Sarah Lacy over at TechCrunch posted today that Israeli entrepreneurs post-bubble have lost their mojo and VC funding has reflected that. There has been a lot of reaction to her post in the comments section and off the site, but it is really much more complex and wide-ranging than a post on TechCrunch or even here on Israel Innovation 2.0 can handle. I think that Sarah is both right and, of course, wrong.  

She is right that the crop of Israeli IT and Web startups are disappointing when compared to Check Point and ICQ from the 1990s. There have been many theories, denials and other responses of the lack of companies of this caliber in the past few years and I have to say, when researching these different companies, there definitely is a difference. 

The theories for this that I believe and have often mentioned (sorry to anyone familiar with those posts) are the ones Daniel Cohen of Gemini Israel Funds wrote about in an article on Venture Beat back in the fall of 2007: “Entrepreneurs want to retire with $3-$4M, Impatience of investors, ‘Think small’ mentality and The lack of $1bn experience.” Add to these reasons the brain drain of top engineers and entrepreneurs and relocating the company outside of Israel and Lacy has a very good point. 

Fortunately though, Lacy’s post on TechCrunch was only fulfilling a certain agenda and only relevant for the IT and Web 2.0 sectors which TechCrunch covers. No matter what happens with Israeli IT companies in the future (and I believe Israeli SaaS and security companies, such as Clarizen, Imperva and Trusteer all have a lot of potential), Israel is almost guaranteed to be the main player beyond this in the next tech revolution, clean technology. 

A lot of VC funding has gone into cleantech companies in wastewater management, solar energy and wind energy that won’t mature and really show its worth for another few years. In addition, there is a noticeable trend over the past year of people from Israel’s IT sector considering and heading into cleantech.

So, where does China fit into cleantech? I haven’t researched it to say, but on the Israel end I know that China, along with several other Asian countries, countries in Africa and Australia have all expressed interest in Israel’s innovations especially to deal with water conservation management and solar energy. If in relation to Lacy’s article, China is getting more investments in IT (the greatest tech sector in the past) in comparison to Israel but not in relation to cleantech (the likely greatest tech sector in the future), the answer to Lacy’s question about “If China is the new Israel..” would really be that Israel is the new Israel.

As if reading the news the past few months hasn’t been depressing enough with the worldwide economic downturn, the current conflict going on in Gaza had to happen to bring the news down to a whole new level of sadness. With each passing day it seems less likely that there will ever be a real peace between Israelis and Palestinians, and yet, as the current conflict unravels, one company, with an office in the Israeli city of Modi’in and another in the West Bank city of Ramallah seems to have found a solution.

That company, G.ho.st,  is the only joint venture between Israelis and Palestinians and is defying the odds and difficulties that have arisen from strong sentiments on both sides. Founded in 2006, G.ho.st is short for Global Hosting Operating Systems and provides its 100,000 and growing users with a free vitual desktop that allows them to store items from their desktops and files and to access them from any computer connected to the Internet. G.ho.st calls it a virtual computer or VC.

The company is made up of 35 Palestinians who do software programming and are led by Director, Tareq Maayah and 6 Israelis, including CEO, Zvi Schreiber. Though the offices are relatively close to each other (under 6 miles away), because of restrictions, workers usually have to communicate via video conference and don’t have leisurely access to visiting each other. While the Palestinians are paid less than their Israeli counterparts (because the cost of living is less), both the Palestinians and Israelis have equal shares in the company.

According to correspondence I had with Schreiber this week, this model worked well and thrived during the relative peace that took place from the time G.ho.st was founded and, even now, is continuing to.

(Picture on left: Zvi Schreiber with Israeli President Shumon Peres. Picture on right: Ghost team.)

Schreiber explained that despite everyone’s concerns about the current conflict, in which employees on both sides have family and/or friends who are affected, work is still going on as usual and that the team, which includes people who worked through a previous conflict at their last job,  is prepared to continue to work even if the situation were to spread to the West Bank.

Perhaps the secret to G.ho.st’s success and resilience of its employees so far has been the care that’s been taken to keep and maintain the common ground between employees in both offices. Prior to the latest conflict, the company would manage to get permits to bring everyone together in Israel for valuable team activities, meals, business updates etc. Because of the conflict though, Schreiber said that everyone is now (understandably) worried about the safety of their families and friends on both sides and there’s only so much the company can do about it. His hope however, is that “in some small way our team, working peacefully together, can be an example of what a different reality could look like.”

