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@stephhospital Bravo to the @israel_innovate team... Well done! #innovateisrael13
event synopsis There were many highlights and achievements at Innovate Israel 2013. However, perhaps it was Israel’s Ambassador to the UK, Daniel Taub, who put it best when he said that, “the second Innovate Israel Conference, it is more remarkable than the first. The first time you do something, it is an event, the second time you do something it is already a tradition.” And some tradition this is proving to be. Building on the success of last year, Innovate Israel 2013 welcomed over 550 attendees, 50 Israeli companies, and a delegation of 40 visitors from Lithuania to the Hilton, Park Lane in Central London on December 4th. While the wind blew a bitter chill outside, the atmosphere inside was warm – probably for the best for those more used to Israel’s climate – as the day began with a typically enthusiastic welcome from co-Chairman Yossi Vardi & Marc Worth. In the exhibition hall, the companies on display welcomed hundreds of investors, corporate executives, entrepreneurs and industry experts. While in the auditorium, the panels included discussions on gaming, publishing, advertising, ecommerce, video technology and how best to invest in Israeli companies. Key themes throughout the day were the need for adaptability, and the importance of cross platform compatibility, as well as the challenges faced when bridging cultural gaps, and attracting international consumers and partners. In the gaming panel, we heard that Facebook now receives over fifty per cent of its revenue through mobile - up from zero just fifteen months earlier. In the conversation on the future of publishing, we heard about the battle to balance editorial independence with paid
@ericsalama content, while the discussion on advertising raised the issues of generating personalised promotions and customer engagements without being intrusive. In addition, the panel on TV & video addressed the challenges posed by new platforms and the need to protect copyright, while still creating cutting edge content, at an affordable price for the widest possible audience. Crucially however, Innovate Israel 2013 succeeded in bringing together Israeli companies not just with investors, but with international corporations. It was that vertical as well as horizontal networking opportunity that made the day so unique, and full of opportunity. And it wasn’t just those in the hall who found the day interesting. When interviewed on the BBC World News in the evening, following a short clip filmed during the day, Amit Shafrir was asked by BBC Business presenter Jamie Robertson, why Israel produced such a high number of start-ups and technologies!
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His answer was that Israeli society was an environment which encouraged thinking ‘out of the box’. He pointed to both the influence of the serving in the military, and the influx of immigrants from around the world as being key factors in the entrepreneurial nature of Israel. He was also asked why though there was not yet a brand name like Samsung from Israel, and why many technologies preferred to sell rather than become larger independent corporations. Amit answered, that ‘yet’ was the key word, and that he believed this was the next logical step in the StartUp Nation’s story.
So watch this space for the next Innovate Israel in December 2014. For more information, contact firstname.lastname@example.org
great event and lively panel on advertising with @RechtmanLondon @stephhospital @YoncaBrunini #innovateisrael13
The Future of Gaming Moderated By: Frank Meehan, General Partner, SparksLabs Global
Noam Korin, Director, Zynga Shaul Olmert, CEO, Playbuzz Julien Codorniou, Director, EMEA Platform, Facebook Tom Cheshire, Associate Editor, WIRED magazine
PUBLISHING AND ECOMMERCE click to play
Everyone is interested in the future of gaming, and this panel explored Israel’s innovation in the field. Trivia game Quizup was first out of the blocks as one to watch for the panellists, but of course Candy Crush was not far behind. The secret for these applications was identified as the emphasis placed on cross platform playability – indeed the panel said this was not even a choice for new technologies. The dominant role of mobile was highlighted to the extent that PC or desktop compliancy was now considered redundant. Julien Codorniou said that over 70% of Facebook traffic now came through mobile.
Panellists discussed the increasing competition between Googel and Microsoft to become the leading platform for gaming and home entertainment systems. But where to put your resources in 2014? Shaul Olmert said he was looking to the open platforms instead, which perhaps may benefit Google with the ‘deployability’ of Android and ChromeS on other OEMs. He said the old business model of the platform as the gatekeeper is becoming obsolete and we should expect more independent platforms, really opening up the door to new innovation.
