Howes: Israeli savvy carves niche in global auto space

Daniel Howes
The Detroit News
Mobileye President & CEO Ziv Aviramon, left, CFO Ofer Maharshak, center, and Chairman Amnon Shashua, clasp hands to ring a ceremonial bell as their company's IPO begins trading, on the floor of the New York Stock Exchange Friday, Aug. 1, 2014.

Jerusalem –  Don’t try to tell Amnon Shashua or his folks at Mobileye NV that there’s no auto industry in Israel.

They know better, and so do the biggest players in Detroit, Germany, Japan and South Korea. They understand that this tiny country’s tech sector is producing solutions to some of the industry’s most vexing problems, stirring the venture-capital community and charting paths to next-generation mobility.

Waves of technically savvy people, schooled in Israeli and foreign universities, are trained in elite military units devoted to cyber-security and advanced computer programming. The net result is a uniquely skilled cadre of coders and out-of-the box thinkers well suited to developing answers for system integration and self-driving cars.

“You can find it in Silicon Valley, where they’re not interested in automotive, and in Israel, where we are interested in automotive,” Shashua told more than 20 Michigan CEOs in Israel last week to better understand the DNA of the country’s business culture and what underpins its “Start-Up Nation” phenomenon.

He should know. The founder of Mobileye ranks among the brighter stars in Israeli business these days. Founded in 1999, the company of 700 sits on the outskirts of the capital and carries the distinction of being the largest initial public offering in Israeli history — raising $890 million in its first week, according to Bloomberg News, and underpinning a total market capitalization for the company of what is now $10.1 billion.

Mobileye’s system is already available on such diverse models as the Hyundai Genesis, the Volvo S60 and others from BMW, Audi, Nissan and General Motors Co.’s Opel unit in Europe. It uses a single optical camera to detect obstructions or vehicles ahead, measures the distance to them and alerts the driver. The system will brake the vehicle before a collision, unless the driver does so first.

“Everything we as humans are able to do, that system is able to do as well,” says Itay Gat, Mobileye’s senior vice president of production programs. “We have here the biggest vision group assembled in the world for this purpose.”

Cool? Yes. New? Sort of. Yet the message of Mobileye to outsiders from Michigan looking in isn’t the technology, or the fact that Shashua and his crew are players in the self-driving car technology fast making its way to the market. The message is the alignment between higher education, business and government exemplified by Mobileye and other players in Israel’s mobility tech space.

Many of Israel’s would-be entrepreneurs are supported in the early stages by the government’s Office of the Chief Scientist, an unambiguous signal of pro-business national purpose. The office — armed with an investment budget of $500 million, making it twice the size of the Michigan Economic Development Corp.’s entire annual budget — uses outside consultants to evaluate 180 start-up funding proposals annually.

“Fifty percent of our exports are high-tech,” says Avi Hasson, Israel’s chief scientist. “This is strategic. It’s important to the economy. That, people understand.

“We think the private and public sector need to play a role. Where we are better than you is infrastructure. Second … we are much more risk-takers than you guys. That’s where we put our money. By taking the lion’s share of the risk” with public investments in private ventures “you are not taking the lion’s share of the financial investment.”

In the early stages, “OCS money” (as the investments are called by the Israeli entrepreneurial community) can account for 85 percent of a start-up’s budget. As the firms succeed and other investors step up, the government share is reduced and the grants are repaid under a royalty system.

The support for aspiring entrepreneurs transcends the partisan politicking infecting economic policy-making at the state and national levels in Michigan and the United States. In Israel, entrepreneurs can compete for early-stage funding with pitches that are reviewed by independent outsiders, not government bureaucrats loyal to a particular political party, ideology, special interests or the next election cycle.

Michigan and the epicenter of its auto industry should take a closer look at the model. Here is an entrepreneurial eco-system unafraid to take a point of view, to take risks and often to use government money to do it (but not to blow $500 million on a single solar-power company, courtesy of the Obama administration’s Solyndra boondoggle).

A week in a country with a population smaller than Michigan’s offers a snapshot, as do brief visits with business leaders telling their individual entrepreneurial stories. Still, the impression reinforced repeatedly to the Michigan CEOs is of a sector on the move and on the same team. They aim to exploit niches suited to a skill-set marked by advanced computer knowledge, coding and determination to play in sectors where those skills gain them a competitive advantage.

“There’s some great technology,” says Chip McClure, a longtime auto supplier CEO who now heads the Michigan Venture Partners equity fund. “Commercialization is the next challenge.”

Take Gil Dotan, deep in efforts to raise as much as $4 million to fund the business. His Guardian Optical Technologies, a start-up operating out of the Eco-Motion accelerator at Tel Aviv University, uses an optical sensor to detect motion inside a vehicle. Are seatbelts fastened? Is a passenger seated properly to insure correct deployment of an airbag? Has a child been left accidentally in the back seat?

“We’re the source of cabin data,” Dotan, the CEO, says of technology that is expected to soon be under evaluation by global automakers. “It’s low cost. We are not Mobileye. They are looking outside the vehicle, and we are looking inside the vehicle.”

But they’re all looking ahead, hoping they can be the next Mobileye or the next Waze, an Israeli social mapping company Google bought for $1.1 billion two years ago. Or the next big story in a “Start-Up Nation” that takes seriously its new brand and what it takes to match reality with the hype.

Daniel Howes is a Detroit News columnist and associate business editor. Watch for his columns through November on the Michigan CEO mission to Israel. Howes’ column runs Tuesdays, Thursdays and Fridays. Catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.


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