It’s not just the employees in the company working peacefully together though that can change reality. G.ho.st also has a foundation that is helping lay the groundwork for future joint ventures by creating community computer centers in Ramallah and in mixed Jewish-Arab towns in Israel. Perhaps if more companies were to use G.ho.st’s model in business and in the community, Schreiber’s hope will not only become a reality where the two sides co-exist knowing no borders and,  in line with the G.ho.st slogan, no walls.

I meant to write about WorkLight last month but got caught up with things. As what happens every few weeks though, my attention has quickly been drawn back to the company again. In Jon Brodkin’s post on Network World earlier today, he listed the “Secure Web 2.0 for Business” Enterprise 2.0 company as one of 10 startups to watch in 2009. I couldn’t agree more.

WorkLight, Inc. seemed to have a stellar year in 2008, and as Web 2.0 in the enterprise continues to grow  in 2009 despite the economic downturn, there’s no reason not to think that it won’t repeat it, and more. Since the company first showed up on my radar as one of two Israeli demonstrators at the 2007 DemoGermany conference in Munich, the company has raised an impressive round of funding, been chosen as one of the top 10 web startups in Israel’s version of the TechCrunch and Demo conferences and just last month, and partnered with NetVibes to develop secure widgets for the enterprise among other news about the company.

The company’s software is customized for specific industries and, as such, has helped simplify and accelerate the embracing and integration of Web 2.0 in the enterprise. On its website, the company explains itself and its offerings as follows: 

“WorkLight® Inc. develops server software products that help businesses reach customers, channels, employees, and partners securely in the places they frequent online, such as iGoogle, Windows Live, desktop widgets, RSS readers, Facebook, even the Apple iPhone. Through WorkLight, people effortlessly get valuable information they desire, such as account status, product availability, or updates about their latest transactions. They can then take actions, for example order products or services, respond to promotions or offers, and consult with colleagues, without having to log into a portal or corporate web site. As such, WorkLight transforms consumer interfaces into enterprise-grade business tools that directly increase revenue.”

Here is an image from the site of how its products work.

Additionally, I’ve created a timeline of some of the WorkLight news that caught my attention in 2008

Company Facts

Founded in 2006.

Based in New York and Yakum, Israel.

Shahar Kaminitz, CEO and Co-Founder.

Doron Somer, Vice President of R&D.

Products: WorkBook, WorkLight for SAP, WorkLight for Technology Companies and WorkLight for Business Services.

Competitors include: Awareness Inc. and NewsGator Technologies Inc.

Customer industries: financial services, retail banking, manufacturing, book publishing, technology and IT services and utilities

Website: myworklight.com

Since Israel began its operation in Gaza a week ago, over 300 sites have fallen victim to cyberattacks. Large Israeli company sites, such as Israel Discount Bank, Ynetnews and Israel’s largest domain registration site along with small Jewish community sites, including several religious ones in the US have been targeted. The main group behind several of these attacks, though far from the only one, is the infamous Moroccan group, TeamEvil, which also hacked some of the 750-plus Israeli websites before and during the Lebanon war in 2006.

Security analysts predict that American company websites will also be attacked in the next few weeks. For an article on the topic that appeared in SC Magazine last week, Dan Kaplan interviewed Gary Warner, director of research in computer forensics at the University of Alabama at Birmingham and John Kindervag, a senior analyst with Forrester Research who both made suggestions for preventing cyberattacks:

“Warner said website operators must secure common entryways for hackers, including vulnerable programming language, forum or blog software, image programs and utilities, such as website statistic applications. In addition, they must prevent the theft of FTP credentials, which are used to access sites and load content.

John Kindervag, a senior analyst with Forrester Research, said most websites are not built with security in mind. As a result, site owners should conduct a vulnerability assessment and, if they need immediate action, install a web application firewall, which can detect anomalous behavior.”