Moderated By: David Osborne, Partner, Yigal Arnon & Co. Law Firm Ken Bronfin, Managing Director, Hearst Ventures James Bilefield, Advisor, Condé Nast International Marc Worth, Chairman & CEO Stylus Alison Loehnis, President, Net a Porter Jonathan Wall, Group e-Commerce Director, Shop Direct
Playtech, Sidekick and others were credited with being the industry leaders in a space that in the past ten years has blossomed. Israelis no longer typically sought to create the next Cisco, but instead want to find the next Instagram or Candy Crush.
Moderated By: Yossi Vardi, Co-Chairman, Innovate Israel Nathalie Boulanger, Senior Vice President, Orange Saul Klein, Partner, Index Ventures Mark Hughes, CEO, BT Security
The trend was noted as being very clear, the gap between editorial content and commerce is shrinking. People increasingly wanted a streamlined one day delivery from an on-screen purchase. Media companies were seeking to get closer to the transaction, creating partnerships between media and retailers to enable a new and exciting purchasing experience. The panel also discussed the dangers of blurring the lines between editorial and advertising, with concern that once revenues become more heavily based in the affiliate and revenue sharing with commerce, instead of subscriptions and readership, there would be issues of integrity as far as which advertisements one may accept.
The panel spoke about the trend in ecommerce and media partnerships focussing on the US, however, as a result of the R&D and technologies in Israel focussed on ecommerce and advertising, there were growing global firms with Israel based media partners, enabling them to utilise cross platform ecommerce opportunities. The areas to watch for our panellists were a reemergence of curated content, and an emphasis on multi-channel ecommerce, combining online advertising with physical locations, while using publishing technologies to unify the branding and messaging of a retailer from mobile, to desktop, to in-store.
There was also an emphasis placed on the separation of editorial and advertising decision making process.
Why major media & technology corporations see Israel as a great source of innovation
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ADVERTISING Moderated By: Rene Rechtman, Internet Entrepreneur
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Today there are around 300 international companies with R&D centres in Israel, yet Israel’s population is less than 8 million and has few ongoing political challenges. Yet, as the audience heard, and as noted in the book ‘Stat-Up Nation’, Israel has a high percentage of R&D per capita, a high number of VCs and patents per capita, its IPOs on NASDAQ are equal to those of France, UK and Germany combined and around 40% GDP per capita is now from the tech sector. This was noted as even more significant when considered that just decades ago, Israel was focussed on agriculture. Israel was considered the key place to be outside of Silicon Valley, which was why the UK had
established the UK-Israel Tech Hub, and why the brightest companies from the US and Asia especially, were establishing a presence in Israel. The adaptability and speed of Israeli companies and researchers especially was key to this growth. Aside from the quality of the products which attracts global companies, notably in the area of security, the innovation from the research to the lab, to the production environment was considerably shorter than in other companies in other countries. Orca as a company was noted to have made the leap of integrating with a global company following investment, as was MyThings, both of which were invested in by Orange. Indeed Orange have announced a new accelerator in Israel at the beginning of 2014.
Stephanie Hospital, Executive Vice President, Orange Eric Salama, Chairman & CEO , Kantar Yonca Brunini, Vice President of Marketing, Google
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Israeli start up MyThings was given as an example of leading the field of personalisation and data, as the industry recognised that retailers and advertisers required partners to make investment into technologies that maximised their understanding of why people behave the way they do and measuring trends. Israel was noted to have had more energy and excitement around developing these technologies outside of Silicon Valley. The future of advertising itself however, required a rebranding. Advertising was considered intrusive, and new technologies were looking to create an interactive and more engaging personalised content for the consumer. Within a decade, 6 billion people would be online, with the majority on mobile. Advertising as an
industry would need to adapt to this to establish the right sales relationship between clients and service providers. Key to this would be local advertising being driven by mobile devices. Indeed, there is a growing trend of investing in video, especially with the majority of television content consumed on digital platforms. As such, companies were investing heavily in YouTube and Dailymotion. While retailers were however looking to increase one-to-one advertising, there would still be the big investment in mass marketing such as Super Bowl commercials. There were questions raised as to whether consumers will continue appreciate value exchange as they have over the past decades, and doubts were expressed over the ability for retailers to be able to scale native advertising to create a less intrusive way of engaging customers.
