This article presents a successful, second year running, international collaboration of undergraduate students from two institutes: The Vertical Lift Research Center at the Pennsylvania State University, and the Faculty of Aerospace Engineering at the Technion Israel Institute of Technology. The Waterspout helicopter, presented here, is an advanced submarine deployable compact rotorcraft that can be launched from a submerged submarine in support of special operation forces, as a response to the 2007 annual American Helicopter Society student design competition. The profile and blade design was assigned to the Penn State team, along with performance and crashworthy fuel system design. The Technion Team was in charge of water stability analysis, mechanical deck design, crew cabin layout, de-icing analysis, water proof design, and submarine launch/retrieval method and mechanism. The general airframe design, internal layout, entrance/egress path and landing gear were continuously interated between the two teams. As shown in this article, this combined effort produced an innovative compact co-axial helicopter, designed to exit and enter the submarine launch compartment vertically and float to the water surface already in take off position, requiring only the deployment of the rotor blades for mission take off.