Georgia’s $100 million factory win from Israel proves that the small country “punches above its weight” in creating American jobs, but even greater impact could come from from solidifying the state’s reputation as a global launch pad for innovative Israeli firms, a well-known investor told Global Atlanta.
While the Caesarstone Sdot Yam Ltd. plant near Savannah will be a boon for the area, creating 180 jobs, the dollar figure is dwarfed by the price tags of recently acquired Israeli companies with Georgia ties.
In December, Given Imaging, an Israeli-founded company which makes pill cameras that take gastrointestinal photos, was bought by Ireland-based Covidien in a deal valued at $860 million. Given has long had its corporate base in Atlanta while keeping its research arm in Yoqneam, Israel.
And that’s just the latest in a line of mergers with eye-popping figures. NCR Corp. bought retail software firm Retalix for $652 million in 2012. Hewlett-Packard Corp. paid more than $1 billion over the past decade for printing technologies from Israeli-founded Scitex and Indigo, which are on display at the company’s Graphic Arts Experience Center in Alpharetta.
“You’ve got a whole host of companies having this huge impact, and yet, really below the radar,” said Jonathan Medved, who was in Atlanta to promote OurCrowd, a new venture applying the principle of crowd-funding to help lower-level investors to fund vetted startups.
Previously a destination where federal legislators burnished their foreign-affairs credentials, Israel is now being recognized by local and state government executives for its jobs potential, Mr. Medved said.
“It used to be basically that senators and congressmen went because it’s foreign affairs,” Mr. Medved said. “Now the governors and the mayors are going.”
Especially from the South: Texas Gov. Rick Perry announced that Texas A&M would put a branch campus in Israel, while South Carolina sent a delegation to Israel in December as the state was featured at the annual Globes newspaper outlook conference.
Georgia Gov. Nathan Deal’s office confirmed to Global Atlanta that he will be leading an economic development mission to Israel in June.
Mr. Medved said these trade missions play a key role in solidifying strong personal relationships that underpin global business deals. They also can help raise the profile of the already strong and growing commercial ties between Israel and the U.S.
“This doesn’t belong under the radar anymore. This is a big trend, and the more people see it the more the trend gets legs. (Governors have) got a bully pulpit and they’ve got use it,” Mr. Medved said.
Part of the puzzle should include quantifying Israeli impact on the region, he said. The chamber counts some 80 Israeli companies with operations around the Southeast, more than half which are in Georgia. Mr. Medved urged chamber leaders to take this analysis a step further by conducting a formal study similar to one released in December by the New England-Israel Business Council.
Privately funded by Jewish philanthropies and conducted by Stax Inc., the study found that Israeli-founded companies in Massachusetts brought in $6.2 billion in sales in 2012, accounting for $11.9 billion in total economic impact when factoring in office space, accounting, marketing and other business services. That amounted to about 3 percent of the state’s gross domestic product.
More tellingly, the 211 Israeli firms grew jobs five times faster than the state average, potentially explained by the fact that many are part of the thriving biotechnology cluster in and around Boston.
On the capital side, Israeli founded firms raised $700 million in venture capital from 2010-12 and returned more than $2 billion to investors as a result of 14 mergers during that time.
Perhaps most illustrative of the competition Georgia faces, the study found that 16 U.S. governors and nine mayors had conducted trade missions to Israel since 2010, and interviewees often cited Massachusetts Gov. Deval Patrick’s mission as important in their relocation decision.
Georgia is one of few states with a trade and investment office in Israel.
Ronan Kenan, managing director of the office, visited Atlanta recently for a convention of the state’s international representatives.
He sees more potential in areas like defense, clean technology and medical devices, and he hopes to bring a group of Israeli cyber security companies to Atlanta. Caesarstone and drone manufacturer Innobots are part of a coming wave of Israeli investments in the state, he said.
“I’m quite sure that this will be a very good incentive for other companies to come,” he told Global Atlanta of the Caesarstone announcement. He added that Israel can also present opportunities for small Georgia exporters, despite its market of just 8 million people.
The ‘Kickstarter of Startups’
While Mr. Kenan said his office wasn’t explicitly focused on the capital side of things, Mr. Medved was keen to let Atlantans know how they can invest in Israel through OurCrowd.
“We’re like the Kickstarter of startups,” said Mr. Medved, referring to the popular website enabling crowdfunding of small business ideas and creative projects.
Led by Mr. Medved, the company’s nearly 30 seasoned investors perform due diligence on up-and-coming Israeli firms and put them in front of OurCrowd members all over the world, who can peruse the website “like a Chinese menu,” ordering up investments in companies that resonate with them.
There is a $10,000 minimum, but Mr. Medved insists that’s a small price to pay to get the same terms as veteran venture capitalists who are also risking their cash on each startup listed on the site.
“We diligence these companies like we’re a venture capital fund,” he said. “We are a venture capital fund. The difference is instead of having to spend $1 million or $5 million to get into the club and lose your freedom, you spend zero to get into the club.”
Another difference is that investors feel personally connected to the investment rather than casting their cash into a black hole. The idea is that this should extend the company’s support structure and brand awareness, making it healthier overall.
OurCrowd manages the investments, which are illiquid until the company is acquired or goes public. Investors who put in at least $100,000 can use the firm’s new Portfolio Reserve product to automate their investments, trusting the firm’s leaders to ensure that they don’t miss out on opportunities.
The site now has more than 3,000 members and has facilitated more than $27 million worth of investments more than 30 companies, Mr. Medved said in December.
One example is Highcon, which makes a machine that digitally cuts and creases paperboard to form boxes, a process that is still done manually in most factories. While in Atlanta, Mr. Medved introduced the company to potential investors via video conference. It has raised $1.6 million through OurCrowd.
The American-Israel Chamber has long lobbied for more venture capital to fund Israeli firms coming to Atlanta and last year launched a capital funding committee to try to help foster a better fundraising environment.
Mr. Medved isn’t just trying to attract money from Atlanta. He’s also looking at the growing tech scene here.
“We’ll be looking for deals here, especially deals that can be collaborative with Israel,” he said.