From government to serial entrepreneurs

After a long and fascinating week, today was our last day of business meetings. We began at the Ministry of Industry, Trade, and Labor with a discussion focusing on the Israeli economy. The speaker, Yair Sharon, spoke about the importance of exposing Israeli industries to competition by allowing foreign companies to compete within Israel. This seemed strange to me at first. If Israel struggles to produce huge companies, why wouldn’t the government want to foster growth by protecting Israeli companies? Many other countries impose high tariffs to protect local companies, yet Israel doesn’t do so. Israel believes the country is better off not wasting resources trying to produce certain goods when they can be imported for much cheaper prices. Instead, Israel can dedicate all of its resources to other industries in which it excels, rather than attempt to compete in industries in which it is at a disadvantage. While I think this has allowed Israel to excel in many industries, I’m curious if this has factored into the issue of imbalanced industries in Israel. Would Israel benefit from having a more well rounded economy?

Next, we spoke with Gabby Bar. His presentation focused on the Israeli economy from the perspective of foreign trade relations. Due to globalization, countries must use goods from wherever they are cheapest in order to compete. In order to compete in foreign trade, nations are constantly searching for trade agreements to avoid having to pay high tariffs. Previously, Israel had benefited from a free trade agreement with Jordan. Jordan wanted access to the U.S. market, so Jordan would trade goods to Israel who would in turn trade them to the U.S. However, now that the U.S. and Jordan have their own free trade agreement, it eliminates the need for Israel as a middleman. Israel does have other trade agreements, though. In addition to a free trade agreement with the U.S., Israel now has the Qualified Industrial Zones (QIZ) agreements with the U.S. and Egypt. The goal of these agreements is for Israel to open new markets, Egypt to increase the competitiveness of its exports to the U.S., and the U.S. to diversify its trading. Israel must ensure it has a variety of trade agreements to protect its economy moving forward.

For our last meeting of the week, we spoke with Raphael Nejman from Terra Venture Partners, a venture capital fund that focuses on clean technology. I found this presentation particularly interesting because the industry I have been studying all semester is clean tech. The issue in this industry is that it requires a lot of capital up front and takes a long time before investors can see a return on their investment. Investing in early stage companies is a huge risk, particularly in this industry, so most VC firms are shifting to later stage investing. Terra, on the other hand, is placing an emphasis on early stage investing. This sets Terra apart and is exactly the type of strategy that is needed to foster the continued growth of companies in the clean tech industry. Especially in this industry, the technology is all there (or at least close), but insufficient support, infrastructure, and capital are preventing further growth. We have talked all semester about Israel’s VC industry and how a willingness to take risks has led to success. But from what I can see, it seems that many Israeli VC firms, as opposed to Terra, are beginning to be more cautious and less willing to take risks. Conversely, Terra’s strategy encompasses the “chutzpah” I have come to expect in Israeli business. I believe more companies should adopt this type of strategy to foster future growth, especially if they hope to alleviate the growing concern about Israel failing to produce large multi-national corporations. After all, it is important not to forget the key elements that allowed Israel’s economy to flourish in the first place.

Jordan, Class of 2016, Olin Business School, New York

In Global
Tag , , ,

Comments are closed.