Venture capital is the most catalytic force in the world economy of the 21st century. In the United States, venture-backed companies produced more than one-fifth of GDP in 2010. Today American venture capital is flagging in the wake of the financial crisis and such regulatory overreach as the Sarbanes Oxley law that stifles new public offerings with a toll of some $2 million of mandated accounting costs. Thus the emergence of a comparable venture scene in Israel, linked closely to Silicon Valley, is providential not only for the American economy but also for its military defense (which depends on venture capitalists to finance new technology). Israel’s economy steamed through the financial crisis with nary a down quarter and with an ascendant shekel. The rising shekel notably failed to abate an unprecedented export boom (with shipments up some 30% in 2010 and 2011) in the face of widespread international calls to boycott Israeli goods.
In the second decade of the twenty-first-century, Israel’s supremely innovative companies make Israel America’s premier economic ally. Israel’s creativity now pervades many of the most powerful and popular new technologies, from personal computers to iPads, from the Internet to the emergency room and the operating room.
Consider the Israeli leadership in medical instruments. Dr. Raphael Beyar, Israeli inventor-entrepreneur, rich from the 1996 sale for $200 million of his Instent corporation to Medtron-ics, is now head of Rambam medical center in Haifa. The 4,500 doctor institution resides in a sparkling white campus beside a gleaming curve of beach below storied Mount Carmel. Allied to nearby Technion, and to the noted Rapaport Medical Faculty, Dr. Beyar’s institution not only provides lifesaving services to more than 100 thousand patients annually from around the Middle East but extends its influence to the world through its frequent breakthroughs in medical research and technology.
Among Rambam’s accomplishments are two Nobel Prizes and what is said to be the world’s most innovative embryonic stem cell project. Its researches also have produced such companies as Biosense, which has revolutionized the treatment of dangerous cardio fibrillation. Biosense’s catheter is able to capture a 3D voltage map of the heart accurate enough to guide ablation of specific tissue for the cure of arrhythmias.
Medical advances in Israel metastasize to the United States with almost zero delay, saving lives and imparting gains for the U.S. economy. Purchased by Johnson&Johnson for $500 million, Biosense has become J&J’s fastest growing division. Bringing the value of its inventions home to me, two of my brothers are now enjoying the benefits of this treatment for otherwise intractable heart problems.
In the 1980s, Rambam imaging advances transformed the treatment of burns by the use of rapid Computerized Tomography scans, a technique quickly adopted by the U.S. military. After 2000, Rambam’s imaging department began an intense collaboration with GE on hybrid medical imagers called CT-SPECT that allow complete appraisal of heart conditions without invasive tests.
A pioneer of stem cell innovations, Rambam also supplied the two most-used embryonic stem cell lines out of five approved by the NIH under the Bush Administration for government supported research in the U.S. Bringing unique therapies and technologies to patients from around the globe, this hospital illustrates the centrality of Israel in the global economy of human life.
Israel’s contributions to American interests do not end with stents and stem cells, catheters and computerized tomography. Spurring the entire U.S. information sector, Israelis continue to supply Intel corporation with many of its advanced microprocessors, from Sandbridge to the Atom. Israeli companies endow Cisco with new core router designs and realtime programmable network processors for its next generation systems, Apple with robust miniaturized solid state memory systems for its iPhones, iPods, and iPads, and Microsoft with critical user interface designs for the OS7 product line and the Kinect gaming motion sensor interface, the fastest rising consumer electronic product in history.
For agriculture and acquaculture, Israeli companies continue to innovate world leading technologies for water management and desalination. An Israeli company called Beeologics has even invented a remedy for the virus afflicting beehives and jeopardizing agricultural productivity around the world.
For the U.S. military — among many contributions — Israel provides some 600 upgrades for the F-16 fighter jet, key sensors and algorithms for Predator drones and missiles, and protective equipment for battlefield vehicles. At a time when all the cities of the world are vulnerable to terrorist missile and rocket attacks and Israel is the target of some 6 0 thousand missiles near its borders, this tiny country is addressing a central strategic crisis of the civilized nations. It has developed crucial software for the Arrow anti-missile system, for David’s Sling against intermediate range attacks, and single chip systems that enable the Iron Dome defense against batteries of nearby rockets.
There is no natural resource or global asset or American ally anywhere in the Middle East — or likely in the world — that compares in value to the genius of the Israeli people.
With a command of information theory, a mastery of the electromagnetic spectrum, and a sophistication in real time algorithms, Israeli companies are also spearheading the move of the Internet to wireless forms. With Cisco predicting a 26-fold rise in wireless Internet traffic over the next five years, wireless mobility will generate markets as large as the previous wireline Internet era.
Crucial will be a technology called software radio that enables a single device to receive signals from any wireless network (rather than requiring a separate hardwired circuit for each protocol and spectrum band). Under the leadership of CEO Gilad Garon, Israel’s ASOCS is the world leader in software radio technology. Originating in large scale electronic warfare and anti-jamming technologies for the battlefield devised by two Russian immigrants, these now one-chip systems can fit in a handset and enable intercommunication among the towers of Babel in urban America.
Israelis also lead in computer chips using parallel processing to sense, accept, and parse information as quickly as modern transmission techniques — especially fiber-optics lines — can deliver it. A representative device in this “fiber-speed” effort is the “network processor.” Just as a Pentium microchip is the microprocessor that makes most PCs work, the network processor is the device that makes the next-generation Internet work, doing the vital routing and switching at network nodes. The next-generation Internet will allow “petaflops” (10 to the 15 floating-point operations per second) of real-time computational power to be deployed to virtually any point on the planet. The network processor will let any computer or “teleputer” access data and processing power exponentially greater than that incorporated into any single PC or any corporate data center.
The next-generation Internet and its associated technologies will be both the next great machine of capitalism and the next great weapon in its defense. Leading the field are companies such as Eli Fruchter’s EZchip (in which I have long been an investor), launched in the late 1990s with a few dollars, no customers, and a compelling PowerPoint presentation in lieu of any actual products. In less than a decade, EZchip drove most of its rivals — firms like Intel, Motorola, and IBM — to the sidelines, and welcomed the rest, like Cisco and Juniper, to its list of major customers. Cisco had previously turned to Israeli innovator Michael Laor to develop two of its core routers that met the late nineties explosion of Internet traffic. Now as the network infrastructure girds to meet a new surge of traffic, Laor is developing a new generation of fiberspeed technology in his own company Compass EOS (ten percent funded by Cisco). Laor’s new routers are based on ingenious inventions that channel traffic to and from the machine in optical form at the speed of light. Only at the heart of the router, where new paths are computed and information packets are parsed, does electronics still prevail — in the form of an EZchip. EZchip is becoming the chief source of network processing in the switches and routers of the net.