Israeli innovation showcase
The future of tv & video click to play
Moderated By: Amit Shafrir, Internet Entrepreneur
@brenthoberman good to see old friends and some new great startups. What was the best one?
Guy Avshalom, Chief Operating Officer, Lionsgate Films Josh Berger, President, Warner Bros. UK, Ireland & Spain Oded Vardi, Internet Entrepreneur Thomas Benski, CEO, Pulse Films
The key aspect of developing TV and video technologies was allowing innovators the space to experiment and take risks. The recently released movie ‘Gravity’ was noted as having been an example of how such risks in the areas of graphics and effects could produce significant returns on the investment. With the threat of piracy, as has been experienced in the music industry, there were several views as to how to protect the future of video content. First was to ensure availability on cross platforms including iTunes, Netflix and Blinkbox for example, which in addition brought down prices of video content as competition increases. It was noted that the digital era had already significantly brought down prices for consumers.
Whereas, what drove down prices for physical DVDs was the involvement of retailers such as Tesco who sold DVDs at a loss to attract consumers. That was very different for the digital content market which was experiencing more competition from different platforms. The industry therefore would need to segment content to maximise revenues in the new reality of the subscription versus the ownership model. The issue of ‘cord cutting’ was also addressed, while it was noted one needed a better understanding of technology. However, this was a growing trend, and questions were asked as to how content producers would replace lost revenues on the part of the cable providers. The key question raised was the importance of copyright enforcement.
Investing in israeli technology. is this the right time? Moderated By: Toby Coppel, Partner, Virgin Management Gilad Novik, CTO, Horizons Ventures Daniel Waterhouse, Partner, Balderton Capital Mattias Ljungman, Partner, Atomico Harry Nelis, Partner, Accel
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With regard to now being the right time to invest in Israel – we heard a resounding (if unsurprising), yes. Panellists noted that Israel’s entrepreneurs are famed for their level of expertise – something that was credited to the support of the Government, and significantly to the military service, where a culture of building, not only new and innovative technologies, but an ecosystem and network of skills and creativity exist. Waze, Hola and Magisto were given as good examples. This was also reflected in the growing number of US tech giants seeking to harness the Israeli creativity with presences in Israel. While for many, the tendency for Israelis to be strongly opinionated, and of course blessed with
a healthy helping of Chutzpah, the investors on the panel said they felt it was quite easy to work with Israelis, and because of the pro-active and entrepreneurial styles, Israel was a great place to do business. They found people were engaged and informed. Difficulties did include the small domestic market, and the need to become international early on to ensure referenceable clients for growth abroad. In addition, there were many people on the ground in Israel with international experience who were able to bridge the cultural gap. As for the up and coming, panellists pointed to Hola.org, eToro, Gigya and Wix.
what’s next and who to watch Moderated By: Eze Vidra, Head of Campus London & Google for Entrepreneurs European Outreach Eyal Gura, Partner, Pitango Jeff Pulver, Internet Entrepreneur Brent Hoberman, Internet Entrepreneur Zack Weisfeld, Senior Director, Microsoft Ventures Bhavneet Singh, President & CEO, Pearson eLearning
Jersey. For business. For life. click to play
Healthcare featured strongly as panellists gave their insight into the new technologies emerging. One such technology was devices which allowed doctors to monitor our behaviour and engage with users, advising them on their behaviour. One to watch in this space was Tiktrac. There was also an emphasis on healthcare IT, and new technologies around genome sequencing and the storage of the related data. These were labelled as both proactive as well as reactive medicine solutions which enabled medicines and prescriptions to be more personalised. Similarly edtech, technology around education, was highlighted as an area where new technologies were emerging. In terms of the investors, it was felt that traditional VCs would continue to make revenues
an interview with: nathalie Boulanger svp, orange
Representing Orange, one of Innovate Israel’s key sponsors was Nathalie Boulanger, Senior Vice President, in charge of the Orange Start-up Ecosystem within the Orange Group. First thing we have to do in Israel, is to explain who we are! NB: Orange is a strong brand in Israel, but it is a franchise not a direct part of the company, so that can cause confusion. We are however building strong ties in Israel, with start-ups and new technologies especially. IBR: Well the question must of course then be why Israel? NB: Israel has a real culture of entrepreneurship, and a genuine ability to think outside the box. We have seen this not once, not twice, but hundreds of times, with Israeli technologies providing hi-tech solutions. IBR: Is that because of the education system or the military perhaps? NB: It is certainly due to the higher education. Orange is now working with Ben Gurion University, with plans to launch the Orange Fab accelerator in order to learn and nurture this very high level of innovation. Indeed San Francisco and Israel are working very closely, and share a tremendous amount in their approach to innovation. IBR: Ok, so what mistakes do the Israeli start-ups make? What would you best advise they do? NB: Overall I would give the Israeli start-ups full marks, A+. There is an area which needs careful
investing in new technologies, but that crowd sourcing platforms were greatly impacting the ability of companies to get off the ground. It was felt however that the accelerator and incubator models was likely to be the best way for more traditional investors to be able to filter out the better investment opportunities. Equally, there was a need for greater transparency on the side of the investors which was provided by the closer engagement through being involved in the accelerator or incubator process. Panellists concluded that the developing markets in Africa and Asia were good areas for investment, alongside edtech, and health tech as mentioned. The question remained however, would edtech generate the same returns as the gaming or ecommerce?
