When investment pays off in knowledge
I-Lab Angels funds early-stage entrepreneurial work in Israeli universities
There are many problems in Israel right now. We all know that.
Many of us have followed the political upheaval with horrified fascination, desperately hoping that it all will work out, somehow, someday soon.
Behind the divisive politics there are other issues, some of them little known but long-simmering — including such seeming arcana as the pay structure in research universities — as well as very real reasons for hope, based on some of the traits Israelis are best known for: scientific and technological creativity, imagination, and hard work.
David Rosenblatt of Tenafly has been considering that problem, and he’s connected it to one closer to home.
He’s started a group of angel investors to work with new Israeli start-ups at the country’s research universities, right where research and entrepreneurship come together.
Here’s how that happened.
“I’ve been on the board of the American Technion Society in New York City for about 10 years,” Mr. Rosenblatt said. “I’ve always noticed that the ages of the larger givers are higher.” To be less polite than Mr. Rosenblatt, he’s saying that the biggest donors are elderly, if not actually old. “That’s a problem that many Jewish organizations face.
“How do you renew for the next generation? How do you interest them?”
The Technion Israel Institute of Technology is the Haifa-based university that’s known for its innovation and research. “The Technion effectively is Israel’s MIT,” Mr. Rosenblatt said. “The government pays 70 percent of its operating budget, zero percent of its development budget, and sets tuition and the professors’ salaries. Tuition is $3,500 a year, and it hasn’t been raised in 10 years.” Salaries aren’t high either, he said. “You have to fill the gap with 30 percent of the operating budget and 100 percent of the development budget.
“You have a major research university, competing around the world for the best professors, and you can’t compete,” at least not on salary. “A professor has to choose between MIT and Stanford, and those institutions can’t compete in salary but they can in other ways.” Some of those ways are concrete, some are less tangible — “the labs, the world-class faculty, and the opportunity to make an impact,” Mr. Rosenblatt said. So the funding that provides the labs and fuels the research has to come from elsewhere. “A lot of it is private philanthropy, and 80 percent of that is from the American Technion Society,” Mr. Rosenblatt said. Partly, that’s because Israeli society is less based on private philanthropy and more on government support than the United States is. Therefore, “Israelis don’t yet have the tradition of supporting universities. Private funding is just getting started in Israel.” But now, “as companies are sold or go public, Israel has a real base of high-net-worth individuals who will start doing more philanthropy.
“But that will take time,” Mr. Rosenblatt said.
“Private philanthropy is critical not only for the good of the university, but for the good of Israel. You want Israel to sustain itself. It is the start-up nation! So supporting the major research universities is supporting Israel itself.”
And no matter what else is going on in the country, “education is one of those beautiful issues that theoretically at least can’t be a bad thing, regardless of your politics.” And science has nothing to do with ethnic or religious divisions, either. “It’s good at bringing Arabs and Jews together,” Mr. Rosenblatt continued.
“Part of my passion is that I believe that this kind of work done at research institutions makes the world a better place, and this is one of the best ways there is to help not just Israel, but humankind.”
Okay. So how do Mr. Rosenblatt’s passion for supporting and furthering the work of Israel’s research institutions and his recognition that older donors must be joined by younger ones come together?
“I’ve been thinking about this problem for a long time, but I never had the time to do anything about it,” he said. But then covid happened. “You’re stuck at home, not traveling all the time, not exhausted, so you could think more.”
He realized that “the generations coming up don’t think of Israel as needy any more. When we were growing up, it was an existential thing. Poor Israel.” It needed us to survive. “Now, Israel is a pretty significant entity on its own.”
An entity, moreover, with seven major research universities, each doing cutting-edge work.
Mr. Rosenblatt is an investor, and Israel presents a great opportunity for investment, he realized.
“I thought that if people could hear about the early-stage companies coming out of these research universities” — not only the Technion, that is, but the other six schools too — “and invest in them, that would get them involved, and spur the next generation.
“It wouldn’t be a donation. It would be an investment.”
Around the beginning of 2021, Mr. Rosenblatt formed an angel investing group; it’s called I-Lab Angels. “It’s a bunch of individuals who get together, look at early-stage companies, and invest in the ones they select. $100,000, $200,000, $500,000 — that really can make a big difference at the early stage. Later, it’s more for venture capital.
“This investment can do really well and there can be a meaningful return. Of course, it’s also a greater risk. You have to be willing to lose the money.”
The group he formed “has a mission — to support the continued growth and strength of Israel’s major research universities by investing in their entrepreneurial students, professors, and alumni to create the world of tomorrow through innovation, and to achieve outstanding financial returns, while sharing a portion with the institution.”
