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Israel engineers are behind the development of the largest communications router in the world, launched by Cisco.

Thursday, May 17, 2012

Procter & Gamble Explains Why Israel is THE Startup Nation

by Ricardo Geromel

I visited P&G office in Tel Aviv. Lital Asher-Dotan, who established Procter & Gamble first R&D hub in Israel called “P&G Israel House of Innovation”, explained why P&G calls Israel a “startup nation.”

In the entry lobby of P&G office, which is 20 minutes away from Google’s office in Tel Aviv, there are a few samples of different products sold by P&G in Israel. Among the usual health and beauty brands (Head & Shoulders, Pantene, Oral B, Gillette, Tampax, Pampers …) and brands of household cleaners (Ariel, Lenor, Swiffer, Tide …) there were also different prizes and trophies P&G Israel has received for the development of innovative products. However, what surprised me the most was that besides all these products and prizes there was a copy of the acclaimed book Startup nation by Dan Senor and Saul Singer.

Procter & Gamble takes Research and Development seriously: it invests $2.8 Billion annually and has 9,300 employees in R&D worldwide. The Israel House of Innovation (IHI) was created five years ago by CEO Bob McDonald and one of the key goals is to create alliances between P&G and Israeli innovators.

Procter & Gamble’s Israel House of Innovation collaborates with Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA; TASE: TEVA), the largest generic drug manufacturer in the world; the Hebrew University of Jerusalem, which carries out more than 1/3 of all academic scientific research in Israel;

Powermat, which has only 70 employees and is developing wireless battery rechargers. By the way, Jay-Z participates in the JV with Powermat and P&G not only as a spokesperson but also as an investment partner. P&G has also signed on bilateral agreement with Israeli Chief Scientist providing Israeli start ups that collaborate with P&G favorable access to governmental funding.

Present in over 180 countries and with total revenues of about $80 Billion, P&G is the world’s largest Multinational consumer goods company. Procter & Gamble has promised to deliver 3-6 % of growth per year or about extra $5billion in annual revenue. Open innovation is the key to this growth: the giant established in 1837 aims to have 50% of all innovation (not only on new products but also on internal systems) having elements from outside of the company. Jeff Weedman, P&G Vice President, External BD:

“Our JV with TEVA represents the lessons learned that we need better access to Innovation and global abilities while we can provide the in-depth consumer knowhow.”

Lital Asher-Dotan explained why P&G calls Israel a startup nation:

-Israel has the highest density of tech start-ups in the world. Israel has about 80 companies listed on NASDAQ, more than all of Europe, Japan, Korea, India, and China combined.

-Israel is the biggest destination for global venture capital per capita. In recent years, many US based VCs have opened Israeli funds and/or Israeli offices – Sequoia ($580M), Benchmark ($490M). Greylock, Battery Ventures, Bessemer. Main accelerators in Israel are: Microsoft, VentureGeeks, The Junction, TechLoft, DreamIT Ventures,The Hive, UpWestLabs, The Library, and MobileMonday.

- Israel raises 2.5 times as much global venture capital as the U.S., 30 times more than Europe, 80 times more than India, and 350 times more than China.

-Israel has twice the number of engineers per capita than the US and Japan. 34% of its population holds university degrees (24% of the work force).

- Israel has the highest level of R&D spending relative to GDP in the world: 4,9% in 2009. OECD average is 2,3%.

- Israel holds the largest number of Nobel Prize winners this past decade. By the way, I had the chance to meet Dr. Dan Schechtman, winner of the 2011 Nobel Prize in Chemistry for “the discovery of quasicrystals,” who told me his views on entrepreneurship.

-In Israel, Military technology is often transferred to other areas. For instance, Based on real-time image processing technology from Rafael’s Missile Division, Dr. Gabi Iddan from Given Imaging developed the PillCam™ capsule endoscope – the first ingestible camera in a pill for detection of GI disorders. The PillCam™ capsule is easily ingested by the patient and transmits high quality color images that enable physicians to directly visualize parts of the GI tract. Capsule endoscopy is the only available ingestible diagnostic tool that allows direct visualization of the small intestine.

I have just outlined the key points why Israel is considered by P&G as a startup Nation. In a post for Techcrunch, Roi Carthy and Daniel Cunha, founders of Initial Capital, suggest what the Brazilian booming startup community could learn from the Israeli case.

Source: Forbes