The fraternity at core of nation's business

By Michael Kanellos
Staff Writer, CNET News.com
August 9, 2006 4:00 AM PDT

HAIFA, Israel--Walking around the Technion Entrepreneurial Incubator Co. is sort of like trick-or-treating in the 22nd century.

Situated appropriately next to a shopping mall, TEIC takes ideas conceived in the labs at the Israel Institute of Technology--called the Technion--and transforms them into start-ups. The first stop is CorrelSense, which has come up with a way to anticipate problems in technology networks through chaos theory and advanced math from physics.

A few doors down is Regentis Biomaterials, which has developed technology that lets humans regrow cartilage or shattered bone, ideally foregoing screws and grafts. Others include Matteris, which has devised a coating that lets DVDs hold a terabyte of data; Cellaris, a developer of ceramic foam that is 95 percent air; ImageIn, a maker of disposable colonoscopy equipment; and GeneGrafts, which aims to cure Parkinson's or epilepsy by controlling electrical impulses in cells.

"Sometimes, I am meeting with four or five proposals a day. The incubator has a first look at every project at the Technion," said Zohar Gendler, chief executive of TEIC, adding that around 85 percent of the companies in the project land venture backing while many sign development alliances with multinationals. "But if they can't get investors in two years, we close it up and tell everyone to go home. It is very brutal."

To understand Israel's emergence as a global technology powerhouse, one must appreciate the university located on the slopes of Mt. Carmel in this coastal city. And to understand the future of the Technion, you have to look into TEIC.

Founded in 1924, the Technion has been the source of many of the country's scientific breakthroughs, brand-name companies and its engineers. Roughly 70 percent of the engineers educated in the country graduated from the institute, as did 74 percent of the managers in local tech companies. The school is 24 years older than the establishment of the State of Israel itself; a tree planted by Albert Einstein still stands in front of the former main building.

It would be a vast understatement to say that technology is big in Israel. Nine out of every 1,000 people employed in the country work in research and development, nearly double the R&D rate in the United States or Germany. Of every 10,000 individuals, 135 are scientists or engineers.

In 2004, Technion professors Avram Hershko and Aaron Ciechanover won the Nobel Prize in chemistry, the first time Israel won the award in science. Researchers at the school, such as Uri Sivan in the nanotechnology program, have shown how transistors can be assembled by biological agents, including strands of DNA. The Lempel/Ziv algorithm for data compression originated here.

"One of our other people came up with a pen-sized device that can identify IEDs (improvised explosive devices)," said Moshe Eisenberg, executive vice president of research at the university and professor of materials engineering. "For years, this was the only engineering college in Israel."

It is also a university facing a financial crisis, which is where TEIC comes in. In the past several years, the government has cut the school's budget, forcing the university to trim salaries, close labs and limit enrollment. Professors on average earn 40,000 to 50,000 shekels ($9,162 to $11,452) a month, often less than what they might make teaching in the United States.

Close to 7 percent of the operating income comes from alumni donations, which at most other major research institutions are used to erect buildings. Tuition covers only about 11 percent of the bill.

"We live on about one-third of the budget of the equivalent big research university in the U.S.," said professor Shy Shoham, who builds microscopes for studying neuron behavior.

If the budget cuts persist, Technion President Yitzhak Apeloig warned at a press conference for the school's 82nd anniversary, the university might as well be shut down.

"When we recruit a new faculty member, we have to supply him with a new lab. That costs a half-million dollars. Because of the economic situation, it is very difficult," said Aviv Rosen, a senior vice president and professor of aerospace engineering. "They'll say, 'OK, I drive a lousy European car, but I have to compete with Stanford or Singapore.' They are willing to sacrifice the standard of living, but they won't sacrifice the ability to compete with the rest of the world."

To help close the gap, the university is starting to exploit its intellectual property more aggressively, as evidenced by its licensing of patents around a Parkinson's drug called Azilect to Teva Pharmaceuticals. Investors, the university and the government get around 50 percent of the stock in companies out of the incubator.

In addition, the school directs its research toward scientifically intriguing problems that carry the potential for a significant payoff. Nearly 100 faculty members have been recruited to participate in the nanotechnology program, which has a budget of $90 million for five years.

The university also has strengthened its emphasis on life sciences, which includes drug development, gene therapy and medical devices. Professor Yoram Baram, for instance, is tinkering with a "visual feedback walker," a pair of glasses with a built-in LCD (liquid crystal display) screen that throws a pattern on the floor. By following a pattern, patients with multiple sclerosis or other diseases that hinder mobility can lose their fear of walking on their own.

These projects often combine scientists from the medical school and the engineering departments. "We are doing this deliberately to create doctors that have a much better grasp of technology," Eisenberg said. Next, he added, the university will organize a program for energy research.

The transition from research to business is no simple task. Technion alumni such as Dan Maydan, former president of Applied Materials, the world's largest maker of chip manufacturing equipment, chastises the school for an ivory tower attitude.

But others remain hopeful that things are changing. For most of its history, alumni donations came from graduates who moved to the United States or Europe. But in the past two years, the Israel-based chapter of the Friends of the Technion has become the second most generous--a shift that Rosen calls a revolution.

"I don't think we did a good job up until now," Rosen said. "If you asked the question (about commercialization) a few years ago, people would look at you and say, 'What are you talking about?' Everything was free, and we talked to everybody."

Even non-graduates are coming to the university's aid, such as Business Wire founder Lorry Lokey, who toured the campus and wrote a multimillion-dollar check for Technion. The university is trying to raise its profile further by conducting more academic and scientific exchanges with schools in other nations such as China and the United States.

"My gut feeling is that our grads are a notch above what you can get in the Far East and Europe," said Oded Shmueli, dean of the faculty of computer science.

Part of that feeling is based on the quality of Technion's students, who must go through a highly competitive enrollment process. For every opening at Technion, six people apply.

Typically, students apply after three or more years in the Israeli Army; they thus have more real-world experience than freshmen in many other parts of the globe. As a result, once they do graduate, the average starting salary comes to around $51,000 a year, school spokesman Amos Levav estimated.

Alumni have produced a broad range of successful companies, from Steadicopter, which makes robotic helicopters, to Tynat, which sells a backyard hose reel.

"Israel is not going to be able to compete for mundane processes," Shmueli said. "It is going to compete by being 10 years ahead."