Wednesday, April 28, 2010



Israel. Some people love the country and how it acts both internally and externally. Others seem to be driven by complete hate to such an extent that they even don't mind volunteering for suicide attacks.

We don't have to repeat all the standpoints, most of ...them are known by people across the globe anyway. But what is far less known is that Israel is a world leader in one area that will - when exported or copied internationally - be beneficial to all of us. And that area is cleantech


We attached a small paper by Shawn Lesser, CEO of Sustainable World Capital, an Atlanta-based placement organization that tries to raise capital for cleantech-oriented venture capitalists. He describes in 10 points why Israel is so strong in this specific field. A link to Lesser's article is attached below.

The Israeli cleantech success story

And the success story is remarkable. Especially when taking into account that we are talking here about a not too rich country, that does of course benefit from an inflow of international (mainly from the US) venture capital, but that - to a considerable event - did it all by itself. It created a strong cleantech industry that is world leading by all standards, and in many areas. Not just water, but also solar energy. Top level research and a strong academic tradition go hand in hand with entrepreneurial spirit and the guts to take risks. If you add to that the availability of sufficient start-up capital, the story becomes logical.

From an Israeli point of view we were talking about a fantastic market niche that was at the same time a logical necessity. Israel is a poor country when it comes to resources and commodities. New technologies, durabe energy etc were all by itself already win-win situations when treating them as an important new industry. And so it happened. Israel is a world leader when it comes to water treatment with now more than 70 percent of waste water being re-used. Far more than any other country.

Lesser's story is convincing and clear. But is the Israeli story in cleantech unique? We all know from both academic research and the work from Al Gore and others, that environmental developments and depletion of fossile resources urge us to consider alternative energy sources as a necessary area of future development. When looking at opportunities to generate solar energy, Israel's neighbors do definitely have potential and that does also include those nations that still have sufficient fossile fuel resources. They are all dry and arid as well, so Israel's experience when it comes to water management is more than important for these countries as well. And we can go on and on to state our case that Israel provides those other nations with a great example when it comes to cleantech.

What is Cleantech?

And unlike Israel's other tech related industry, defense, we are talking here about an area where export of technology is not impossible. On the contrary, the cleantech industry is growing at such a rapid pace in Israel that the domestic market is totally insufficient to satisfy the needs of the most talented entrepreneurs in this sector. They are ready to export their product to Western economies, China, and other emerging economies.

An example for other nations!

Lead by the sovereign wealth funds, other Middle Eastern nations do have the monetary means to acquire products and technology from the Israeli market leaders. These countries should understand that - based on their comparable geographical situation - creation of an academic climate like the one in Israel could really represent a great contribution to their economies as well.

It is remarkable that not too much is happening yet in this respect. A missed opportunity, but one that smart entrepreneurs in those nations could and should capture. If not, they should consider cooperative structures with the Israeli specialists instead of simply buying products from those firms. In the latter case the main cash flows will move into Israel and developed nations (since the latter are already main shareholders in the Israeli cleantech industry). Sovereign Wealth Funds in the Middle East or their asset managers are smart enough to see this. 

Western observers are often quick in pointing out that Arab nations are missing opportunities here, but the same holds for most Western nations. When analyzing Lesser's success factors one could easily argue that developed nations should be able to do a far better job on them than the small Middle Eastern country, but still they don't. It takes a specific type of entrepreneur and visionary spirit to develop a new industry from scratch. The type of spirit that lead the brightest computer minds to Silicon Valley since the 1990s. And the smartest financial minds to Wall Street and London at a time when New York and the British capital weren't seen as synonyms of greed and self-centered, asocial behavior when discussing their leading role in the financial industry.

Evaluation: from political motives to economic gain and how the two can go hand in hand 

Back to the Middle East.

An ideological decision not to invest in these firms for ideological reasons would in the longer run not just harm the non-investors but also their countries and the world at large (since it would make peace more unlikely).

We hope that - as so often - business and trade in an area that has no negative strategic connotations will help in bringing peace a bit closer. But unfortunately the Middle East is a difficult area where people are hoping for peace for so long already.

But for those of you that are not hindered by ideological problems: check out Lesser's article. He does also provide you with information about several firms and funds that are true market leaders within a country whose giants are really leading the trend in what is one of the fastest growing industries in the world.

And for those of you that do have ideological difficulties with Israel, do also know that the cleantech entrepreneurs are normally not Israeli conservatives but liberals. Ideologies are straightforward, but sometimes not that smart. Politics in the Middle East is a chess game. And what makes the opponent of your opponent stronger is probably a more efficient way of reaching your goals than full-fledged counteractions that bring the opponent and his domestic opponent closer together.

Therefore our plea for a rational entrepreneurial, future-oriented spirit all through the Middle East. The world as a whole and your region in particular will be the beneficiaries.

Click here for the link to Shawn Lesser's original article.

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