If the federal government does not grab the opportunity presented by Israel to set up a jointly funded research and development fund we will know all the talk out of Canberra about innovation is hollow rhetoric.
Israel would welcome an R&D partnership fund. That was made clear to Chanticleer on Monday during an interview with the Amit Lang, director general of the Israeli Ministry of Economy.
“If the government of Australia, which is a big supporter of Israel, approaches the Israeli government ands says: ‘Listen we want to establish a fund’, based on my knowledge the answer will be yes,” he says.
The federal government should grab this opportunity with both hands. It will strengthen the trade and investment relationship and be mutually beneficial to the tech sectors in both countries.
Israel already has similar funds in partnership with the United States, Canada, Singapore and Korea.
Unfortunately, Israel’s experience with government to government co-operation in Australia is a bit patchy thanks to a somewhat disappointing partnership with the Victorian Government.
The Victoria-Israel Science Innovation and Technology Scheme (Vistech) was started in 2005 with the objective of promoting jointly approved science and technology R&D projects.
But the original objectives were derailed following a change of government. It turned into a grants program with the Victorians simply handing out lumps of cash.
The Israelis are determined to revitalise the Vistech program, which is why it is being relaunched this week.
But to maximise the opportunity for closer relations, the federal government would sign a separate federal government R&D fund agreement with Israel. A federal program could draw in the CSIRO and perhaps achieve the sort of results recorded by the R&D funds jointly run by Israel and the US and Canada.
Lang is one of several senior Israeli officials in Australia this week for a series of meetings to promote closer trade and investment between the two countries.
Heading the list of Israeli guests is the chief scientist Avi Hasson, who is visiting Australia for the first time. He will participate in a “tech talk” conference with Prime Minister Malcolm Turnbull and Minister for Industry, Innovation and Science Christopher Pyne.
Hasson will also meet NSW Premier Mike Baird, the new chair of Innovation Australia, Bill Ferris, Trade and Investment Minister Andrew Robb and Assistant Innovation Minister Wyatt Roy.
The high point of the week’s schedule will be the first Israel-Australian Investment Summit being held in Sydney on Tuesday. It is being organised by the Israel Trade Commission, Telstra and Landmark Ventures out of New York.
It includes a start-up competition where six Israeli and six Australian companies willpitch to leading investors in a two-minute segment commonly called the elevator pitch.
Lang says there are enormous opportunities for closer co-operation between Australian and Israeli companies.
To some extent this is already happening. A good example is the agreement between the Commonwealth Bank of Australia and the chief scientist to link the bank with Israeli start-ups.
The memorandum of understanding between Hasson and CBA, signed on Monday, will allow Australia’s largest bank to tap into the latest Israeli start-ups specialising in cyber security and data analytics.
TIME TO EXPLOIT DEFENCE
One area where Israel is streets ahead of Australia is technology transfer in defence equipment procurement.
Ziva Eger, a former colonel in the Israel Defence Force and now chief executive of international investments and industrial co-operation at the Ministry of Economy, told Chanticleer that Australia should use its annual expenditure on defence equipment to boost the country’s technology ecosystem.
Australia spends about $9 billion a year on defence supplies and about $3 billion a year on specialist military equipment, according to the Annual Defence Report.
Eger’s experience working on Israel’s Arrow missile defence system missile showed the importance of technology transfer between both Israel and the US.
“The Arrow weapons system has background knowledge which stays in Israel but since we started to develop this with the Americans all the know-how is jointly owned,” she says.
“They [the Americans] can get all the documents and all the R&D knowledge.”
Eger says the Americans are very tough in their relationship with the IDF. “They protect their interests,” she says.
“The difference between Israel and Australia is that we deliver knowledge back
to the Americans. They have their own missiles but they don’t compare to ourArrow 3.
“They know that they are going to get value with this type of agreement.”
When Chanticleer put to Eger that Australia’s habit of buying off-the-shelf weapons systems from American companies was not a sensible long term strategy, she agreed.
“You cannot buy innovation off the shelf and hope to create a technology ecosystem,” she says.
“This strategy is dealing with the past. It is not dealing with the future.”
She says there is nothing to stop Australia putting in place a system that builds the country’s technological skillsand allows these to be used in defence industries.
Eger says this requires a combination of commercialisation of research from universities. But success sometimes requires firm government intervention such as Israel’s decision to set up a cyber security headquarters inBeersheba.
Eger says another feature of Israel’s defence industry which has helped the local technology industry is the use ofoffsets.
Offset agreements with foreign governments have ensured the transfer of technology to Israel. However, Australia’s defence forces have shunned offset agreements since the1990s.
Take a look at the numbers of investors in Australia joining the OurCrowd funding group and you will realise that the business relationship with Israel is deepening quickly.
OurCrowd has raised $300 million and about $50 million of that has come from Australian investors.
About 1000 of the 10,000 investors on the OurCrowd platform are Australians. Leading the list of wealthy Australians on the platform are former Investec Australia CEO Geoff Levy and the technology entrepreneur David Shein. Shein built a $1 billion tech business which he sold to DimensionData.
During an interview in Sydney on Monday, the founder of OurCrowd Jon Medved said Levy was one of the three people he consulted before launching his company.
Medved is a huge fan of Prime Minister Turnbull.
He believes Australia now has the opportunity to put in place all the necessary policies to encourage a surge in start-ups.
An important part of that will be to open up Australian companies to global funding of technology.
“The world is much more complicated today, much more multi-polar and if you are going to be democratising this gospel of innovation around the world, you have to do it all around the world,” he says.
Medved says that means when a company is created in Sydney by a couple of people in a garage, they should think about the market for their product in America and Europe.
This approach was behind the success of Atlassian which is listing its shares in the US on NASDAQ.
The success of OurCrowd means that it is probably the largest provider of venture capital in Australia given its annual run rate of investments is higher than most funds.
But for investors using the OurCrowd platform they should be aware that they need to spread their risks through investment in as many companies as possible.
The minimum investment portfolio of start-ups is 10, according to Medved. But he says even more would be better. So far no company funded by OurCrowd has gone bust.