For more on the topic and to make sure your secure, you can check out the following sites:

10 Ways to Prevent Cyberterrorism

International Cooperation Needed To Prevent Cyberterrorism

Cyber Terrorism Threat Increasing – How To Prevent A Digital 9/11

Lilach Weissman reported on Globes online yesterday that Ministry of Industry, Trade and Labor director general Gabriel Maimon told the Knesset Economics Committee that 4,000 high-tech employees have lost their jobs since October, and that the number could reach 15,000 (out of a total of 70,000).  A day earlier, Roi Carthy posted an entry on TechCrunch that Deloitte Israel recently released its VC Indicator Survey, conducted among Israeli VCs in December that he said, spelled doom for the industry regarding  employment and funding.

While times will be tough in Israel regarding the economy this year, it doesn’t seem likely that most of those unemployed in the high-tech sector will sit by idly. Eze Vidra of VCCafe.com reported in early December 2008 that of the 270 startups founded in Israel in 2008, 40 of them were founded in a 30-day span in November and beginning of December. It seems that once laid-off and with time, several high-tech workers are able to pursue their ideas. (How many laid-off employees out of the 15,000 this will acutally benefit should be kept an eye on in 2009.) 

While venture capitalists will be more conservative in their investments, this past September a panel of angel investors at TechCrunch50 basically said that this is the time for them. Though there’s less money going around, especially coming from VCs, there’s still money out there for the right ideas. (There’s also still some investments in R&D-type activities that are being made in Israel.)

Here are some facts from Carthy’s entry and the Globes article that are particularly of interest:

• 92% of VCs surveyed believe that companies who do not lay off employees will slash salaries.
• 74% predict that at least 10% of venture backed startups will be shutdown.
• 95% foresee harsh times in the fund raising department.
• 54% expect a slowdown in seed investments.
• 87% expect a decrease in company valuations.
• According to the Globes article, every high-tech employees supports 4-6 employees in business services sectors. 
• Total cost of layoffs could reach NIS 12 billion a year. 
• High-tech industry employs 70,000 people directly, such as engineers, programmers, and R&D staff, and 300,000 people indirectly, such as subcontractors, lawyers, accountants, catering and cleaning staff.

Forget BRIC-countries. It’s the R.I.CH.I-countries. David Hill of eChannelline wrote today that EMC, an IT-supplier, recently announced that it established a Centers of Excellence program in four emerging markets, Russia, India, China and Israel. Under the program, EMC will invest locally in software development and manufacturing and gain access to the local talent pool that can help with future innovation.

Hill’s article describes how the program works using China as the example,

 ”How EMC taps into that talent pool to hire the proverbial “best and brightest” is illustrated in China. The country annually produces a huge population of computer science and engineering graduates, and EMC receives thousands of resumes. Through a process that includes standardized testing and multiple interviews, the company is able to winnow down to a selected number who are given job offers.

EMC is able to select the crème de la crème from a very deep talent pool, and the company states that its employee turnover is a fraction of the industry mean. Maybe that’s because EMC has figured out how to make the COE developers work together, drive productive relationships with developers around the world, and innovate based on country or regional opportunities.” 

It’s intersting to note that EMC chose Israel in place of Brazil, which is an emerging market that along with China, India and Russia are known as the BRIC-countires and are the largest emerging markets. It’s not a surprising decision though considering that in the past year, EMC’s competition, IBM in specific, have acquired Israeli companies with key technology that threatens EMC’s business, especially storage.

Data storage and data security were hot topics in 2008 and are expected to continue to be in 2009 with Israel leading the way in innovation. The smartest part of this move for EMC is that instead of spending millions on purchasing companies with these technologies in the future and then converting them into R&D centers, it can now go after these future entrepreneurs before they start their own company and offer them incentives to stay (such as a good work environment). It can be assumed that EMC will get a positive ROI from the Israeli COE program in the very near future. 

In addition, this news answers the question I asked after reviewing IBM’s purchase of FilesX last year.

Actimize, a transactional risk management software company under NICE Systems, announced last week that it has embedded IBM’s InfoSphere Global Name Recognition (GNR) technology within the Actimize enterprise risk management platform “to enhance its analytical capabilities.”

According to the announcement,

GNR is an enterprise tool designed to help organizations understand, analyze and process multi-cultural names to provide name processing and matching capabilities for mission critical and corporate wide applications… [that] will help Actimize’s sophisticated analytical models focus more closely on the names of different customers, citizens, criminals and other individuals by examining and comparing them to different known names of good and bad entities.

