By Sarah Hilzinger for IsraelStrategist.com–February 2012
The hype surrounding Apple’s opening of an R&D center in Israel (its first outside of California) and its acquisition of Israeli start-up Anobit may be warranted. But Apple is only one of many multinational corporations to set up operations, support start-ups or create partnerships in Israel. There is a trend much larger than Apple of international organizations capitalizing on Israel’s entrepreneurship, especially in the realm of technology. Multinational corporations are pursuing collaboration with Israel on their own, but the Israeli government is also actively promoting collaboration through several programs, including the Global Enterprise Collaboration Program, which facilitates R&D collaboration between multinational corporations and Israeli companies. The projects are supported financially by both the corporation and the Israeli government.
Here are some notable multinational corporate activities in the Israeli cleantech realm:
The Coca Cola Company:
In 2008, the Challenge Fund, an Israeli Venture Capital Fund, was selected to scout technology and management investments on behalf of Coca Cola in Israel. The Global Enterprise Collaboration program (mentioned above), has encouraged the efforts of Coca Cola to capitalize on Israeli innovation through the Challenge Fund. Characterized in a phone conversation by Saul Reichman, a Principal at the Challenge Fund, as complementary to the fund’s own scouting efforts, the Global Enterprise program assists in locating technologies and joint R&D opportunities in Israel that address Coca Cola’s specific issues and priorities.
As reflected in a Global Enterprise call for proposals, Coca Cola’s strategic interests in Israel cover product developments such as sweeteners (Coca Cola bought the rights to natural sweetener and preservative research conducted by the Volcani Institute in May 2011) and sustained energy components (i.e. caffeine) through controlled release. The call for proposals also indicates Coca Cola’s interest in agricultural-based innovation, like improving plant characteristics to optimize their applications to beverage manufacturing, and improved packaging initiatives. Mr. Reichman emphasized that sustainable agriculture and water are high priorities for Coca Cola. But, he also noted that the Corporation’s franchise business model makes implementation of water and energy efficiency technologies in manufacturing difficult.
In GE’s most recent Ecomagination Challenge, two out of five of the Innovation Award winners were from Israel (Winflex & GridON). It is not surprising, then, that GE is aggressively pursuing collaborative agreements in Israel. In 2010, GE Water formed a strategic partnership with Kinrot Ventures, Israel’s only incubator focused exclusively on water technologies. Through the agreement, GE will provide both technical and strategic support to Kinrot portfolio companies through its Power & Water and Global Research businesses. Assaf Barnea, the CEO of Kinrot Ventures, has also expressed his hope that the relationship will mean greater opportunities for his portfolio companies to set up beta sites abroad, helping to better facilitate their transition from start-up to successful commercial operation.
GE is also investing capital in Israeli water technologies. One of GE’s most notable investments in Israel was through Energy Technology Ventures, its joint venture with NRG Energy and ConocoPhillips. The joint venture invested an undisclosed amount in Emefcy, an Israel Cleantech Ventures portfolio company that was recognized by the Global Cleantech 100 and named winner of the Most Promising Early Stage Award. Emefcy offers what could be a critical technology for the wastewater treatment industry by generating, rather than consuming, energy through the wastewater treatment process. One of the major barriers for the wastewater treatment industry is the high cost associated with water treatment due to high energy input. According to Emefcy, the wastewater treatment industry weighs in at around 2% consumption of total global energy capacity, a number that is likely to increase without continued improvements in efficiency. GE’s investment in Emefcy signals to the market the growing importance of the wastewater treatment industry and the key role Israel is playing in the market.
Active in Israel since 2000, Siemens has been growing its presence in Israel and focusing increasingly on Israel’s cleantech sector. In recent years, Siemens has made two large investments in Israel: first, in 2009 Siemens Project Ventures acquired a minority stake–for $15 million–in Arava Power Company, a leading operator of photovoltaic plants in Israel. As a part of this agreement, Siemens took on the project management aspect of Arava’s photovoltaic business. In June 2011, Arava Power’s (and Israel’s) first PV field was launched. The unveiling of Ketura Sun, as the project is called, marks the beginning of many PV projects Arava Power has planned for Israel, and Arava Power has committed to working with Siemens on at least 10% of those future developments.
Secondly, two months after its $15 million investment in Arava Power, Siemens acquired Solel, a concentrating thermo-solar power company, for an impressive $418 million. Solel has since become a central part of Siemens’ thermo-solar energy business, which has to date not been viewed as entirely successful mostly because of the impact of European austerity measures on the market. With that being said, now is the time that Siemens might begin to see its investment in CSP business pay off: this month, it was announced that Siemens won four of the seven orders for CSP turbines in India’s first round of its National Solar Mission, whereby 1 GW of power will be generated in India exclusively from solar sources.
These three snapshots only touch the surface of multinational corporate activity in Israel. As the energy and water markets continue to grow, it seems likely that large companies will rely increasingly on Israeli innovation, especially given the Israeli government’s active lobbying efforts for these partnerships.