Michigan: Israeli Startups’ Next Gateway to America

A Michigan delegation headed by its governor visited Israel last month, looking for Israeli technologies to tackle the state’s challenges in the fields of smart mobility, cybersecurity and clean water.

While traditionally the main access points for Israeli startups that wish to penetrate the American market have been Silicon Valley, New York and Boston, more and more Israeli entrepreneurs are discovering the “Great Lakes State.”

Shaping the automotive industry

Michigan has developed as a hub for automotive manufacturing thanks to its natural resources and its rail routes leading to major metro-areas like New York City and Chicago. But behind Michigan’s leadership position in this field were two entrepreneurs who shaped the industry as we know it: Henry Ford and Ransom E. Olds.

Henry Ford was the first in the world to manufacture cars that were inexpensive to produce and affordable for the masses. In 1913, he was the first to introduce the moving assembly line, which dramatically reduced production time and costs. His entrepreneurship kept Ford at the forefront of the industry, with his company being one of the “Big Three” (along with General Motors and Chrysler).

Devastating implications for Michigan’s economy

The Big Three have left a mark on Michigan’s economy, employing thousands of people in the state over the past century. But following the economic crisis of late 2008, the American car industry was in distress. Despite financial support from the government, in 2009 GM and Chrysler filed for bankruptcy, which had devastating implications for the economy of Michigan.

A decade later, Michigan’s auto industry emerged leaner and quicker to adapt to industry changes: Sales have increased, and the number of auto manufacturing jobs in the state has grown by 7% from 2014 to 2018. Today, 22 car models are assembled in Michigan; 17 percent of U.S. and 11 percent of North American vehicle production in 2018 occurred in Michigan.

Reemerging as a world leader

Michigan is a leader in the field of connected vehicles, with 11 deployment projects. It is also the top state for U.S. transportation equipment exports. Moreover, automakers and automotive suppliers have invested $29 billion in Michigan since 2009, three times more than in any other state.

As the future of the industry is being shaped by the rise of electric and automated cars, changing consumer tastes, stricter environmental standards, ridesharing options such as Uber and Lyft, and more disruptive technologies, the continuous success of the state’s automakers and suppliers now depends on how well they adapt to the rapidly changing industry.

While traditionally relying on manufacturing, nowadays Michigan is trying to reinvent itself, looking to resurrect its innovative DNA and move to the forefront of technology in order to overcome the crisis that hit it hard in the previous decade. The state is eager to diversify its economy and to inject innovation and technology in an attempt to return to its global leadership position.

Venturing out of crowded hubs

This is where the opportunity for Israel lies. True, Silicon Valley, New York and Boston are the most globally connected and competitive hubs in the US and around the world. But access to the US market through these hubs is now somewhat limited because they’ve become so crowded in recent years.

If you’re willing to venture out of these major tech hubs, Michigan and other states offer a unique opportunity for market access, a blue ocean, if you will. Furthermore, they are eager to attract innovation they can benefit from it. In return, they offer solid support systems and access to the largest players in their regions.

Since 2009, Michigan exports to Israel increased 76%, totaling $173 million in 2018 alone; it is ranked at No. 16 on the list U.S. states for volume of exports to Israel. According to data from Start-Up Nation Finder, there are at least 21 Israeli technology companies with offices in Michigan, particularly in the fields of digital health, industrial technologies and security. Among the Israeli companies that have chosen Michigan as their base to penetrate the American market is Plasan, a well-established company that manufactures advanced armor for ground vehicles and aircraft, with applications mostly in the areas of defense. Another Israeli startup with a presence in the Great Lakes state is Karamba Security, which develops embedded security technologies for connected systems with applications in the cyber, mobility and Industry 4.0 sectors.

Accelerator programs as door-openers

Israeli startup Supportomate, which automates sales and customer support for the insurance industry, recently graduated from a three-month accelerator program in Michigan. When founder and CEO Ron Shalit was looking for InsurTech accelerator programs in the US, he came across the PROTO Accelerator – a relatively new InsurTech program in Lansing, the capital of Michigan. It is also the state’s insurance industry hub, where eight national and international insurance companies are headquartered, and industry employment is growing at a rate 10 times the national average.

Supportomate graduated from the program with its first customer, Farm Bureau Insurance, a large regional insurance carrier company. According to Shalit, “the accelerator pushed the company from 0 to 100 in three months.” Moreover, the buzz surrounding the pilot with Farm Bureau created a pipeline of additional insurance carriers in North America and in Israel that are interested in implementing Supportomate’s technology.

Cementing our partnership with Michigan

Start-Up Nation Central is actively looking for these kinds of ‘blue ocean’ opportunities for Israeli innovators to diversify their go-to-market strategies – in Michigan, and elsewhere around the globe. In the field of digital health, we started working with Henry Ford Innovations in 2015 to showcase Israel’s most promising technologies, some of which were chosen for pilots in the Michigan ecosystem. But the potential is much greater. With expertise in finance, insurance, automotive, healthcare, Industry 4.0 and more, Michigan’s appetite to revitalize its ecosystem naturally connects the state to Israel.

That’s one reason why Start-Up Nation Central created a tech Finder for the State of Michigan. By sharing the technology and best practices we developed to create our own innovation discovery platform, we were able to help Michigan map its innovation ecosystem. In mid-2019, the Michigan Israel Business Accelerator launched StartupMichigan.com (part of our Global Finder Network). This partnership brings knowledge and solutions into the Michigan ecosystem, as well as programs that make its economy more accessible to Israeli companies.

To bring our work with Michigan to a new level of commitment, in November 2019, Start-Up Nation Central signed a memorandum of understanding with the State of Michigan. Governor Gretchen Whitmer came to Israel to pledge the state’s commitment to working closely together with Start-Up Nation Central in order to identify Israeli technologies that could be adopted by Michigan-based companies. This unique entrepreneurial collaboration will also identify Israeli companies that could select Michigan as their base for operations outside of Israel, in order to further develop and apply their technologies.