Israel and India launched a five-year technology fund aimed at growing the countries’ business relationship, the way a similar fund has boosted the Jewish state’s ties with the U.S. for the past 40 years.
The government announcement follows a flurry of recent tie-ups. Indian Angel Network, the country’s largest angel investor group, said last week it was starting operations in Israel, and India’s biggest marketplace for startup funding, LetsVenture, agreed June 27 to work with Israeli equity crowdfunding platform OurCrowd. Separately, Wipro Ltd. entered a partnership with Tel Aviv University to research emerging technologies, and Wipro Infrastructure Engineering began an alliance with Israel Aerospace Industries Ltd. to make aerostructure parts.
Avi Luvton, Israel Innovation Authority’s senior director for Asia Pacific, said each government would put $4 million a year for five years into the Israel India Innovation Initiative Fund, or I4F. The hope is this will encourage Indians to invest in Israel’s technology ecosystem and spur large Indian companies to open development centers.
“The fund is important,” Luvton said. “It creates a tool through which connections are made.”
The fund was announced as part of an unprecedented visit to Israel by Indian Prime Minister Narendra Modi, who is looking for military and other technologies as his government seeks to procure cutting-edge weapons know-how and move the country aggressively into the digital age. Israel, whose export-focused economy relies heavily on technology, is eager to penetrate deeper into India’s market of 1.3 billion citizens.
Trade between the countries has grown from about $200 million in 1992, when they established diplomatic ties, to nearly $4.2 billion last year, according to figures from Israel’s Economy Ministry. Excluding defense items and diamonds, Israeli exports to India have fallen in recent years.
“India is an almost infinite market for Israel,” said Benjamin Grossman, partner and head of Indian legal practice at Tel Aviv-based APM & Co. law firm, who previously worked in Israel’s defense sector.
India is one of the world’s largest arms importers and is the biggest buyer of Israeli defense products, a relationship Grossman said can be expanded to the civilian sector.
“It isn’t ‘copy-paste,’ but it can be done,” he said.
India’s technology industry, long a source of software programming talent, is evolving beyond outsourcing as startups spring up to compete in ride-sharing, e-commerce, education and health. An alliance with Israel offers Indians the chance to learn from a country that has built a world-renowned innovation industry from the ground up.
Deepak Bagla, chief executive officer of Invest India, the national investment promotion and facilitation agency, was in Israel last month to see what lessons from “Start-Up Nation” could strengthen India’s innovation infrastructure.
“We were impressed by how closely linked the entire ecosystem is,” Bagla said, noting a network that enables ease of access across a startup’s entire lifecycle, and government support through various financing programs.
“We hope to convert these lessons into success as we strive toward strengthening the start-up ecosystem in India,” he said.
A 2016 report by Nasscom-Zinnov found India lags in the number of incubators and accelerators, the time it takes to set up a new business, and on corporate tax rates.
“We can help one another,” Luvton said. “It’s a giant step forward.”
The Israel-U.S. Binational Industrial Research and Development Fund, the model for I4F, has invested in almost 1,000 projects since 1977. Its products have generated $10 billion in indirect and direct revenue for the two countries.
Each country can learn from the other, and Israel can help India write a playbook for innovation, said Shanti Mohan, LetsVenture’s chief executive officer. At the same time, India can serve as a beta site for Israeli technologies looking to scale up, especially in the agricultural and defense sectors, she said.
Indian investments in Israeli technologies are likely to grow. Amitra Farmahan, country business head for the Indian wealth management company Reliance Private Client, said she has seen “extremely good response” since they started working with OurCrowd last month.
(An earlier version of this story was corrected to fix the spelling of Avi Luvton’s name.)