Where one should look

By Sherwin Pomerantz
President
Atid E.D.I. Ltd.

More and more Israeli companies are giving serious consideration to opening facilities in the US. For the most part the United States represents the largest overseas market for Israeli goods and technology and the synergy between the two countries makes the US a natural overseas destination.

Registration

When it comes to operating facilities there, two questions arise. The first one is where to register the US company? On this issue there is simply "no contest." Delaware, with its ease of registration, its low corporate taxes and its chancery court system fully dedicated to handling corporate cases only, is the location of choice for Israeli companies. The registration office in Delaware is open until midnight every workday and the state maintains a representative office in Jerusalem as well, in the Har Hotzvim Technology Park. The process is simple, the fees are low and local attorneys are well experienced in dealing with this subject.

While the decision as to where to register the company is a simple and straightforward one, the decision as to where to locate the physical office, factory, warehousing facility, or operations headquarters is more complicated. Usually such decisions are made based on a number of factors.

Product Area

The product area of specialization is normally the prime limiting factor in deciding where to locate a facility. If the company is involved in media, the US location should be in the New York area. If the company's area of specialization is semiconductors then the location needs to be in Northern California. Each area of the US may have some special appeal as a result of its concentration of local technology and this, for most Israeli companies, is a major determinant as to where to locate their US facility.

However, in considering these options, one needs to be careful not to overlook some not so obvious opportunities. So, for example, in the field of biotechnology the natural locations might be California or Minnesota, but companies in Israel need to be sure not to overlook other areas of rising importance such as St Louis, Missouri and Atlanta, Georgia. Sometimes the Israeli company can strike a more favorable "deal" by looking at an up and coming area in a particular field rather than one that has a long history of association with a specific technology.

Incentives

Unlike Israel, the US does not have a uniform set of investment incentives that it offers to overseas investors. Rather, each local community (not even each state or county) will alter its own incentive packages so as to mirror their job creation needs and current level of unemployment. So, for example, if an Israeli company is interested in opening a pharmaceutical processing plant in the US, they would do infinitely better in rural Georgia, than Atlanta or better in rural Pennsylvania than in Philadelphia.

In some rural areas, where unemployment is high and the need for new job creation is critical, local communities will sometimes not only provide a physical facility at no or very low cost, but may also provide tax relief for up to 10 years as well as reimbursement for training costs of new employees. Oftentimes a foreign investor will become a local hero because of the resultant job creation.

There are, of course, statewide programs in each state, which also encourage foreign investors to locate in a particular state, and those cannot be overlooked. In addition, some local communities such as Atlanta, through the efforts of the America-Israel Chamber of Commerce there, go out of their way to be welcoming to Israeli companies interested in locating in that area. In Atlanta's case they even have orientation material in Hebrew so that the incoming families will find their way in a foreign country made a bit easier.

Distance from Israel

Oftentimes it is important to Israeli companies to have their US staffs in closer physical proximity to Israel and fewer time zones away. In such cases, the East Coast of the US, states such as Georgia, Pennsylvania and Delaware, which are 12 hours away from Israel by air and 7 time zones earlier, are more desirable than California, which is 18 hours away by air and 10 time zones earlier.

However, even on this topic the facts are not always determinant. Sometimes the other factors listed here are so important as to be overriding and will cause the Israeli company to move to the west coast even given the extra travel time and time zone differential.

Local Staff

Odd as it may seem, oftentimes the choice of an overseas location is dependent on the engagement of a chief operating officer that resides in a particular location and does not want to leave. For example, the potential COO may live in Indiana or Missouri and wish to remain there and not move his family. The Israeli company may be so enamored of this particular candidate that they are prepared to locate their US operation in his/her home state.

Summary

In summary, the choice is really dependent on a number of factors but, for the record, every state has something to offer the Israeli company. Some examples follow:

In short, in the US, there is something for everyone.

Sherwin Pomerantz is president of Atid EDI Ltd., a Jerusalem-based economic development consulting firm with offices in Istanbul as well. EDI is a contract operator of trade and investment offices for the states of California, New Mexico, Georgia, Delaware, Pennsylvania, Indiana, Missouri, Wisconsin and Oklahoma and represents the America-Israel Chambers of Commerce of Minneapolis, Chicago, Miami and Atlanta.