consideration, and that is the expansion abroad. Israel has a small domestic market and often the strategies for expansion there are not appropriate for wider growth. That is where Orange comes in, we have the expertise on an international level to allow these companies to maximise their impact and return on investment. There is a real need for companies to ensure they do bridge the culture gap – not just in terms of around the office – but as international firms. Orange has a track record of developing new technologies and presenting them on a global stage, tailoring their use in each relevant market and maximising the potential. This can be very difficult for new technologies, especially from smaller countries such as Israel. IBR: And finally, what would you say to a young Israeli entrepreneur? What is the top area to explore when seeking that next start-up idea. NB: We are focussing our growth on technologies that deal with cyber security for sure, and also optimisation and Big Data and analysis technologies are important. As we are hearing today at Innovate Israel, the future of advertising especially is all about personalisation, and there is a need for the technologies to best enable that. IBR: That is interesting, so you are saying that you know we all use our mobile devices, and that we shop and play games etc. But you are saying the area that still needs developing is the ability to best secure that interaction, and allow companies to best use the data gathered. NB: Yes, that is right. This is the way forward for expansion, and many Israeli start-ups here at Innovate Israel are exactly aiming to do just that.
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A word from our partners:
level 39 Innovate Israel: Destination London
your international partner Mazars is a global partnership providing audit, tax and advisory services to clients in more than 70 countries. Our integrated partnership enables us to offer local expertise, coordinated at a local or global level. We draw on the expertise of more than 13,500 professionals worldwide to assist listed companies, major international groups, SMEs and entrepreneurs at every stage of their development.
Eric Van Der Kleij, CEO Level 39
After another successful Innovate Israel conference, now is a good time to reflect on how Israeli companies can take advantage of London’s tech boom. In the past, Israel’s leading TMT firms would often choose to list on the Nasdaq as habitually the most progressive and disruptive Israeli tech companies would head straight to the USA when the time came for super-growth, A-Rounds and possible IPOs. This procedure sentenced founders and their development teams to years of nocturnal Stateside engagement in preparation for the big move. This well-trodden route was becoming extremely common, until London seriously began to establish itself as a major tech location, capable of supporting high growth companies.Israel is home to one of the world’s most well developed and exciting technology hubs, with home-grown technology companies intermingling with global brands to lead thinking in many tech industries. You will be familiar with the statistic that Israel produces more startups per-capita than any other nation in the world, this impressive stat demonstrates the entrepreneurial predilection and technological literacy of the Israeli population, and the benefits that nurturing a world-leading technology ecosystem can have to a nation’s economy.
