Recent Pittsburgh-Israel crossovers

By Elliot Dater

Although the blog has been quiet the last couple of months, many exciting things have been happening.

In November, I had the opportunity to teach Law & Entrepreneurship to law students at the College of Law and Business in Ramat Gan, Israel. Through this course, I taught my students about the legal issues involved in guiding a technology start-up through its life cycle – from idea to an exit. Given the fact that Israel is known as “Start-up Nation” or the “Silicon Wadi,” the students had great familiarity with start-ups in general and were enthusiastic and engaged in learning about the legal issues for these types of companies in the United States. The students were especially interested when I discussed Israeli companies that had success in Pittsburgh, such as dbMotion. Their final project was to prepare a client memorandum in English.  I was pleasantly surprised at both the level of analysis and application of the law, as well the level of writing, given that English was the second (or third) language of most students.  I hope to repeat this experience and further strengthen ties between the College of Law and Business and the University of Pittsburgh Law School.

In December, UPMC and Schnader sponsored a Pittsburgh visit by the Israeli Medical Device and Life Sciences Road Show at UPMC’s Center for Connected Medicine. The Road Show featured six Israeli medical device and life sciences companies from Israel’s incubator system.

  • Agam Biological has developed products based on jelly fish-derived collagens for a wide range of medical, nutritional and cosmetic applications.
  • Discover Medical Devices has developed a medical necessity sleep mask for patients that have both sleep apnea and heart failure.
  • Inovytec has developed a non-invasive life saving solution to increase survivability of patients suffering cardiac or respiratory emergencies in out of hospital environments.
  • Premia Spine has developed a motion implement intended to replace traditional spinal fusion surgery for patients with spinal stenosis other lower back maladies.
  • Bio GenCell is developing a technology platform for automated production of patient specific stem cell based therapies.
  • TenCure is developing revolutionary cancer therapies based on a newly described mechanism of action .

These companies presented their innovative technologies and products to a room full of local investors as well as visiting investors from Cincinnati and Cleveland. Local participants included the Pittsburgh Life Sciences Greenhouse, Innovation Works, Mutual Capital Partners Funds, Woodland Family Partners, FCC Capital, Blue Tree Allied Angel Investors, Draper Triangle Ventures, UPMC’s Center for Innovation in Regenerative Medicine as well as representatives of local and state government.  We hope that this is the first of many of this type of events that will provide opportunities to link Israel and Pittsburgh on a business basis.  There is already talk of a future Healthcare IT Roadshow.  Stay tuned.

Elliot Dater is a partner in Schnader’s Business Services Department,  and represents Israeli companies doing business in the United States and U.S. companies and investors doing business in Israel, as well as emerging growth companies in the technology and medical device industries

The materials posted on Schnader.com and SchnaderPittIsrael.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Bringing Pittsburgh to Israel

By Elliot Dater

Hello from Israel!

A few months ago, I was asked to teach Law & Entrepreneurship at the College of Law and Business in Ramat Gan. This course, which I first developed with my colleague, Justine Kasznica Thornton, teaches students about the legal issues encountered by technology companies throughout their life cycle. My students are second, third and fourth year law students and they are very enthusiastic. I’ll only be here a week but I’m happy to be bringing a little Pittsburgh perspective to my Israeli students!

Teaching my first class at the College of Law and Business was a great experience. The students were attentive and interested in the subject matter. Even while being lectured to in a foreign language (English), they asked good questions and created an engaging dialogue. I am looking forward to the rest of the week, especially since I now know how to find the College without getting lost. Driving in circles can be a typical driving experience here, even if you’ve lived here! There was even heavy rain and thunderstorms last night, which is a good thing for this time of year.

I went for a walk on the boardwalk early this morning and could only marvel at the number of people out running, biking and walking. The bike paths, as well as bike rental stores, have really developed in Tel Aviv over the last few years. It reminded me of the community development we’ve been seeing in Pittsburgh during the same time.

I look forward to keeping you posted with more from my week in Israel.