That last part, giving some of the profit back to the institution, also matters, Mr. Rosenblatt said. “From the beginning, we instill that idea in people, so it’s a triple win — a win for the entrepreneur, and win for the investor, and a win for the university.”
That’s why the group’s logo has three flames, he added.
At the beginning, the group included three people — Mr. Rosenblatt, Matt Golub of Demarest, and Danielle Capalino of New York City. “Danielle went to MIT, and Matt worked at McKinsey,” the global management consulting firm, Mr. Rosenblatt said. “These are serious people. They are impassioned by the same things that I am, and we’ve been working together as a team.”
Mr. Rosenblatt went to law school at Northwestern and then to Harvard Business School. He worked in Silicon Valley, at BlackRock, had his own private equity firm, and “the big thing I did in Israel was pioneer the utility solar industry there,” he said. His company, Arava Power, was able to work with the government so that “privately generated electricity could be fed into Israel’s national electric grid. Before that, it all had been government-sponsored.” Between that and other ventures, “I have more than 15 years of experience working in Israel,” he said.
When the first three I-Lab Angels started investing, in 2021, “very few people were doing this early-stage thing in any methodical way.” The field was wide open to them. They began with the Technion and then moved on to Israel’s other research institutions.
“In our first 20 months, we have made 14 investments — roughly $6 million,” Mr. Rosenblatt said. “We have over 60 active investors, and our largest investment has been almost $1 million. Some have done well enough to have attracted other investors — and if a company you are investing in attracts other investors, that is progress.
“We’ve invested in biotech, artificial intelligence, AI combined with biotech, sports media, and material science. For example, we invested in a company called Solutum that is working to eliminate plastic with a biodegradable product that is environmentally friendly. It looks like plastic, but it biodegrades. Large companies are looking at replacing their packing materials with it; a beverage company says that it wraps all its pallets in this plastic.
“We have another company, Quris, which has reimagined how drug discovery is done.” It uses AI and something called “patients on a chip” to refine the understanding of how bodies react to drugs so that you don’t have to start animal testing until much later in the process.”
I-Lab Angels have invested in a company that is working on better ways to fight infectious diseases, and another one that uses AI to inspect infrastructure. “Think of the bridges around New York City,” Mr. Rosenblatt said. “They usually have cracks, and you have to have engineers hanging off ropes. This technology can do it digitally.”
Yet another start-up is working on an app that Parkinson’s patients can use so they and their doctors can monitor their condition. And another one puts a camera in athletes’ helmets so audiences can see games from the players’ vantage points.
“Our most recent investment in Israel is — ironically — in a company saving shrimp,” Mr. Rosenblatt said. “The shrimp population is threatened by disease, and we invested in a food tech company that prevents disease in shrimp and many other animals. It seems even those who are commanded to keep kosher like to help make seafood safe.”
One thing that all these companies have in common is to combine “great intellectual property and really strong entrepreneurs, and they’re going after significant markets,” Mr. Rosenblatt said. “You want to invest in a company that has a large addressable market.
“Our investors range from in the 20s to well out of them,” he summed up. “We are attracting a range of folks who are intellectually curious, want to support Israel, and increasingly understand the important of Israel’s major research universities.
“I’m very interested in technology and science, and in companies that operate at their intersection,” Mr. Golub, one of the first three investors, said. “That work could become the basis of great companies that can help the world, and a lot of it is happening in Israel. And I feel a kinship for Israel.
“In my case, the investment activity is strengthening my relationship for Israel, instead of the other way around.
“As a Jew, there is a lot of be proud of in Israel,” he continued. “Israel is the size of New Jersey. New Jersey has Princeton. Imagine if it also had Stanford, MIT, and the University of Michigan. Israel is a place where people have to be innovative to survive. That’s the prototypical start-up nation story.
“It’s a very unusual confluence of facts — the people’s entrepreneurial spirit, their intelligence, their intensity — and the military.”
The military? What do you mean?
“We look for people with leadership experience in the military,” Mr. Golub said. In the U.S., kids go straight to college, or sometimes take a gap year. In Israel, they go straight to the military, and right away they have a lot of responsibility. They have to keep their friends and family from getting killed. And then they go to school with a better idea of what they want to do.
“Imagine if everybody in the United States had to go to West Point or Annapolis before college.”
The early-stage companies in which I-Lab Angels invests “tend to be very risky — but that’s what we do,” Mr. Golub said. “We are interested in placing risky bets on things that can help people.”