Actimize’s risk management platform will mainly function by analyzing name order, multiple titles or prefixes, cultural spelling variations, possible transposition errors. Upon identifying a match when a transaction is made, the Actimize solution is able to then determine whether to approve, block or forward it.

Company Facts

Founded in 1999.

Headquartered in New York. R&D in Petach Tikva, Israel.

David Sosna, Co-Founder and CEO.

David Govrin, Co-Founder & General Manager, Israel.

Boaz Pe’er, Co-Founder & CTO.

Technology: Actimize risk management platform.

Website: www.actimize.com.

Once again, IBM gets the top mention in the Israel Innovation 2.0 Israel-related technology headlines. This time resulting from its announcement during the week of April 6 that it plans to purchase data protection and recovery company, FilesX. IBM also announced its usage of water cooling to create an energy efficient supercomputer. It wasn’t the only green friendly news though; Jonathan Shapira (author of the Cleantech Investing in Israel blog) and Gene Dolgin, both of Israel Cleantech Ventures, recently created the Cleantech Israel group on Meetup.com and held its first event, which was informative and well-attended by Israelis and Israeli companies trying to break into the field. For more on these, the headlines related to major moves in IT and the full 22 Israel-related technology headlines from this past week, check out the list below.

Cleantech
Inter-ministry disputes hold up solar power plant

Cleantech industry networks in Israel

(Feature) Solar balloons to power remote areas?

Indian and Israeli Industries to Collaborate on Renewable Energy Technologies

Cleantech Group Reports Cleantech Investments Up 42 Percent in
1Q08 From Prior Year, Despite Recent Peak of Ethanol, Wind and Thin
Film Solar Waves

M&A
IBM Picks Up Remote Data Backup Help

Amdocs buys Jacobs Rimmell for $45 million in cash

Kodak Completes Acquisition of Intermate A/S

Meter firm buys Israeli technology

Investments
IVC Research Center: Capital Raised by Israeli VCs

Imperva Raises $20m in Financing

Storewize Secures $19M

Information Technology
Eglue launches new CIM suite

Aternity Named ”Cool Vendor” in IT Operations by Leading Industry
Analyst Firm

Cisco leads coming out party for FCoE (Mellanox)

InstallFree promises easy desktop virtualization

In Israel
Toll-free numbers reach cell phones

New regulations expected to drive bank IT spending

Survey: weak dollar set to drive 15,000 technology-based job cuts in Israel

Miscellaneous

OpenSpan and Malam Team Enter Strategic Agreement to Build Enterprise Customer Care Solutions

IBM Uses Water Cooling to Create Energy Efficient Supercomputer

blinkx Draws Users in With aniBoom’s Original Animations

About the author: Lisa Damast is the Membership
Manager of ebizQ.net and currently resides in Israel. Any questions or
inquiries regarding this blog or ebizQ membership services can be
directed to her via email at ldamast (at) ebizq (dot) net. She can also be followed on Twitter, where she covers additional Israeli technology companies and Israel-related headlines and topics.

Aternity, Inc., a leader in frontline performance intelligence for Global 1000 enterprises, is a very hot Israeli company to watch right now. As with VeNotion Technologies, the company has been making headlines with regards to its partnerships and developments several times monthly. In the past few weeks, Aternity has announced that it is joining the Red Hat Inc. ISV Partner Program as a Red Hat Ready Partner and that it has earned Certified Partner Status in the Microsoft Partner Program.

Aternity’s Frontline Performance Intelligence Platform lets IT
professionals get a birds’ eye view of what programs users are running
and monitor their interaction with the company’s information. The
software can also detect problems in the early stages before most users
can, and can provide the organization with the valuable information it
needs to make sure it is running smoothly and meeting its goals.

How important is software, such as Aternity’s, to IT professionals and the enterprise right now? Aternity recently sent over some facts and figures to a colleague of mine that should provide IT professionals (and investors) with enough information and reasons to at least keep an eye on Aternity and the field, if nothing more:  

    -  According to Jean-Pierre Garbani of Forrester Research, there are
more than 30,000 enterprises that have more than 100 servers today – and
40 percent of these enterprises are potential targets for deploying end user
experience monitoring solutions.

    -  According to Forrester Research, 74 percent of end user problems are not detected by IT, which means these organizations are negatively impacted from a productivity, revenue, customer service, and delivery-time standpoint. Any enterprise interested in dramatically reducing business disruption and increasing user productivity needs to understand how IT services are consumed by end users, and how end user experience impacts business results.

