Massachusetts Meets the Middle East: How the Commonwealth Became a Magnet for Israeli Entrepreneurs

Camoin Associates has recently been working on an economic development strategy for the N2 Innovation Corridor in the communities of Newton and Needham in Massachusetts. Newton and Needham are working together to attract and grow innovation-oriented businesses and become a hub for entrepreneurial activity in the Boston metro. Through our work, we have come across a fascinating economic relationship that spans continents and has contributed to a huge amount of investment in Massachusetts and the Boston region: Israeli entrepreneurs are flocking to Massachusetts.

A 2013 study conducted by Stax Inc. for the New England–Israel Business Council found that in 2012 there were over 200 Israeli-founded businesses in the state, generating over $6 billion in revenue in the state and employing 6,600 people. Moreover, these businesses raked in nearly $700 million in venture capital from 2010 to 2012, representing 6% of all VC funds raised in the state.

At first glance this may seem like an unlikely match – of all the places that an Israeli entrepreneur could choose to start or expand a business, why Massachusetts? Although Israel has become a global innovation powerhouse, its local market opportunities are limited due to the country’s small size and challenging political situation within the Middle East region. Entrepreneurs must look globally in order to maximize success. Massachusetts’ strengths include a deep talent pool, top-ranked higher education institutions, solid research and development, top-tier venture capital, and a strong and diverse presence of technology sectors.

But these advantages are shared by New York City, Silicon Valley, and other places as well. Well, according to the Stax study, it turns out that are a number of factors, both economic and cultural, that make Massachusetts, and particularly Boston, an ideal fit for Israelis:

  • Location: Boston is quite a bit closer to Israel than the West Coast, and there is some overlap in business hours, facilitating communication between offices on different continents.
  • Cost: Cost of labor and cost of living is somewhat less in Boston compared to New York and Silicon Valley, and businesses taxes are lower in Massachusetts.
  • Culture: Boston was among America’s first cities to have a strong Jewish presence. The Jewish population has grown to comprise over 9% of that of the Boston region, becoming a highly educated group that is highly active in Jewish life and feels a strong connection to Israel. Some of the earliest connections for Israeli-founded businesses were established with the help of the Boston Jewish community.

Massachusetts has been able to capitalize on this relationship and continues to foster its economic relationship with Israel. The Commonwealth’s government has been active in promoting commerce with Israel through trade missions and other activities. MassChallenge, billed as the world’s largest startup accelerator, is a non-profit that promotes innovation by connecting startup companies with the resources needed to bring their ideas to market. Its first international expansion was to Israel in 2013, with the MassChallenge Israel program connecting Israeli startups with U.S. customers, mentors, partners, and investors.

Beyond companies launched in Israel that expand into the U.S., there are also many examples of Israeli graduates of Massachusetts universities launching companies here; Massachusetts businesses acquiring Israeli companies; Massachusetts-based commercialization of IP developed in Israel or by Israelis; and companies created in Massachusetts from scratch by Israelis, sometimes serial entrepreneurs.

What can other communities learn from this relationship?

Entrepreneurs around the world seek to expand in the U.S. for a host of reasons related to the abundance of talent, potential consumers, and investment dollars. Massachusetts has been able to leverage its historic cultural ties to a small country halfway around the world and forge a unique and lucrative economic relationship. Communities around the U.S. have special cultural relationships with other countries due to the presence of concentrated immigrant populations. These cultural ties and community networks have the potential to be developed into mutually beneficial economic partnerships.

We’d like hear from you – are there examples similar to the Massachusetts–Israel model in your community?

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