Intel for example, have all chosen to establish R&D centres in Israel. Given the envious track record for successful innovation, the presence of these multinationals – in addition to the investment from VCs – is hardly surprising, and serves as a clear recognition of Israel’s competitive advantage. Indeed, the 2013 World Competitiveness Report (WCR), published by the World Economic Forum, described Israel with the following:
The country’s main strengths remain its world-class capacity for innovation (3rd), which rests on highly innovative businesses that benefit from the presence of the world’s best research institutions geared toward the needs of the business sector. Israel’s excellent innovation capacity, which is supported by the government’s public procurement policies, is reflected in the country’s high number of patents (4th). Its favourable financial environment, particularly evident in the ease of access to venture capital (3rd), has contributed to making Israel an innovation powerhouse.
Many examples of the innovation to which the WCR refers, continue to play large parts in our everyday lives. It is difficult to imagine life without the USB memory stick, instant messaging, the firewall and the secure data links that enable banking transactions to take place. There are many other similar examples.
On 12 August 2013, the Guardian newspaper featured an article that noted another of Israel’s most important partnerships, from which these examples (and many more besides) have developed – the partnership between industry and the Israel Defense Forces. In this article, the newspaper highlighted a number of successful Israeli solutions, each of which has been the brainchild of one (or more) alumnus of the IDF’s Unit 8200 – an Israeli Intelligence Corps unit responsible for collecting signal intelligence and code decryption.
Israeli high-tech entrepreneurs, reapplying their army-honed skills and expertise to new challenges, they have almost literally “beaten their swords into ploughshares” and developed a new generation of products an example of which being Waze, the crowdsourced navigational app that was recently bought by Google for approximately $1 billion.
In the process of establishing itself as a world leader in so many technological spheres and industries, Israel has developed another partnership, one that has helped to export its talents to destinations and markets far beyond its own shores. International trade partnerships are the lifeblood of any country’s economy and quite often, in this age of increased globalisation, a bilateral trade partnership with its ensuing economic incentives can contribute to more profound cultural or political exchanges, which in turn leads to deeper understandings and the creation of more all-encompassing and lasting partnerships between nations.
Israel and the UK have such a partnership. Moreover, in recent years, one of the most striking elements to the Israel-UK partnership is how the bilateral trade figures have increased by staggering amounts. In the ten years leading to 2012, bilateral trade between Israel and UK more than doubled to USD 5.2 billion, (excluding diamonds and services). The latest set of figures released by the Israel Central Bureau of Statistics show that 2013 is on course for further increases; in the first half of 2013, exports from Israel to the UK increased by 16.9% on the same period for 2012, and bilateral trade increased by 7.9% over the same period.
As things currently stand, the UK is Israel’s fourth largest overall trading partner and their second largest export market. However, this partnership is not just inward facing. As a world leader in many aspects of the global market, the UK is a gateway for Israeli companies to access other European and international markets. In turn, UK businesses are keen to draw on Israeli innovation and utilise new technologies to gain a competitive advantage in the face of constantly changing client expectations. The international collaborations extend to academia with the recently signed memorandum of understanding between the University of Manchester and the Technion-Israel Institute of Technology further evidence of the technological and R&D partnership between the two countries.
Both the British and Israeli diplomatic missions have teams dedicated to exploring new ways to strengthen this partnership. They focus on encouraging capital flow in both directions to stimulate the development of innovative ideas and they place a strong emphasis on increasing awareness of Israel-UK technology opportunities among policy makers and business leaders alike.
Over the past six years, I have focused our efforts in continuing to develop these partnerships. Working together with the British government, I have joined officials such as the Rt Hon David Willetts MP and Prime Minister David Cameron’s senior policy adviser, Rohan Silva, leading business delegations to Israel. Having taken numerous senior executives on these trade missions over the years, we have been able to introduce UK companies to the latest developments in Israeli technologies and ultimately enhancing the Israel-UK trade relationship.
There are countless more examples of this bilateral partnership in action and over the next few years, with even greater interest in new Israeli technologies, the Israel-UK partnership will present both countries with new business opportunities that will undoubtedly have a positive effect on the growth of both economies.
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Daniel Saunders is the Chief of Staff, Trade & Economic Affairs at the Embassy of Israel, London
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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