Elliot Dater is a partner in Schnader’s Business Services Department,  and represents Israeli companies doing business in the United States and U.S. companies and investors doing business in Israel, as well as emerging growth companies in the technology and medical device industries

The materials posted on Schnader.com and SchnaderPittIsrael.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Forbes Magazine profiles unique U.S., Israeli and Palestinian business relationships

By Elliot Dater

While not directly Pittsburgh related, I’d like to share with you Forbes magazine’s  “Peace Through Profits? Inside The Secret Tech Ventures That Are Reshaping The Israeli-Arab-Palestinian World.” The article discusses exciting developments involving U.S., Israeli and Palestinian technology companies and investors. I hope you enjoy this insight into a unique business relationship in the region and find the developments spotlighted encouraging.

Elliot Dater is a partner in Schnader’s Business Services Department,  and represents Israeli companies doing business in the United States and U.S. companies and investors doing business in Israel, as well as emerging growth companies in the technology and medical device industries

The materials posted on Schnader.com and SchnaderPittIsrael.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

An Energy Future for Pittsburgh and Israel

By Elliot Dater

Pittsburgh and Israel are on the verge of, if not already in the middle of, becoming energy titans. For years, Israel was known for innovation in solar technologies, water technologies and other alternative energy and conservation initiatives due to a lack of natural resources. Pittsburgh was one of the early oil-producing states in the U.S. from the 1800s to early 1900s. Now both are in the middle of a natural gas revolution: Israel with tremendous offshore reserves and Western Pennsylvania with Marcellus Shale.

Estimates of the major gas reserves off the coast of Israel, in the Leviathan, Tamar and Tanin fields, run as high as 30 trillion cubic feet of natural gas. While those estimates are dwarfed by the size of the Marcellus Share reserves (estimated to be between 141 trillion and 400 trillion cubic feet), they are sizable nonetheless, potentially ensuring Israel’s energy independence for generations to come. The only debate is whether, and how much of, the offshore natural gas should be sold for export. Moreover, the petrochemical manufacturing potential that results from a thriving natural gas pipeline is a potential game changer for the economies in Israel and Western Pennsylvania.

Major international players are involved in Israel’s offshore gas play. For example, Noble Energy is a partner in the Leviathan exploration and Gazprom has signed a deal to purchase liquefied natural gas from Israel. The players in the Marcellus Shale are also some of the leading companies in U.S. natural gas exploration, such as Range Resources, Shell, Talisman Energy, Chevron and many others.

Local experts in entrepreneurship and innovation are taking notice. For example, last spring, Professor Paul Harper’s class at the Joseph M. Katz Graduate School of Business at the University of Pittsburgh focused on the development of Israel’s natural gas resources and took note of the potential synergies with what is happening with natural gas exploration and development in Western Pennsylvania.

Not a fan of natural gas drilling, whether it is deep-sea drilling or shale fracking? Natural gas is not the only thing happening in energy in Israel and Pittsburgh. My next article will discuss developments in alternative energy in both markets.

Elliot Dater is a partner in Schnader’s Business Services Department,  and represents Israeli companies doing business in the United States and U.S. companies and investors doing business in Israel, as well as emerging growth companies in the technology and medical device industries

The materials posted on Schnader.com and SchnaderPittIsrael.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Many Similarities Between the Pittsburgh and Israel Technology Sectors

By Elliot Dater

As I looked out my Pittsburgh window on May 12, it was 50°F outside with 16 mph winds, gusting to 28 mph, which resulted in a wind chill of 40°F. This caused me to observe (for not the first time) that there is no confusing the Steel City for Israel.

However, there are many similarities when it comes to the technology sector. For example, both places have extensive programs in place for very early stage technology development. These include universities; in Israel:  The Technion, The Hebrew University of Jerusalem, Ben Gurion University, Haifa University and Tel Aviv University; in Pittsburgh:  Carnegie Mellon University, the University of Pittsburgh, and University of Pittsburgh Medical Center; government-funded investments from entities like the Office of the Chief Scientist in Israel or incubators like Idea Foundry, Pittsburgh Life Sciences Greenhouse and Innovation Works in Pittsburgh.

