For many decades, Israel’s ties with the world and its trade have been though Europe and America. The recent slowdown in these two regions has brought the realization that the nation must look to other parts of the globe for collaboration, investment and technology transfer. One recent manifestation of this is the partnership between Tel Aviv University and India’s Tata Group.
The Tatas have announced a $5 million investment in the Momentum Fund run by Tel Aviv University’s Ramot Technology Transfer Company. This is not a large amount, but both sides feel it is just the beginning. There are imperatives in both Tel Aviv and Mumbai (where the Tatas are headquartered) that point to much more to come.
The Israeli thinking has crystallized in recent times. “We have to be open to new markets and to develop the same kind of relationships with other nations at the strategic level that we have had with the U.S. or Europe,” venture capitalist Chemi Peres told Knowledge@Wharton recently.
A First for the Tatas
“This is the first investment in Israel by the Tata Group and I believe the Tatas’ expectations in this relationship are to use this as access to Israel and the amount of innovation that exists here,” says Shlomo Nimrodi, CEO of Ramot. “Since the announcement, we have received calls with requests from Israeli companies for introductions to the Tatas in order to expose their technologies to the group.” Adds K.R.S. Jamwal, executive director of Tata Industries: “We expect that this engagement will enhance the capabilities of Tata companies to leverage technology as a differentiator for their businesses.”
For the $100 billion Tata Group, India’s largest conglomerate, accessing technology from abroad has become an imperative. India does not have a strong innovation ecosystem, though many alumni from the country’s reputed Indian Institutes of Technology are involved in the cutting edge of the technology sector in the U.S. For Tata Industries, which has been spearheading the group’s forays into high-tech areas, casting a wider net had become essential. Observers say it therefore makes good business sense for Tata Industries to sign the strategic memorandum of understanding (MoU) with Ramot to fund and generate leading-edge commercialization — ready technologies in a range of fields.
“India’s relations with Israel have improved significantly in the past 20 years and now the two countries are close partners,” notes Wharton marketing professor Jagmohan Raju. “India is probably the largest buyer of Israeli-made defense equipment. The cultural relations are also very strong. Israeli youth have visited India after their military service for several years now, but other tourism activities are also flourishing. The confirmation of one of the lost tribes [of Israel] in India, and many other events, has further cemented relationships. I see the two nations coming even closer in the future.”
According to Raju, the Tata relationship is good for both sides and it is important for Indian companies to learn how a small country with fewer than 10 million people can turn out so many new ideas across many different fields.
Under the MoU, Tata Industries, through a wholly-owned overseas subsidiary, will be the lead investor in Ramot’s $20 million Technology Innovation Momentum Fund, which will invest in promising breakthrough technologies with significant commercial potential. Projects will be selected by committees comprising global domain experts and Tata representatives. The fund operates in three sectors: engineering, health care and clean-tech. For each sector, an advisory committee will be set up comprising a Tata Group executive, an Israeli and foreign experts. The committee will select the ventures that will join the fund and direct their development. When the project is in a defined Tata field and a decision is made to commercialize the technology, the company will have the first rights to negotiate a license agreement, within a limited time period. This will give the Tatas a pipeline of products and technologies.
Innovation a Critical Factor
“Tata Industries promotes the group’s entry into new and high-tech businesses,” says Jamwal. “Over the past two decades, it has initiated and promoted Tata ventures in several sectors, including control systems, IT, auto components, advanced materials, telecom hardware and services.”
The Tatas did extensive due diligence before choosing Ramot. Nimrodi says that a delegation of 13 C-level executives from Tata visited the facility. The group interacted with more than 70 scientists and technologies. They ranked individual technology on the level of the scientist, the innovation, the relevance to India, the relevance to the Tatas’ current and future businesses, and the attractiveness of the technology for investment purposes. “The scores across the board led to the eventual decision to move forward with the proposed transaction with Ramot,” notes Nimrodi. It’s not just access to technology; as an investor in the fund, Jamwal adds, the Tatas hope to achieve good financial returns over the long term.