These are all contributory factors to the strong international reputation, market-position and industry caché that Israel’s tech scene has gained. The UK can undoubtedly rival the USA as a place where aspirational fintech companies come to grow. London has a strong financial legacy, and a new focus and appetite for innovative finance technologies. This has become apparent at Level39, as the established banks are showing a genuine interest in our efforts to help young finance technology companies realise their highgrowth potential, by participating in accelerator programmes and hackathons. Additionally, with the launch of the Fintech Fifty Watchlist, which shines alight on a very strong pipeline of companies considering flotation on the London Stock Exchange, London has just become an even more interesting proposition for ambitious tech companies that are innovating in the financial services industry. When these factors are added to London’s convenient timezone - which extends the working day for a tech company with global aspirations to incorporate conversations with Asia and the USA, and allows for the easy-maintenance of an open dialogue with Israel - London’s place as the global destination for the growth of fintech is further cemented.
In the UK, we operate out of 18 offices. Whether you’re opening new offices, looking for a merger partner or seeking investment opportunities or funding, we can help. We support Israeli-based companies with their UK growth plans and UK companies with interests in Israel. For more information about how we can support your business, please contact: Gavriel Lebens T: +44(0)20 7063 5036 E: firstname.lastname@example.org
A word from our partners: mischon de reya What Israeli companies need to know about the EU’s data protection law
Adam Rose, Corporate Partner Mishcon de Reya
The European Union is moving closer to adopting new data protection laws. Israel is one of a small number of countries which the EU recognises as currently having suitably stringent data protection laws. But as European laws change, Israeli companies will need to be aware of the impact this will have.
So, what does that mean in practice for Israeli companies?
Adam Rose, Corporate Partner at independent law firm, Mishcon de Reya highlights some of the key proposals.
It means that those Israeli companies, even if only based in Israel, that process data relating to individuals based in the European Union, will need to comply with the new EU minimum standards; and those that provide services to companies based within the European Union will need to understand what obligations those companies face. For example, if an Israeli software company is looking to license its software to an EU company, the EU company will be seeking to ensure that the software enables it to comply with the new rules. This may require the data controller (EU company) to erase personal data, to allow the individuals to enforce their rights to know what data is held about them, and to enable the individual to move their data to an alternative provider.
Introduction of significantly increased fines for breaching the new law of up to 100 million or 5% of annual worldwide turnover. Organisations based outside of the EU which provide services to consumers inside the EU – such as cloud providers, for example – will be expected to comply with the new law (regardless of whether they are data controllers or providing processing services for controllers) requiring individuals to give their consent to data processing, where that data processing is not strictly needed for the services being sought by a consumer, won’t count as being freely given new rules will govern the handling of a range of personal data, including pseudonymous data and encrypted data existing adequacy findings (such as those applicable to Israel) will need to be reapplied for after 5 years.
The new rules are now expected to be passed into law in 2015, and will come into force in 2017. Companies working in or with EU member states should begin preparations now to ensure they comply.
A word from our partners: etoro social trading
Innovation is probably one of the most overused words of our time. Especially in a country that is well known for being a “start-up nation”, being innovative is almost mandatory. However, there are two major types of innovation we feel need to be distinguished here. The first type of innovation is the kind that makes the ordinary that much better and enables technology to make our lives simpler, easier and more connected. The second type belongs to the innovation that knows no borders. It is limitless and concerns itself with disrupting the status quo and shaking our belief systems. This kind of innovation has a vision, is revolutionary, and enables us to discover something we never thought could exist.
Yoni Assia, CEO eToro
However, there is also a third type of innovation. It is a combination of the previous two as this type of innovation takes something we think we know and breaks it down into pieces. The result is the creation of something completely new and unfathomable. This type of innovation is what eToro is all about.
We all grew up believing that the financial world is a given fact of life and that we shouldn’t hope to have any sort of control over our financial future. We are taught that the complicated stuff should just be left to the guys in suits and they’ll take care of us while also taking care of themselves, of course. Well, as we all know by now, that pipe dream has been proven wrong in ways we couldn’t anticipate. Therefore, the solution would have to be something completely new that we could not imagine as well. That is, connecting the social revolution to this secretive world of finance in order to transform it into something that was never seen before- an open, transparent, equal, and of course global community of people that believe it’s time for a change in the financial echo-system. And sometimes, knowing that you need a change is the only step you need to take to create it.. with 3 million users, almost a 100M trades executed in the system to date, and thousands of new users joining us every day, we can safely say that the change is already here. What will you do about it? Well, that’s entirely up to you.