Both regions are imbued with the entrepreneurial spirit.  Israel developed the “Start Up Nation” out of necessity. Without any natural resources and needing to develop its own defense electronics industry, Israel cultivated the math and science strength of its academic and immigrant communities. Pittsburgh’s technology industry also developed out of necessity, growing a new industry on the math and science strengths of its local academic community. Israel’s investment in technology transformed the nation from a primarily agricultural export economy to a technology powerhouse. Similarly, Pittsburgh has been transformed from “Steel City” to a center for “Eds and Meds,” as well as software, medical devices and robotics.

One of the common complaints that I hear in both communities is the lack of funding after the development phase and before a company is ready for a Series A round of venture capital financing. Part of the explanation for the dearth of funding at that stage is a lack of locally available venture capital financing. Although there is a significant Israeli venture capital industry, the bulk of venture capital financing for Israeli technology companies comes from foreign funds. Similarly, in Pittsburgh the vast majority of venture capital financing comes from funds outside of the Pittsburgh region while funds within the region seem to make most of their investments outside the region.

One interesting new development for raising additional capital in Israel is the new accredited investor crowdfunding website, Our Crowd, which was established by veteran Israeli investor Jon Medved. Our Crowd exposes accredited angel investors to Israeli opportunities, which in turn provides start-ups a new potential source of investor capital. Similarly, a number of new crowdfunding websites are popping up in the United States, however, they cannot sell securities to non-accredited investors until the crowdfunding portions of the JOBS Act of 2012 become effective. Another source of capital that may be available to local innovation companies is funding through angel investor networks such as Blue Tree Allied Angels and the Pittsburgh Chapter of the Keiretsu Forum. In fact, the Keiretsu Forum recently began an Israeli deal flow program, which resulted in Israeli companies presenting to Keiretsu members here in Pittsburgh.

Time will tell whether the new avenues of investment such as Our Crowd and the Pittsburgh Chapter of the Keiretsu Forum will speed the development of innovation companies in Pittsburgh and Israel, but these and other new ventures are certainly a good start.

Elliot Dater is a partner in Schnader’s Business Services Department,  and represents Israeli companies doing business in the United States and U.S. companies and investors doing business in Israel, as well as emerging growth companies in the technology and medical device industries

The materials posted on Schnader.com and SchnaderPittIsrael.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Creative destruction: The benefit of failed start-ups

Recently there have been some very interesting success stories on the Israeli technology front, including one significant story with a Pittsburgh connection. As you may have heard, the Israeli crowd sourcing navigation app company, Waze, was recently bought by Google for between $1.1 and $1.3 billion. Although the transaction is being reviewed by the FTC, it has created a strong ripple effect throughout the Israeli technology sector, with the demand for mobile and internet app developers up by 40 percent, according to Globes.

A few months ago, another Israeli technology company, this time in the field of healthcare IT, also had a successful exit. dbMotion, an Israeli company with its U.S. operations in Pittsburgh, was sold to Allscripts for more than$230 million. According to published reports, Pittsburgh-based healthcare system UPMC was a significant investor in dbMotion. This was a very successful exit and has whetted the appetite for investment in medical device and healthcare IT coming out of Israel.

Not all of the news out of the Israeli tech sector is good, however. For example, Better Place, the electric car battery changing system company, recently went into liquidation in Israel. Although Better Place created an alternative to slow charging electric cars by creating battery-changing stations where the depleted battery would be replaced with a new, fully charged battery, the economics of the new system just did not add up; at least not in the near term. According to published reports, Israel Corp invested over $230 million in Better Place and will most likely never see that money again.

Success stories and nightmares, which provide the true picture of Israeli hi-tech? The answer is that they both do. The fact of the matter is, most start-ups fail, whether in Israel, Pittsburgh or the Silicon Valley. Some say that only one-in-ten succeed. Some say that out of ten start-ups, three or four will fail, three or four will be minor successes or return investors’ capital, and only one will be a home run. This sounds like a recipe for disaster; why would anyone ever found a start-up company with those odds, and even more importantly, why would anyone invest in an early stage technology company?