Why did the Tatas choose Tel Aviv University and why Israel, when the field is so much greater and varied in the U.S.? Tata Industries has relationships with several leading institutions and universities in North America, Europe and India including Oxford University, Imperial College and the University of California, Los Angeles.
The Advantage of Tel Aviv
Tel Aviv University is reputed to be one of the leading R&D institutes in Israel. “In addition to their technology leadership and focus on an interdisciplinary approach, we appreciated Ramot’s passion for technology commercialization and desire to partner with the Tata Group,” says Jamwal. The investment in the Momentum Fund is not an exclusive arrangement. “If leading U.S. universities provide such opportunities, they will certainly be considered,” he adds.
On the potential opportunities in Israel, Jamwal is enthusiastic. “We are impressed with the culture of innovation and creativity in Israel,” he says. “The country, with a population of only seven million, displays immense talent in business, innovation and R&D.”
Tata companies have been interacting with Israel-based institutions for some time. In 2010, as part of a Tata innovation mission, 17 senior Tata executives from 11 Tata companies were hosted by the Israel government and Tel Aviv University in an effort to better understand the innovation environment in Israel. The focus was on agro-technology, water and life sciences, all of which share platforms of nanotechnology and biotechnology.
Tata Industries has also been working closely with faculty from Tel Aviv University and hosted a delegation of senior researchers in 2012 to visit the facilities of various companies in the group. Over the past few months, Tata Group representatives have met several Tel Aviv University researchers to discuss the innovations emerging from their laboratories. A range of relevant projects were found to be compatible with the group’s investment policy.
Nimrodi says that the Momentum Fund, launched a few months ago, is geared toward bridging the gap between early-stage innovation and commercialization — “crossing the valley of death,” as it is called — for inventions in pharmaceuticals and health care, clean-tech and environmental engineering and software. It is about moving technologies from stage five to stage 10. “That valley is dangerous because many promising technologies are either commercialized too soon or too cheaply, leaving the inventors and their institutions high and dry,” Nimrodi explains.
“One of the biggest challenges of an academic institution is the lack of funding to translate early-stage research to commercially-ready innovation,” adds Nimrodi. “As a result many technologies fall by the wayside.” The Momentum Fund is an attempt to resolve that problem by filling the gap.
Tel Aviv University is the largest multi-disciplinary research institute in Israel. Location plays a major role as it is situated in the center of the country and close to many multinational headquarters and financial centers. “We place great emphasis on bringing talent to the university and have succeeded in attracting scientists from leading institutions in the world,” says Nimrodi. “We have a leadership focused on innovation, entrepreneurship, and collaboration with industry. This was a major factor in the Tata decision to work with us.”
The Momentum Fund is structured as a for-profit fund. The Tatas have chipped in with $5 million. But they want to keep their share at 25%, which means more investments will be made in future funding rounds. “This fund could have a far-reaching impact on the relationship between India and Israel,” Nimrodi notes.
According to Wharton marketing professor Jerry (Yoram) Wind, who also directs the school’s SEI Center for Advanced Studies in Management, for Israel to continue on its innovation track, both the government and the entrepreneur community must be willing to go beyond technological and scientific risks and also take marketing and business risks. “The government and business requirements call for a bold long-term vision and stretch objectives accompanied with a culture [that] values creativity and innovation,” Wind says.
David Reibstein, Wharton professor of marketing, notes: “It is not that Israel has not been interested in the rest of the world. Rather, it is the rest of the world that has not been as interested in Israel. The U.S. … has had a strong interest in all of the innovation emanating from Israel and has been a fertile ground for bringing these innovations to market.”
According to Reibstein, India has not historically been a hotbed for innovation, and is looking to partnerships with other nations, including Israel to discover such opportunities. Reibstein adds: “Today, the greatest pockets of growth [are] in the developing markets — primarily the BRIC countries, and now we are starting to see opportunities even in Africa. It makes sense that Israeli entrepreneurs would go where the market is.”