Israel Innovation 2.0

Since I attended TechAviv two weeks ago, in which nearly half the startups there were early stage and pre-seed, I have been thinking a lot about the discussions on getting funded that took place there and earlier that day at Eze Vidra’s VC Cafe breakfast and in general.

It has been clear for several months now that VCs are being more conservative in choosing companies to fund and that those that do get funding, are generally receiving less than they would have in good times. Additionally, somewhere along the way in the past few years, VCs have become more concerned with the capital aspect of what they do which has led them to invest in fewer “ventures.” They are taking less risks, such as by not investing in ideas, and are looking more for “ventures” that have already proven themselves a little – in many cases, by already becoming profitable or developing the technology. Whether this is good or bad, it’s just the way it is.

Since an angel investor panel, which included Yossi Vardi, at TechCrunch50 in September 2008 discussed what the decrease in VC funding would mean for them, I have constantly heralded angel investments as an alternative to VC funding and one that would still thrive… then the stock market and economy crashed. While that was already a few months ago, The New York Times had an article earlier this month titled, Angels Flee From Tech Start-Ups, about how bad it has really been and is for them. 

So, hypothetically removing VCs and Angels from the startup funding equation, what other sources of funding are there in Israel? For more established startups, close to nothing. 

For small startups and individuals though, here is a list of nine alternative funding programs:

1. Israel Internet Society Research Grants
2. US-Israel Binational Industrial R&D Foundation (BIRD)
3. US-Israel Binational Science Foundation (BSF)
4. Intel-Annual Research Grants Program
5. Technion Research and Development Foundation
6. Israel Science Foundation
7. Incubators (Ministry of Industry, Trade and Labor Office of the Chief Scientist)
8. Call for proposals (Israel Ministry of Science, Culture and Sport)
9. Yozma Group

While attending a VC Cafe meetup in Tel Aviv last week, I had the opportunity to meet Henry Broodney, co-founder and COO of the Israel-based business continuity software company, InGrid Networks. The company’s data protection suite provides small businesses with solutions for backup and recovery and disaster recovery for desktops, laptops and servers by “leveraging existing networked resources to create a private storage cloud that integrates with a public cloud for off-site disaster protection.”   

In this video taken at the meetup, Broodney gives a brief overview of the company.

Benefits of the technology include, seamless operation, low cost of ownership and ease of use.

According to a news release from Amazon.com, the Nintendo Wii topped the 2007 Video Games list of “bestselling products,” “most positively reviewed,” and “most-wished-for.” This domination isn’t surprising as the game console’s innovative remote sensor provides users with the most realistic gaming experience on the market by giving users the opportunity to just “wave, point, rumble and listen”.

While it is likely that in 2008, the Nintendo Wii will continue to hold its ground and gain more, two Israeli companies, Prime Sense and 3DV Systems are at the forefront of the next revolution in motion sensing and gaming and intend to challenge the success of the Wii in the next few years.

Both companies have developed motion and depth sensors that can turn a 2D gaming experience into a more interactive 3D one, without having to use a controller. They were also both present at the CES conference that unveils the latest consumer electronic technology last week and have been competing for deals with major gaming console companies, Sony, Microsoft and Nintendo to use their technology.

Before the CES conference, VC Cafe blogger, Eze Vidra predicted that 3DV Systems would be a company that would garner a lot of media coverage at the event. He was right. At the CES show, 3DV Systems had an interactive booth that showcased its relatively inexpensive and recently released, ZCam. Anyone passing by the booth at the event, including media members, had the opportunity to interact with it or watch others do so.

Aside from gaming, 3DV Systems and Prime Sense have plans to apply their technologies to other fields that can benefit from advanced real-time sensor technologies, such as automotive-safety, security and robotics. In the next few years, look for the 3DV Systems or Prime Sense brand to be part of your virtual reality experience in gaming and any of these other fields.