Israel's government-backed business fund a model

By PAULA OLIVER

New Zealand should heed Israel's transformation into a technology force and launch a strong Government-backed fund to help the country's entrepreneurs towards global success, a panel of local technology experts said yesterday.

Israel's technology-rich industry is flourishing, after a raft of Government initiatives during the 1990s snared foreign venture capital and fostered new ideas. Many believe the changes could be applied to New Zealand.

The man behind Israel's transformation, the country's former chief scientist Yigal Erlich, told a breakfast gathering in Auckland yesterday that the Israeli Government's moves to establish incubator and venture capital funds had been crucial to the country's development.

Since 1984, when a research and development grant system was started with just $US25 million, industry had become dominated by telecommunications, electronics and software companies. The country is ranked third in the world in the number of Nasdaq-listed companies.

Generous Government funding options, including the establishment of a $US100 million investment company in 1993, had given business the helping hand it needed to secure backing for its ideas.

"We were faced with a large number of Russian immigrants, and we were concerned how to use and extract technology from these people, who were mostly engineers and scientists," Mr Erlich said. "One of the ideas was to start a programme of incubators to grow the ideas."

The Israeli Government backed entrepreneurs with original ideas to the tune of 85 per cent of their total costs, and later established the venture capital company that gave investors the chance to buy out the Government's share in a company.

Auckland University dean of medicine Dr Peter Gluckman likened New Zealand's attitude towards funding to getting into a cold swimming pool.

"There are two ways to get into a cold swimming pool - one is to jump, and the other is to creep down the ladder," he said. "Israel jumped, and we're creeping, using a very small amount of money."

Dr Gluckman said that rather than protecting crown research institutes, New Zealand needed a holistic view of the sector. Instead of using a 1960s model for technology growth, bits of Israel's 2000 model could be adopted, he said.

"It's important to remember that the amount of money needed to jump is not great - and we do need to train our entrepreneurs by giving them mentors," Dr Gluckman said.

Dr Chris Kirk, a director of the board of Technology New Zealand, said present spending was not enough.

"If the Government is going to get serious about the technology incubators, then it has to get serious about the money, and $2 million is not enough," he said. "They must be the catalyst for change, and bring in the people with battle scars who know what they're doing."

The chairman of the High Tech council, Trevor Eagle, suggested that emphasis on crown research institutes should be shifted and that more assistance be given in management and marketing.

The series of seminars examining the Israeli experience continues throughout the country this week.