The answer is that failure is a necessary part of the growth of a technology industry and the creation of a serial entrepreneurial class. In essence, start-up failures are creative destruction. Without the experience of failure, successful entrepreneurs would not have learned how to be successful in their next company. On the other hand, if their previous, unsuccessful companies were not shut down, those entrepreneurs might have spent years and tremendous sums of capital beating a dead horse rather than investing their time and energy into a new venture. This is the technology version of creative destruction. Without something unproductive, like an unsuccessful company, being destroyed, there is no room for the creation of a new, potentially more successful company, from the aspect of both available capital and entrepreneurial talent.

Back to Waze, that $1.1-$1.3 billion company. According to Globes, Waze was founded in 2008. Of course, Waze was not the first company that its founders were involved in. I wonder what would have happened if after their initial start-up failure, they had given up and joined a large corporation, rather than created a new crowd sourcing navigation app? I am glad they did not, and I bet that their investors are even happier still.

 

New Opportunities for Business Collaboration Between Israel and Pittsburgh

By Elliot Dater

You might not know it, but there is a history of Israel-Pittsburgh collaborative technology investments and transactions. It started as a trickle, but that trickle will develop into a flow, given the right circumstances. Israeli companies such as medical device company Flexicath, portfolio company Pittsburgh Life Sciences Greenhouse and dbMotion (recently acquired by Allscripts for an undisclosed amount), set up their U.S. operations in the greater Pittsburgh area several years ago. In addition, Ness Technologies recently announced the opening of a new software development center in Pittsburgh.

More recently, a new attempt to introduce Israeli companies to Pittsburgh area investors was kicked off. The Keiretsu Forum, the world’s largest angel investor network, recently brought a number of Israeli startups to Pittsburgh to present their companies to local investors as part of the Keiretsu Forum Mid-Atlantic Regions’ Quarterly Israeli Deal Flow program. Five Israeli companies in the fields of internet technology, medical devices, transportation efficiency, human mobility products and drug development presented to a number of accredited investors. Although it is too early to tell whether any investments will be made, Israeli companies that have previously presented are currently under review to determine whether Keiretsu members will make an investment.

Earlier last month, the Israeli Deputy Consul General for the Mid-Atlantic Region visited Pittsburgh and met with a number of key players in the local technology ecosystem to explore ways to create and strengthen ties between the Israeli and Pittsburgh technology communities. This was just a first step, but hopefully the first of many to find ways to increase collaboration in the technology space between Israeli and Pittsburgh companies, academic institutions and sources of capital.

Academic institutions are also working to connect the dots between the Israeli and Pittsburgh technology ecosystems. Professor Paul Harper is creating a program in Global Innovation at the University of Pittsburgh Joseph M. Katz Graduate School of Business. The pilot country for kicking off this program in global innovation? Israel, of course. Professor Harper has been to Israel twice in the last 12 months and immediately noticed the potential for collaboration between the two technology ecosystems. The Israeli Pilot would include case studies of Israeli companies and a student trip to Israel to meet with entrepreneurs, investors and leading business figures in the Israeli economy. For more on this exciting new program, see “Israel Rising” in the Spring 2013 edition of the Katz School’s Pitt Business Magazine.

Although in its early stages, the University of Pittsburgh School of Law is looking to create a collaborative program with the Academic Center of Law and Business in Ramat Gan Israel. Potential parts of this program could include combined classes taught by faculty members of both schools, student internships in immigration law and student exchange programs. Dean William Carter has been leading this effort and it will be fascinating to see what the future holds.

A lot is already happening to link the Pittsburgh and Israeli technology economies. The two keys to creating additional growth is getting the word out on what already exists and working to create more connections where it makes business and/or academic sense.

Elliot Dater is a partner in Schnader’s Business Services Department,  and represents Israeli companies doing business in the United States and U.S. companies and investors doing business in Israel, as well as emerging growth companies in the technology and medical device industries

The materials posted on Schnader.com and SchnaderPittIsrael.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.