Israel Innovation 2.0

During the week of March 22, 2009, it was announced that Israel will share its farming technology with Kenya and more details of the government’s water technology initiative, NEWTech were given. The sale of Aladdin Knowledge to Vector Capital was completed with the news that Aladdin and SafeNet were under common management and information security company, Tufin, added new features to its firewall management platform. Facebook became even more stalkerish with a new photo facial recoginition and tagging application by Israel-based Face.com and SEO guru, Barry Schwartz shared what he found Israeli SEMs are looking for. These stories are only some of the main ones that made it into the media last week. For links to these and the rest of the stories from the week of March 22, 2009, check below. 

Cleantech and Environment

1. Israel NEWTech, A Government Initiative To Promote And Grow Israeli Water Technology And Innovation

2. Israel to share farming technology with Kenya

Investment and M&A

3. Value of Israeli high-tech M&A fell 19 percent in 2008

4. Funded: GoViral, BriefCam, Extreme Reach (BriefCam)

5. SafeNet, Aladdin Knowledge Under Common Mgmt

Information Technology

6. HP to Provide Compaq My Bhasha with its Desktops

7. New Cyber-Ark controller clocks all super-user activity

8. SkillIQ is set to Revolutionize the Human Resources World

9. Dell Certifies Aternity as ISV Partner

10. Tufin adds white lists to firewall management platform

Miscellaneous

11. Israel’s Explay helps you see the big picture

12. First Look: Photo Finder facial recognition app for Facebook

13. Drops in the bucket

14. Partnerships between Florida, Israel are key

15. What Israeli SEMs Want

Bonus: TechCrunch’s Sarah Lacy in Israel and reactions. 

Last week Twitter and the Web erupted when the newest member of the TechCrunch team, Sarah Lacy, posted that Israeli entrepreneurs lost their mojo and that investing in Israel was overhyped. Here are are just some of the responses to Lacy’s post as well as her post and its follow up. 

Now that China Is the New Israel…What’s Israel? (TC)

What’s behind Sarah Lacy trash talking the Israeli VC scene

Israel is the new Israel (Israel Innovation 2.0 response)

Israel Hype Cycle

Sarah Lacy, David Li and the Wrong Side of Historical Performance

Risk Aversion And The Perils Of Selling Too Early (Israeli Startups, Part II) (TC)

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.

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.

Mark Hendrickson of TechCrunch posted about the Flash WYSIWYG editor, Sprout yesterday and included invites to use the beta version to the first 200 readers who signed up through a link on TechCrunch. So far, the general sentiment among those who have tested it out is that it is, in fact, very easy to make Websites and widgets (mini web-programs/gadgets on sites that users can interact with, such as weather boxes) among other things.

While Sprout is getting a lot of attention, it is not a new idea and already faces some direct competition. A few months ago, TechCrunch along with several Israeli-technology focused blogs posted about the Israel-based Flash WYSIWYG Web-based editor, Wix. At the time, Wix was still in stealth mode and didn’t offer much information on its Website. If you go to the site now, however, most of its features are visible to viewers, and it is quite impressive. The site is still in beta, but anyone can sign up to receive more information and be invited in future beta invitation rounds.

Technology professionals should keep an eye on Sprout and Wix, as both sites can make creating and spreading widgets less time consuming and more cost-efficient. Adam Metz has posted a good overview of enterprise widgets and their benefits on his blog, MetzMash.

It should be interesting to see how these companies will do and how the enterprise industry will embrace and use their services.

Company Facts
Has been in beta since October 2007.

Giora Kaplan, Co-Founder.

Avishai Abrahami, Co-Founder.

Nadav Abrahami, Co-Founder.

Website: www.wix.com

News
Reuters and TechCrunch have both reported that eBay through PayPal has purchased the Israeli fraud solutions company, Fraud Sciences for $169 million. The acquisition has received mixed reactions in the blogosphere, with some questioning how smart it was for eBay to pay such an “inflated” price for the company, and others unsurprised as fraud has hurt the use of eBay by honest customers in foreign countries, and is a much needed improvement for the struggling company.

About
According to TechCrunch’s description, Fraud Sciences

    “offers automated anti-fraud systems including SpotLight VFX and SpotLight T2T, merchant
    solutions the provide transaction verification with fraud prevention.”

Israeli R&D companies database, Matimop.org.il, adds that the promise of the company’s science

    “is to emphatically prove a customer is who they represent themselves to be with minimal
     or zero verification friction. Thus, enabling “online merchants to accept more business from
    more markets and increase the lifetime value of customers.”

