Anyone paying attention to high-tech businesses in Massachusetts knows there’s a strong connection between the Bay State and Israel. Over the years, dozens of Israeli entrepreneurs have started companies in the Boston area or moved here, as they try to solve problems in cybersecurity, water resources, healthcare, and more.
A new study prepared for the New England-Israel Business Council, with support from Combined Jewish Philanthropies of Greater Boston, has quantified Israel’s significant and growing impact on the Massachusetts economy.
The report found 216 active companies in Massachusetts with ties to Israel, which collectively booked $9.3 billion in revenue and employed nearly 9,000 people here last year. That’s up from 2012, when the previous edition of the study identified 211 Israel-connected businesses, which booked $6 billion in direct revenue and employed more than 6,600 people in the state that year. And the 2015 numbers have increased significantly from the first such study, which examined data from 2009. That report found nearly 100 Massachusetts companies with Israel ties, which employed 5,920 people and had $2.4 billion in direct revenue booked in the state in 2009.
The study includes firms founded in Massachusetts by an Israeli; started in Israel but later relocated or opened an office in Massachusetts; founded in Israel or in Massachusetts by an Israeli, then acquired by a Massachusetts company; located in Massachusetts and acquired by an Israeli company; or located in Massachusetts and selling a product based on technology developed in Israel.
The total revenues of Massachusetts companies with Israel ties have grown two times as fast as the state’s economy overall since 2012. Israel-connected companies represented almost 4 percent of the state’s gross domestic product last year, according to the study. Their employee base also grew five times faster than the overall Massachusetts economy from 2013 to 2015.
Israel-connected companies are also starting to take a larger share of Massachusetts’s venture capital pie. From 2013 to 2015, 48 such companies nabbed nearly $1.2 billion from investors—good for 10 percent of all venture investments in the state during that period, the latest report said. From 2010 to 2012, Israel-connected companies in Massachusetts took in 6 percent of all venture capital in the state, raking in $700 million across 73 deals, according to the previous study.
Some of the prominent Massachusetts firms with Israel ties include CyberArk Software, Cybereason, and RSA in cybersecurity; Akamai Technologies and SimpliVity in networking and data center technologies; Infinidat and Zerto in data storage and recovery; Applause and VMTurbo in application development and management; Chiasma and Gelesis in biopharma; ReWalk and Syneron Candela in medical devices; American Well and Medisafe in health IT; Desalitech and Superpedestrian in water and energy; and Formlabs in 3D printing.
The study suggests several reasons Israeli entrepreneurs and businesses are attracted to the Boston area. It’s a gateway to the U.S. and other global markets. It shares Israel’s strengths in sectors like software, life sciences, and cybersecurity. It’s home to high-quality colleges and universities, and has a talented workforce. It has a similar culture and an economy driven by innovation. And last (but not least), the relatively small time difference and non-stop flights to Tel Aviv are big pluses.
Despite these advantages, the report warns of competition for Israeli entrepreneurs with other regions, especially New York and the Bay Area.
“Our advantages in talent pool, cost, and other factors puts us in a strong position, but the Massachusetts story on the ground in Israel is often drowned out by the buzz around our two main competitors,” said David Goodtree, author of the white paper describing the study, in a prepared statement. Goodtree has closely followed the Massachusetts-Israel economic relationship for years. “While the mutual benefits are well-documented with the 2016 study, the state’s opportunity is to build on our success by cultivating new relationships and new areas of common interest between Massachusetts and Israel.”
The research was primarily conducted by consulting firm Stax, with additional research by the TAMID Israel investment group at Boston University.