Massachusetts Water Mission to Israel Looks to “Win Inbound Innovation”
Consider, if you will, the future of water. Good old H2O gets a bum rap when it comes to hurricanes, floods, and tsunamis, but it sure comes in handy when you’re thirsty and trying to survive, irrigate crops, or flush a toilet.
Over the past decade, an impending global water crisis has come to light. Already more than a billion people lack access to clean drinking water, and far more are in need of adequate sanitation. It’s not hard to imagine this problem is going to get a lot worse before it gets better.
So let’s talk about an international mission, originating locally, that just might change the world of water innovation through the business of technology.
A delegation of nearly 50 people from Massachusetts is making a special trip to Israel the week of December 16-19. They include entrepreneurs, scientists, tech executives, venture capitalists, lawyers, and policy makers—people like senior vice presidents Peter Tunnicliffe of CDM Smith and Chris McIntire of Xylem; investors Jim Matheson (pictured above with Gov. Deval Patrick), Carmichael Roberts, Earl Jones, and Jonathan Fleming; Tom Burton, the head of cleantech at Mintz Levin; and John Harthorne of MassChallenge.
The U.S. group will meet with their foreign counterparts, including Israel’s chief scientist, Avi Hasson, and minister of national infrastructure, Uzi Landau (an MIT grad), and will tour the country’s desalination and wastewater treatment facilities. Their goals: to develop partnerships that will benefit both the Bay State and Israeli businesses; to learn lessons from Israel’s leading water experts; and to encourage Israeli water companies to set up shop in Massachusetts.
The planning of the trip hit a few bumps in the past month. A group reception with the governor in Cambridge, MA, was postponed because of Hurricane Sandy. (Gov. Patrick kicked off the mission but will not be on the trip.) And recent developments in the Gaza conflict made planning travel to Israel a bit dicey. But with the current ceasefire in place, the trip is on—and, from all accounts, safety is not an issue.
So why Israel? Here’s some background. In March 2011, Gov. Patrick led a trade delegation to build partnerships in Israel. Water wasn’t even on the agenda yet. While at an academic conference there, the governor and other state officials were on stage when a man in the audience stood up during the Q&A and started talking.
He was the former chairman of Israel’s national water utility, and he made the case that his country leads the world in water deals, dollars, and technology. Its home market is small, so it has to globalize, he said. But there’s currently no “Silicon Valley” of water, no epicenter of water companies in the United States. Massachusetts has a huge water industry, he said, and it could be a key place for Israeli companies to grow.
“We didn’t know this. This was new to us,” says David Goodtree, a co-chair of the Massachusetts-Israel water mission. “We did some work, and he was right.”
Indeed, the Boston area is home to a burgeoning cluster of more than 30 startups in the water innovation sector (see image below), such as desalination firm Oasys Water—where Matheson, a VC with Flagship Ventures and co-chair of the trip, is CEO. What’s more, bigger companies like CDM Smith and Xylem have a strong local presence in water treatment and analysis. Goodtree, a former Akamai exec who organized a water innovation symposium in May, estimates that Massachusetts water businesses bring in over $4 billion in annual revenues.
The water industry sits at the intersection of engineering, construction, goods and services, and plenty of academic research. “There’s this innovation wave just beginning to blow through it,” Goodtree says. And as he sees it, the state stands to gain a lot if Israeli water companies choose to expand to Massachusetts and open local offices, as opposed to going to California, New York, or Asia. “We’re in a global competition to win inbound innovation,” he says.
So far, the numbers tell a pretty compelling story outside the water industry. According to a report from Stax, in 2009 there were more than 100 Israeli-founded companies with a presence in Massachusetts, and they employed some 6,000 people in the state and had $2.4 billion in direct revenue booked in the state. That’s mainly across the three sectors of life sciences, information technology, and clean energy. “We’d like water to be the fourth,” Goodtree says.
In the past year and a half, according to stats that Goodtree has compiled, 14 Israeli-founded companies in Massachusetts have raised $266 million in financing; some notable ones are Cyber-Ark, uTest, and NeuroPhage. Bay State firms also have acquired at least eight Israeli-founded companies for a total of $1.6 billion; these deals include Akamai buying Cotendo, EMC acquiring XtremIO (and More IT Resources, last week), and Boston Scientific buying Rhythmia Medical. Meanwhile, Israeli investors have poured more than $100 million into Massachusetts real estate.
But the mission this month is all about water. “Israel has shown us that aligning academic research, public policy, industry and finance within a geographic cluster around the common objective [of] improving the cost, quality and access of water can create an innovation engine that can drive real change and economic development,” says Earl Jones of Liberation Capital, a co-chair of the trip. “This alignment is quite normal in Israel, but far less natural in the Commonwealth.”
It all adds up to a huge opportunity for entrepreneurs, investors, and government on both sides. One highlight of the trip: a startup-pitch competition in Tel Aviv on Dec. 18, called the Water Export Technology (W.E.T.) Revolution, in which six Israeli companies (chosen from dozens of entrants) will compete for a chance to win prizes, including office space at MassChallenge, legal services, and airfare and hotel expenses for a week-long trip to Boston.
Overall, the mission “is emblematic of the type of initiative that can help assist Massachusetts-based companies and innovators to have a truly global impact,” says Flagship’s Matheson, who is emceeing the startup competition. “Having the chance to interact with the Israeli water cluster also provides us an opportunity to share ideas and technologies and to find ways to work together. Ideally, we’ll also be able to identify exciting young companies that are ready for further global expansion and for deployment in the U.S.”