Paul Singer Embraces Startup Nation in Battle for Israel Economy

Why Paul Singer Supports Israel's High-Tech Industry
  • Countering the boycott movement, focusing on innovation
  • Top former Israeli official named to head a new foundation

A U.S. billionaire and a senior Israeli economist are joining forces to promote Israel’s high-tech industry, hoping to lure international investors and officials, and counter a Palestinian-led boycott movement.

The billionaire, Paul Singer, who runs the hedge fund Elliott Management, has put up $20 million in recent years to create a non-profit called Start-Up Nation Central. The official leading the foundation will be Eugene Kandel, who just completed six years as chairman of the Israeli National Economic Council.

Paul Singer
Paul Singer
Photographer: Chris Ratcliffe/Bloomberg

The project is the offspring of the bestselling 2009 book “Start-Up Nation,” which portrays Israel as having disruptive innovation in its DNA: Like many business startups, the book argues, Israel is inhabited by natural risk takers (immigrants) where the military teaches teamwork and self-sacrifice. Translated into 30 languages, the book is widely seen as one of the most powerful pieces of Israel advocacy of recent years. 

Its arguments directly parry Israel’s opponents who say its immigrants are not pioneers and its military is not an innovation incubator but rather both are usurpers of Palestinian land and rights.

Delegitimization

“One could make the argument that the ultimate antidote to delegitimization, isolation, and divestment is legitimization, integration, and investment,” said Dan Senor, who co-wrote “Start-Up Nation” and works for Singer. He said the foundation’s overarching goal is to strengthen the country’s economy and get people to interact with it beyond the prism of conflict.

Singer and Senor are allied with the the U.S. Republican Party which has increasingly made Israel a center of its foreign policy. The goal of the foundation is to act like a foreign ministry for Israel’s tech industry, offering collaboration to outside investors and innovators. In interviews, both Senor and Singer said that while fighting a boycott is not what drove them to start the organization, boosting Israel’s economic ties with the world serves to counteract the forces behind it.

Efforts to isolate Israel’s economy date back to the Arab boycott of the 1940’s. These days, with Arab countries more preoccupied with fighting militant Islamists, pro-Palestinian groups have taken up the cause, organizing drives from Melbourne to Buenos Aires. The campaign, known as BDS, for boycott, divestment and sanctions, pressured SodaStream International Ltd. to move a factory from the West Bank and highlighted a decision by French telecommunications provider Orange SA to phase out its business in Israel.

Pro-Israel activists are fighting back. Billionaire Sheldon Adelson is financing a movement to counter the sanctions and the Israeli government allocated $24 million for the same purpose.

Posh Offices

The Start-Up foundation will join in. Its new offices occupy three floors of a posh Tel Aviv tower that is home to high-profile tenants such as Facebook and venture capital funds. Singer says the group will be the main address for governments and businesses seeking to deepen their relationship with Israel’s tech industry.

“After the book ‘Start-Up Nation’ was published, I kept hearing about heads of states and businesses trooping to Israel from all over the world, wanting to see Start-Up Nation, trying to figure out how they can do it in their own country,” Singer said. “It seemed to me there was a great opportunity to help these countries solve their own problems and to increase economic growth for Israel as well.”

Kandel noted that Israel has attracted global tech giants like Intel Corp. and Google Inc., dozens of Israeli companies trade on the Nasdaq and hundreds have been sold off in recent decades.

“The idea is to look at this ecosystem from 30,000 feet up and identify what are the key gaps that we can fill, and how can we build on its strengths,” he said in an interview.

Israeli Expertise

Kandel, who will take over the foundation later this year, says he will draw from his years of guiding long-term economic strategy at the prime minister’s office. He cites his role in forming a “water city” project in China in which Israeli expertise in desalination, wastewater treatment and reuse are being implemented in Shouguang.

“We want to help advance projects where one company or one government ministry wouldn’t necessarily have the scope or vision to execute on that,” he said.

One hope is to break down barriers with hostile or skeptical countries. In 2013, Senor was invited to the Abu Dhabi Media Summit, the first time it brought a speaker on Israel. As a man in a red keffiyeh asked Senor to elaborate on the role of failure in high tech, a woman in a black head scarf a few rows back nodded approvingly. Absent from the discussion: any reference to the Palestinians.

Eytan Gilboa, director of the center for international communications at Israel’s Bar Ilan University, said that instead of fighting activists by arguing about war and the occupation, "Start-Up Nation" and its foundation try to go from defense to offense.

The Occupation

"The argument is: Israel’s startups contribute to humanity on a daily basis, from water to agriculture to medicine," he said. "If you boycott Israel, you are basically boycotting humanity.”

Yossi Beilin, a former top Israeli official and peace negotiator now in international business, said the book and foundation are good but will probably not succeed at taking attention off the conflict.

“Even the Arabs admire Israel’s achievements,” he said. “But that doesn’t mean they forget about the occupation.”

Besides hosting diplomats and businesspeople at its penthouse -- with views of the Mediterranean and Jaffa’s old town -- the foundation is working on a database for governments, corporations, and investors to tap into Israel’s tech industry.

Company Database

At the company’s temporary offices, Omri Baumer, clad in shorts and flip flops, adds companies to the database as a screen on the wall above him beams the latest tally, nearly 5,000. While many of the world’s largest tech companies already have a strong presence in Israel, the foundation is hoping to attract mid-size companies as well as firms that may not necessarily have a pure focus on innovation, but are looking for technological solutions to their products. Senor listed credit card and soda companies as examples.

A number of Asian companies have started looking to Israel for investments. This year, Xio Group, a closely-held Chinese investment firm, bought medical-device maker Lumenis Ltd. for about $510 million while China’s Bright Food Group Co. acquired dairy producer Tnuva Food Industries Ltd. in a deal that valued it at more than $2 billion.

A few years ago, a wealthy Vietnamese businessman ordered thousands of copies of “Start-Up Nation” in Vietnamese to distribute them at schools, Senor says. He then sponsored a business plan competition for students and the winners were awarded a tour of Israel’s agri-tech industry.

“All of a sudden you have people who have never interacted with Israel engaging with it through ’Start-Up Nation Central’ and this is the way they see Israel,” says Senor. “We want to help cultivate those partnerships.”

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