2015-05-04
Ex-Habs chief bullish on Israeli economy
MONTREAL - "I can't guarantee the Canadiens will win the Stanley Cup, but I can guarantee you will do well investing in Israel."

Those confident words were from Pierre Boivin, former president and CEO of the Montreal hockey team, and now president and CEO of Claridge Inc., the private investment firm headed by Stephen Bronfman.

Boivin was a speaker at a daylong conference April 29 called "Israel's High-Tech Miracle and Canada: Innovation for Humanity," sponsored by the Canadian Institute for Jewish Research.

That belief in the profitability of Israel's technology sector has led Claridge to return to Israel for the first time in a decade. And the Caisse de dépôt et placement du Québec, which manages $225 billion in pension funds, is an equal partner.

They have just opened Claridge CDPQ Israel in Tel Aviv, a new firm looking for promising civil technology and innovation ventures, particularly in early-stage companies.

"To say we are bullish is an understatement," said Boivin.

Claridge, which was established in 1987 by Stephen's father, Charles Bronfman, has not invested in Israel since a major holding, the conglomerate Koor Industries Ltd., was sold in 2006, he said.

Claridge previously had large stakes in Teva pharmaceuticals and Osem, the food company.

Doing business in Israel requires understanding that one must penetrate a "rough exterior to find the sweetness inside," Boivin said.

Claridge is impressed that Israel's economy is projected to grow by 4.2 per cent annually through to 2019, Boivin said. It also takes into account that over 650 companies, 75 per cent of them foreign, have invested over $2.3 (US) billion in the last two years alone in Israel.

As an example of Israeli high tech ingenuity, Boivin pointed to Mobileye, a collision-avoidance app, whose shares are now worth 60 per cent more than those of Bombardier, only five years after the company went public.

Prudent fiscal policy, a sound banking system, a resilient economy, and a government that actively promotes innovation and entrepreneurship are all factors feeding that bullishness, he said, and, of course, the discovery of natural gas in Israel.

The "ecosystem" that exists among government, the military, industry and academia has made Israel "the global capital of innovation," according to Boivin.

Israel invests 4.4 per cent of its GDP into research and development (R&D) annually, the highest rate in the world, which goes a long way to explain the 4,000 startups in the country.

"This is a complicated and aggressive region where the "fight or flight" response is often tested," he said, but that fosters an entrepreneurial and competitive spirit.

As white-hot as the "startup nation" is, Boivin advised that growth-equity investors be patient, and not sell too early as some have in the past.

Patience is something Montreal-based entrepreneur Matthew Price Gallagher, president and CEO of Water Cluster Scientific (WCS), learned.

It took him 18 months to negotiate a partnership with Yissum, the Hebrew University's technology transfer company, on strategy and ultimately revenue sharing. But he has no regrets five years later.

On the contrary, Gallagher believes Israel, a world leader in the emerging nanotechnology field, is the best place to develop WCS. Besides, Canadian universities are too "bureaucratic" to enter into such a partnership, he said.

WCS is looking to harness the properties of water's fourth and little known phase - clusters. Founded on retired MIT professor Keith Johnson's theory that these molecules vibrate in a high range, WCS's first marketable product cleans carbon from combustion engines.

Recently, WCS made a scientific breakthrough in artificial photosynthesis, which has potential applications for solar energy.

Gallagher said WCS's experience shows Israel-Canada partnerships are "truly a 1+1=3 proposition."

He is thankful to another conference speaker, Dan Vilenski, a member of the Israel National Nanotechnology Initiative, for helping him make contacts in Israel and understand the landscape.

Canada can learn from Israel in motivating Canadians to become more entrepreneurial, starting in high school, Gallagher thinks.

Our government needs to follow Israel's example in providing "leadership, funding and infrastructure" to encourage innovation. This country has outstanding R & D institutions but they lack funding, he said.

"It is embarrassing to me as a Canadian that Canada ranks 19th in terms of overall expenditure on R & D as a percentage of GDP [1.9 per cent], while Israel ranks first."

There should also be more linkage between R & D institutions and industry as in Israel, he said. Tax incentives should be offered to encourage investment in early-stage tech companies, he added.

Israel can benefit from Canadian partners in management expertise, marketing, access to larger markets and wider investor networks, he said. That can result in more ?built to last? companies in Israel offering higher valuations and more choice in terms of exit or liquidity options.

By Janice Arnold, Staff Reporter
The Canadian Jewish News

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