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BY JOHN FLANAGAN


Israel offers a high-tech
development model for Hawaii


AS news of suicide bombings and military reprisals arrive in peaceful Hawaii from strife-ravaged Israel, it's hard to imagine two places more different.

Besides being on opposite sides of the globe, the Hawaiian Islands are surrounded on all sides by hundreds of miles of empty Pacific, while Israel is wedged between Egypt, Syria, Lebanon and Jordan in an unfriendly Middle East.

Except for the Pearl Harbor attack more than 60 years ago, Hawaii has enjoyed centuries of peace, while Israel has repeatedly gone to war to preserve its fragile national existence.

Although each is smaller than New Jersey and has roughly the same land area, Hawaii has about a fifth of Israel's population -- 1.2 million vs. 5.9 million people.

Yet, Gideon Marks, an MBA from Tel Aviv University who is now vice president of venture finance for start-up-business funder Garage Technology Ventures, believes there are many similarities between his homeland and Hawaii, particularly in the area of developing high-tech businesses to diversify their economies.

For example, both Hawaii and Israel are remote from their main markets. Both are known for the warmth and hospitality of their people. Both have economies that now rely on tourism and formerly depended on agriculture -- Hawaii on sugar and pineapple, Israel on oranges. Both see opportunity in being closer to important markets than the mainland U.S. is -- Hawaii to Japan, Israel to Europe.

Of course, while shark attacks aren't unknown in Hawaii, "there are many more 'sharks' in Israel," Marks told an audience of entrepreneurs, students and educators last week at the Hawaii Convention Center.

Despite its tenuous political and military existence -- or perhaps because of it -- Israel has created a remarkably successful high-tech industry to supplement its tourism and agriculture.

"Israel has a very strong local venture capital community with 70 or 80 firms. In addition, VC firms from overseas countries are sending scouts" to find new investment opportunities, Marks said.

The NASDAQ exchange lists more companies from Israel than from any other country other than the U.S. and Canada. Over the last 25 years it has become internationally recognized as a research and development center.

YES, much Israeli high-tech expertise has spun off from defense industries hard at work to maintain a vital technological edge. However, Marks said, the government in Tel Aviv did a few things right that made a big difference.

For starters, it's possible to get a government loan to start a promising new company, or even a grant. In exchange for such a grant the government receives royalties when the company succeeds.

New companies also pay no taxes for three years, as long as they don't distribute profits to stockholders.

This is an incentive to reinvest profits as new capital to accelerate company growth.

Government here can do even more, Marks says. It can invite venture capital firms to set up offices in Hawaii, for example, and prime the pump by providing loan guarantees for a few prototype high-tech ventures.

Hawaii start-up companies should look for joint-venture partners, Marks said. Israeli high-tech firms have often succeeded by finding a U.S. joint-venture partner to handle sales and marketing while they concentrate on their primary research and development strengths. Besides helping Israeli firms to learn marketing skills, joint ventures reduce risk -- or even eliminate it.

Strengthening the link between research being done at local universities and the local high-tech community is essential, Marks said. Hawaii should also consider the kind of cutting-edge military research and development opportunities that have spurred Israeli successes.

While "warm and friendly" describes both the people of Hawaii and Israel, Marks says, "Israelis are nice, but assertive-aggressive. They go and get it and they are willing to take leadership positions."

Laid-back Hawaii, on the other hand, has a different cultural tradition. While the Yiddish proverb is "If you want your dreams to come true, don't sleep," here the better-known saying is "The nail that sticks out is hammered down."

Still, the people who came to Hawaii over the centuries were risk takers, from the original Polynesian settlers to the latest immigrants from Southeast Asia. As James Michener wrote, the missionaries to Hawaii "came to do good, and ended up doing well." Entrepreneurial spirit isn't a foreign concept, just one that needs to be renewed.

"If you have the talent and if the government is doing what it is supposed to do, then there is nothing to stop you."





John Flanagan is the Star-Bulletin's contributing editor.
He can be reached at: jflanagan@starbulletin.com
.



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