    -  Aside from its partnership with Red Hat, Inc, [and Microsoft] Aternity has already gained the attention of major industry players – the VC arm of Intel recently led a $5 million investment earlier this year, and Oracle is engaging in a joint venture with the company to provide Oracle E-Business suite users with easy access to Aternity’s platform.

    -  Aternity secured Series A funding in 2005 totaling $7.5M and a Series B round of $6.5M was closed in April 2007.  

Company Facts

Founded in 2004.

Trevor Matz, President and CEO.

Eden Shochat, CTO and Co-founder.

Orit Kislev-Kapon, VP R&D and Co-founder.

Product: The Aternity Frontline Performance Intelligence Platform.

Website: www.aternity.com

About the author: Lisa Damast is the Membership
Manager of ebizQ.net and currently resides in Israel. Any questions or
inquiries regarding this blog or ebizQ membership services can be
directed to her via email at ldamast (at) ebizq (dot) net. She can also be followed on Twitter, where she covers additional Israeli technology companies and Israel-related headlines and topics.

News:
In the past two weeks, Voltaire, Ltd. has received significant media coverage for being listed at the top of Deloitte’s Fast 500 EMEA list of fastest growing companies and for its recent partnering with Tibco Software, Inc.

Background:
Founded in 1997, Voltaire Ltd. is headquartered in Israel and is fast becoming the leader in high performance grid computing solutions. Voltaire offers storage switching Grid Backbone products based on Infiniband to help improve the speed of information in data centers and HPC environments. According to a company description, “Voltaire’s products leverage InfiniBand technology and include director-class switches, multi-service switches, fixed-port configuration switches, Ethernet and Fibre Channel routers and standards-based driver and management software.” With a rapidly expanding client base, Voltaire has offered its solutions primarily in “enterprise, governmental, research and educational organizations.”

What is InfiniBand?
According to a definition on the InfiniBand Trade Association website,

“InfiniBand is a pervasive, low-latency, high-bandwidth interconnect which requires low processing overhead and is ideal to carry multiple traffic types (clustering, communications, storage, management) over a single connection.”

The site additionally explains that “InfiniBand Architecture is an industry standard, channel-based, switched fabric, interconnect architecture for servers. InfiniBand architecture changes the way servers are built, deployed, and managed.”

Analysis: Infinite possibilities for Voltaire

It’s no secret that Internet use by companies and consumers require more bandwidth for faster-processing and InfiniBand is currently the top technology available to them. With Internet applications containing more and businesses relying on applications more, InfiniBand has been deployed on supercomputers in industries ranging from government and financial services to entertainment.

InfiniBand’s continued expansion in the near future means continued good prospects for Voltaire, whose products are based on the technology. As part of its effort to help maintain this trend and make sure CIOs and data center professionals, among other IT professionals, fully understand it and embrace it, Voltaire is on the steering committee of the InfiniBand Trade Association.

Of course, Voltaire’s main reason for playing an active role in the industry is to get its name out and sell its Grid BackBone software. One of its most popular solutions is the Multiple Grid Director, which allows switches to be “interconnected to form very large high performance clusters and grids that can grow into the thousands of nodes with ‘pay as you grow’ scalability.” Solutions such as this and GridVision Enterprise, have helped form the “backbone” of Voltaire’s 50,612% growth in the past 5 years, propelling it to be the fastest growing company in Deloitte’s Fast 500 EMEA.

Voltaire’s deal with Tibco Software last week “to deliver a high-throughput, low-latency messaging solution for advanced electronic trading environments” in the financial services industry helps ensure that the company will continue to grow at an above average rate and promises to make it one of the leaders in expanding bandwidth solutions in the future.

Additional Resources:
Inside a green data center
New Supercomputer Blasts Off
Sidebar: Is InfiniBand Ready for a Comeback?

The fastest growing company
Voltaire ranked as fastest-growing tech company by Deloitte
3 Israeli Companies Top The EMEA 500 Fastest Growing Technology Companies List!
Voltaire Powers Two of the World’s Top Five Fastest Supercomputers on the New Top500 List

Know of/part of a hot Israeli company (established or start-up) in cleantech, telecom, voip or IT that you think should be covered in “Company in Focus”? Leave a comment and let me know.