How to 'Upgrade' A Country's Technology

Yigal Erlich, the founding father of Israel�s R&D ecosystem, talks about his country�s experience in fast-tracking innovation

Published: Feb 29, 2012
Image: Oded Balilty/ AP Photo for Forbes India

Yigal Erlich
Was chief scientist of Israel in the Ministry of Industry from 1984-1992; served as chairman of the executive committee of the US-Israel Bi-National Industrial Research and Development Foundation; was a member of the National R&D Council of Israel until 2010
Current Positions: Chairman of MATIMOP, a non-profit government entity for the promotion of industrial R&D; is a board member of the Russian Venture Capital Company, a $1 billion government fund-of-funds
His Achievement: Started the first venture capital fund in Israel called Yozma and also founded Israel Venture Association; has been a consultant to several governments including New Zealand, Korea, Canada, Latvia, Slovakia and Estonia

I have been to India recently and I know that the government is thinking of developing technology to ‘upgrade’ the country. Once you’ve decided to do this, then it becomes a matter of implementation [of policies].

What we have done in Israel can be copied, but there are certain principles to be adopted—encourage entrepreneurs and leverage R&D, educate more young people to do science and then give financial assistance and freedom to take their work to practical use.

Sometimes a technology roadmap from the government helps. For instance, some years ago, President Shimon Peres [a technology enthusiast] decided to encourage nanotechnology by a one time $250 million fund to the universities, as that’s the place you go to for developing new technologies. Today, we have three new centres. Now, we hear that he is interested in neuroscience.

If you ask me, is it good that such a fillip comes from the top? I’d say, yes in some cases, but in many cases the government policy should be neutral and let the merit of the idea prevail. You need to try many [schemes and programmes], some will fail, and some will succeed.

It’s true that in countries like Israel and the US, defence has played a big role in technology development. The advantage of the military involvement is that they are big and become assured customers if companies choose to work with them. That’s crucial for new product development as entrepreneurs know who their potential customers are and remain focussed on technology development.

In Israel, government procurement has also played a big role in encouraging local companies to develop new technologies. In fact, many technology institutions exist because of government procurement. [One institute alone, Technion, has led to some 4,000 start-ups.]

One way, and I know India is trying to get trained scientists and engineers from developed countries, is to get people from countries which have advanced skills. Israel has tried this in the past and is currently trying again to woo researchers. It works better in the economic uncertainties of today.

The key is to make room for their work and assure them that they can hold on to their jobs. Still, we know that only some will come back.

One of the reasons why Israel develops a lot of new technologies is the steady performance of the Office of the Chief Scientist (OCS) in the Ministry of Industry. It started in the 1970s and continues till date. The idea is very simple: To encourage companies to do R&D. It started with an annual budget of a few millions which now exceeds $400 million.

In the early ’90s, we started the technology incubator programme that eventually led to 24 incubators across the country. It was started because we were getting many immigrants from Russia, most of whom were scientists and engineers. So, there was a need to find work for them as well as to exploit their know-how.

The programme caught on very fast. Then we saw the need for another type of financing, one that could fill the gap in government funding. From the OCS emerged the Yozma programme, the first venture capital fund in Israel where the government not only invested, but invited private investors, who only shared the profits; the risks were borne by the government.

Yozma really helped small companies grow, in size and geography. Initially, it was started as an experiment, not to run for more than seven years, but it became so successful that it was privatised after four years and has raised many more rounds of funds since then. Other countries have tried to emulate OCS, such as France, Singapore, Finland, and some other Scandinavian countries, and Yozma, such as South Korea and New Zealand in varying degrees, but most of them have not been successful.

These things take time even though I’d agree that Israelis have probably less patience, maybe because of the [geo-political] situation. They want to achieve. All this has led to the growth of the ecosystem. Today, bigger companies are coming out from Israel, and they are raising bigger funds. You can even see better technologies. But we still have some deficiencies; we are not there yet in life sciences.  

It’s a challenging time today for all countries and technology development is already suffering, as private sector is not putting in more money into R&D. The governments need to invest more. I see a lot of them have at least begun talking about it.

(As told to Seema Singh)

(This story appears in the 02 March, 2012 issue of Forbes India. You can buy our tablet version from To visit our Archives, click here.)

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