TechCrunch also details how the acquisition “will assist them [eBay] in significantly improving trust and safety across its sites in 2008,” by integrating Fraud Sciences’ “risk tools with PayPal’s fraud management system.” Additionally, the Fraud Science’s management team won’t have to worry about seeking new employment as they will join PayPal’s technology and fraud management teams.

Company Facts

Founded in 2001

Shvat Shaked and Saar Wilf, founders

Gadi Maier, CEO

Yossi Barak, COO

Website: www.fraudsciences.com

Israeli email company, IncrediMail announced last week that Google has dropped the company from its AdSense program. According to TechCrunch, IncrediMail’s stock dropped 40% and lost about 1/3 of its value on the Nasdaq in direct response to the news. The reasons for Google’s suddenly ending the partnership is currently unknown, but IncrediMail may have “been dropped for fraud.”

Last month, Zack Miller of BloggingStocks.com interviewed IncrediMail founder and CEO, Yaron Adler. One of Zack’s questions for him was what the company’s business model was, to which Adler responded that the company relies heavily on viral marketing (though it is not the main means).

This is probably not the viral marketing that Adler had in mind.

It’s unlikely though that this is the end for IncrediMail and not just a relatively minor setback for it. Israeli VC Michael Eisenberg has an interesting take on this in a post on SeekingAlpha.com, as does Zack Miller’s buddy, Aaron Katsman, on BloggingStocks.com.

During the week of December 2nd, Microsoft and Sun Microsystems announced commitments to furthering technological advancements in Israel and TVinci’s success with MTV Israel had TechCrunch raving about its smooth, aesthetically-pleasing user interface. Startups raised funds and cleantech kept up its steady media presence as it did during the week of November 26th. Here’s 25 news headlines from the past week that can impact your present and future business investments.

Funds raised and M&A:
Start-up DensBits raises up to $10m

Medgenics raises ₤3.3m in AIM IPO

Hilan Tech buys IT consulting firm

Oridian to be acquired by India’s Ybrant

UK firm buys Ester Neurosciences in $30m deal

Funding Roundup: Solar, Fuel Cells, Batteries Score Cash

Cleantech:
Israel fights world’s oil addiction by going green

Israeli startup develops ambitious plant to rid the world of waste

Canadian cleantech foundation CEO to visit

Israel Ingenuity: Interview with Meir Ukeles of Cleantech Israel Ventures

Delegation and International recognition:
3 Israeli Companies Top The EMEA 500 Fastest Growing Technology Companies List!

InSightec Selected as a 2008 World Economic Forum Technology Pioneer

Japanese business leaders to visit Israel

Internet, TV and WiMax:
ICQ founders in interactive TV venture

Tvinci Makes MTV Israel Rock So Much Harder Than MTV.com

Israelis among world leaders in Internet usage

AdsONScreen seeks to add to TV marketing options

France Telecom, Alvarion team up on WiMAX venture

Miscellaneus:
Microsoft joins forces with Israel to educate people for the future

Media firms seek Homeless

Alvarion in talks with France Telecom

Matrix, Leading Israeli IT Company, Will Commence Pilot of BENEFIT CRM System

Sun Expands Discount Program To U.K, Israeli Startups

Israel’s technology exports hit by rising materials costs

Mobileye Advanced Vehicle Technologies Power Volvo Car’s Driver Alert Control (DAC) System

What about Facebook apps? Eze Vidra’s latest blog post highlights the Israeli Facebook application, Save an Alien and what a great idea it is. The premise of the application is that in May 2008, a meteor is going to strike an alien planet and destroy its population of 10 million unless 10 million Facebook users adopt one alien each. Since one person can save only one alien, should all 10 million aliens be saved, the company behind the app will have collected personal information from 10 million Facebook users, giving the company a lot of potential for targeting marketing.

After reading about the application, I decided to google Save an Alien, and found several links relating to the application as well as links about people’s frustrations with the overwhelming amount of Facebook applications and the clutter it creates on personal profile pages (which takes away from a positive user experience). Since Facebook opened its platform in May, developers have created over 6,000 applications for it and it is constantly in news articles and all over blogs. As readers of Michael Arrington’s blog on TechCrunch have commented, Facebook is not the be all and end all of the Internet; though it often feels that way.

The questions lying ahead for Save an Alien and other Israeli Facebook-only applications to ask themselves are how can we make a presence on Facebook that will support a viable business model and at what point should we expand or continue to engage our target market on platforms other than Facebook? After all, if companies seek funding, won’t they need to show some additional backbone should Facebook popularity fade in the near future?