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While Israeli technology start-ups have changed the world with their innovative ideas and enjoyed tremendous success in attracting venture capital funds over the last decade, industry leaders warned on Thursday that the local technology sector must significantly alter its approach if it wants to maintain its status as a world technology leader.
"I see a number of primary obstacles facing Israel, chief among them being a strong shift among venture capitalists to cleantech companies," said Ronen Barel, managing partner of Ernst & Young Israel, at the company's Journeys '07 conference in Tel Aviv. "Nations around the world are all looking for more efficient sources of energy and we must, therefore, continue to grow our cleantech sector. Over the past number of years, the focus of VCs has significantly shifted to more cleantech companies and Israel must become more involved."
Other countries, such as Germany, Spain and China have taken the global lead in developing their respective cleantech sectors, in large part due to the strong support that the sector receives from the government. Germany, a country with far less sunlight than Israel, is the world's leading producer of solar energy.
"In Germany, some 300,000 jobs have been created in the renewable energy sector - and all the jobs were created from scratch, from companies that had strong government support in building their infrastructure and getting started," said Torsten Merkel of the Cleantech Group. "While in Spain, the government is expected to significantly increase the budget for solar energy and the Chinese government had made over $265 billion in investments in renewable energy."
The Israeli government, however, has been slow to join the cleantech craze, only recently designating more funding towards cleantech R&D.
One leader in the area of renewable energy told The Jerusalem Post that while the Israeli government talks enthusiastically about dedicating itself towards a deeper commitment to cleantech, it has not backed up its words with actions.
"I don't believe that beyond talking about a revolution in our energy sector, they are actually interested in doing anything about it," he said.
Others, however, are confident that the Israeli cleantech sector can make up for lost ground.
"2007 is the beginning of the clean revolution in Israel," said Itai Zetelny, manager of the Clean Tech branch of Ernst & Young Israel. "Over the last few years politicians here have begun to realize the importance of environmental protection and this year we have already seen three dedicated cleantech funds that have been established here and we have had a surge of traditional funds as well as private equity enter into the cleantech market," adding that more new companies understand that there is "something going on" in Israel's cleantech sector. "There is a clear switch taking place from straight hi-tech to cleantech and this year we have also seen the Israeli government's Chief Scientist's Office move to allocate more funds towards cleantech companies."
Large corporations such as IBM also have started to invest more in "green" companies, with the computer giant allocating more than $1b. towards such companies.
"This is a relatively very new field and IBM thinks that it has a lot of potential for growth," said Ian Abbot Donnelly of Big Green Innovation, IBM.
According to innovation strategist Larry Keeley, the innovation Israel has used to propel its success in hi-tech must now be used to generate similar results in the cleantech sector.
"This is a miraculous place - it has taken adversity and flipped it around into incredible success, but sometimes things change," he said. "Innovation is about seeing a transformation and becoming the best in meeting the needs of that transformation - Israel needs to be able to recognize these changes and commit to them and master this skill as change is happening all around the world."
A VC indicator survey conducted by Deloitte Brightman Almagor released this week said that over while cleantech remained the favored sector for increased investment in Israel over the third quarter, very few significant deals have been completed, a development that the report attributed to a lack of cleantech investment knowledge.