A word from our partners: JT Labs Island innovators
Mark Stutchfield, Head of Strategy & Innovation JT Labs
You wouldn’t necessarily expect a telecommunications company from an island measuring just nine-miles-by-five to be installing an awardwinning fibre-optic network that will connect 45,000 premises by 2016, to become the fastest ubiquitous fibre network in the western world. You probably wouldn’t expect it to be hosting world leading technology companies from around the world at its revolutionary ‘JT Lab’ test bed facility either, or at the forefront in the Machine-to-Machine market and you may not even expect the CEO of a publicly-owned organisation from an island of fewer than 100,000 people to be speaking at prestigious Silicon Valley conferences. It’s the fact that you wouldn’t expect all of those things from a company like JT that make them possible, because the truth is that there aren’t many Tier 1 telcos like JT at all. Being small makes us quicker to adapt, more agile and therefore able to innovate – all key factors in the modern telecommunications industry, especially when you have the vision to see the opportunities all around you. JT’s size is one asset; its location is another. Based in the Channel Island of Jersey, off the south coast of England, we are 20 milliseconds away from the UK and mainland Europe – but we’re not bound by UK or EU legislation. The Island is English-speaking and is best-known for its world-leading international offshore finance industry, which has spawned a strong professional services sector – there’s also a new government agency, Digital Jersey, backing tech innovation and seeking to develop this growing new strand to Jersey’s economy.
However, it’s the fibre-to-the-home network that makes JT and JT Lab stand out. JT Lab provides companies with the opportunity to test, research, develop and launch products on a real network, on real customers and in real time. We’ve been in talks with some of the leading software and hardware firms in the world about trying out their new products and services in our unique testing facility, which is currently already being used by a world-leading hardware company and a top Israeli internetsecurity firm. This is all down to our agility – for some major global players, arranging and carrying out testing can take months or years, our size means that we can make that happen in a timescale that better fits the fast-moving modern telecommunications sector. Whatever the future trends and new product/ sector innovations may be, for all areas of telecommunications whether it be fibre, mobile and the Machine-to-Machine markets, JT is perfectly placed for them. Our vision is to become the partner of choice for global telecommunications innovation which we will deliver through unique propositions such as JT Lab. Importantly, we’re experienced at engaging with organisations at the cutting edge of this dynamic and rapidly-changing industry.
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an interview with: yossi Vardi high-tech entrepreneur
When he went eventually back to the private sector, he continued to take on high-profile tasks for the government, including roles in the region’s peace negotiations. But he also began his series of investments in high-tech companies— funding young entrepreneurs and growing businesses such as Answers.com, Foxytunes and Starnet. ‘I shifted from creating and running my own companies to funding and empowering young people,’ he says. ‘This is a common pattern with entrepreneurs: having realised some financial gains from their successful businesses, they become angel investors to invest their money while continuing to be involved in start-ups. ‘As I expanded my portfolio, I found that I had much less time for each company. But I could still meet the needs of entrepreneurs who require funding at the most risky stage of their young businesses. Institutional investors are unwilling to invest at this point because of what they believe are their fiduciary duties to avoid risk. Personally I think they should be investing to fulfil their fiduciary responsibilities, because although the risks of investing seed capital are greater, the rewards are higher.’
An article taken from Pictet Report Summer 2013 The Israeli investor has founded and helped build more than 60 high-tech companies since 1969, in fields such as software, the internet and mobile applications. He attributes Israel’s record of innovation to its entrepreneurial ecosystem—and an open culture of risk versus failure. ‘You are born with it, and it takes you over,’ he says. ‘You wake up in the morning and you want to start something new. Most people are hesitant about diving into new territories, but some are very curious. It can be manifested in many ways, such as scientific research, geographical discovery or architectural design. I belong to the group of entrepreneurs who enjoy exploring new business opportunities to see where they will go. Sometimes you succeed and sometimes you fall flat on your face—but it is not a rational decision like becoming a carpenter or a banker.’ Born in Tel Aviv in 1942, his interest in technology and its applications began at high school. He studied for a degree in industrial management engineering at Technion, the Israel Institute of Technology, going on to take a master’s and a doctorate in operations research. At the age of 26, he and six partners co-founded Tekem, one of Israel’s first software houses, with just USD 5000 of capital. The business was bought by a much larger company and in 1970, he joined Israel’s public service, as Director General of the Ministry of Development—at the time, the youngest ever appointed. He went on to hold a variety of senior positions in state enterprises and in the US before becoming first director-general of the Ministry of Energy during the time when Israel discovered and develop oilfields in the Gulf of Suez.
Over the last 20 years, Yossi Vardi has invested in more than 60 businesses, many of which have gone public or been acquired by large internet companies such as Microsoft, Cisco and eBay. He believes that such a large portfolio reduces the risk of early-stage high-tech investments: ‘I am investing in the whole industry, not single companies. Unless you are prone to investing in bad prospects, this reduces the risks. And since I had a very strong belief 15 years ago that the internet would grow fast, I decided to bet on the whole industry.’ He regards his greatest investment success was in grooming his children for adult life. His eldest son Arik founded Mirabilis in 1996, which created ICQ, the first instant messaging application released to the web. Sold 19 months later to AOL for USD400 million, it inspired a new generation of young Israelis to start their own high-tech companies. ‘He came to me with his three friends and needed funding, so I invested some money—which turned out to be my most successful business investment. ICQ took off and was downloaded in enormous numbers never seen before.’ Why is it that Israel has proved to be such a successful economy for technological innovation? Yossi Vardi says that a social ecosystem has developed that brings together all the elements needed for entrepreneurs, in much the same way as California’s Silicon Valley does. It provides a way for entrepreneurs, angels and investors to interact through meetings and conferences, giving the entrepreneurs confidence and putting them in touch with role models. ‘Entrepreneurship is not just about money: it is a state of mind,’ he adds. ‘School education, technology, army service, higher education—all of these have provided the fuel for Israel’s high-tech innovation. But they are not enough without an ignition system, and the spark plug has been the entrepreneurial spirit, a state of mind manifested in the history of Israel over the last hundred years. For the Jewish people to leave the places where they lived to come here was a huge start-up: Theodore Hertzl arrived with the business plan that all entrepreneurs need to win backing; and the early settlers built cities,
farms, industries, defence capabilities, homes— establishing smuggling routes when the British blocked Jewish immigration.’ Israel is, of course, a small country with less than 8 million people, compared with the 300 million in the US. Despite its record of creating high-tech start-ups, its size and distance from the largest markets makes it hard to scale up its operations. ‘We cannot launch an armada, so we practise “commando entrepreneurship”,’ says Yossi Vardi. ‘Then we create alliances with the largest companies which are always searching for innovations—we become their long arm of R&D. As a result, we have been a leading country for non-US listings on Nasdaq.’ He cites as an example Intel which is the biggest foreign investor in Israel and the largest high-tech employer. It has 8,500 staff in the country— double the number Intel employs in Germany, reflecting Israel’s strengths in internet sectors such as cyber protection, data communications, mobile, video and e-commerce. As with hightech centres such as Silicon Valley, Boston, Texas and Cambridge in the UK, the small size of Israel creates a high-tech hub where all the entrepreneurs and early-stage financiers are in constant touch. ‘Compactness is an advantage,’ as he puts it. There is also strong government support across political lines. With the workforce and close to 40 per cent of exports, there is extensive public funding which mitigates risk for investors. And governments of all colours work to reduce barriers to success by cutting red tape and negotiating free-trade agreements with Israel’s main export markets.
‘I always brag that over the last 16 years I have had 22 very nice exits from the companies I have invested in, some of them fantastic. But I always admit that I had 27 failures, which led to the entrepreneurs closing 27 companies. If you are not willing to take these losses, you won’t be able to invest.’ It is important, he adds, to remember that the risks are much greater for the young entrepreneur than for the investors. ‘Unless you are totally stupid, you invest only part of your portfolio in a single venture, and your funds can always be replenished. But a guy of 26 who spends three years in trying to create a start-up which fails has lost those three years forever. I always tell the entrepreneurs who have failed not to worry about me: I can recover. I urge them to go and try again and don’t let the experience of failure paralyse them.’
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Innovate Israel Conference - 4 December 2013 Chaired by Yossi Vardi & Marc Worth. Organised by AcreWhite