Israel Innovation 2.0

Despite the economic downturn, Israel’s startup scene is as strong and vibrant as ever. Just as the innovation hasn’t stopped, neither has the need for outside funding to develop these exciting technologies. Several conferences and forums have been organized in the past few weeks to maximize the access of Israeli startups to the funding they need. One that hasn’t happened yet, but will on June 4th in LA, is the The Israel Conference.

Considered the first of its kind, The Israel Conference will have more than $20 billion in capital represented when it brings together over 50 Israel-facing companies to showcase Israeli excellence in technology and products and to expand business and investment opportunities between Israel and California. 

Presenters and panelists include Yossi Vardi (“the Father of Israeli Hi-Tech”), Erel Margalit (founder of Jerusalem Venture Partners, a venture capital fund) and Jeff Pulver (social media guru and VoIP pioneer) . The presentations will cover a wide range of topics from a look at VCs and the CEOs they back (why they were funded and the results today) to green tehcnology (how innovation in that field is helping the earth and changing our lives) and sales opportunities in a slow economy (where the money is, what the current market is like and how Israeli companies are maintaining a competitive edge). 

Some of Israel’s overall edge and Caifrornia’s role in it can be attributed to the following:

• Israel has over 8,000 patents from a population of just 7 million. 
• Within the past 15 years, major companies have risen that were developed in Israel and have their corporate office in California with job creation in the hundreds of thousands, world-wide. A number of these are Fortune 500 today with corporate offices in California such as Check Point, Zoran, and Amdocs.
• Israel has the largest number of scientists in the world per capita at 145/10,000 compared to the US with 85/10,000.
• In 2008, over $2B in capital was invested over 480 Israeli high-tech companies, an increase of 18% over prior year with 50% coming from funds outside of Israel, mostly from the US.
• Over the past 3 years, Israeli firms raised $2.3Billion in IPOs on exchanges around the world while over $18B was spent on acquisitions of Israeli High Tech companies.

The conference will also feature a presentation by Bob Rosenschein, the CEO and Founder of Answers.com, one of the Top 20 fastest growing Websites. I recently had the chance to interview  Rosenschein and will post about that next in this series.

The following is a recap by Jessica Korman of TheMarker’s COM.vention which took place earlier today. Jessica Korman is a graphic designer, blogger and new immigrant. 

“The future is already here, it’s just not evenly distributed yet” – William Gibson

I just got back from The Marker COM.vention held at Airport City. It was a great opportunity to see “Twitter” friends whom I may or may not have met before. While social media is not a dying trend, it is still important to connect to people on a personal level. That was my main purpose in attending the convention; as a new immigrant in Israel I find myself in the midst of a networking frenzy. In that respect, social media is a tool, a means to an end and not the end itself. 

The convention itself had 2 tracks, ‘The New New Thing – NGN’ sponsored by Bezeq, and ‘Beyond the web 2.0.’ I attended two panels within the ‘Beyond the web 2.0′ track. The first panel I attended, “Beyond Web 2.0,” was moderated by Israel’s Hi-Tech guru, Yossi Vardi and included Anil Hansjee, Head of Corporate Development EMEA, Google (UK, London); Allen Hurff, SVP MySpace; Jane Thompson, Managing Director, International, IAC and Greg Cohn, Director of Strategy and Business Development Yahoo!  as panelists.

Yossi Vardi, LeWeb 2008

They discussed how the Internet is moving from our PCs (or in my case, Mac) onto a smaller screen, such as the Android or iPhone and other trends, such as social networking, semantic web and cloud computing, and that search engines are evolving with those trends. The discussion also brought up that there will also be more engagement with entertainment, for example more interaction between the consumer and the advertiser. They concluded that social networking needs to evolve by indexing our relationships, and we must trust our networks to make our privacy decisions for us. From an entrepeneaurial perspective, the economic downturn is actually a great opportunity for start-ups.

The second panel I attended was “Microblogging, Substance or hype.” It was moderated by Gadi Lahav, Director of Internet Content at Haaretz Media and the panelists included Deborah Schultz, Consultant, Advisor and Strategist to Start-Ups and Large Organizations; Yosi Taguri, VP R&D and Social Thinker at Nuconomy and Joi Ito, CEO of Creative Commons. The panel was basically about Twitter, and, in fact, one of the panelists tweeted that this might be the only time it is socially acceptable to tweet when part of a panel.

Deborah Schultz, October 2008

They said that the idea of microblogging is socially connecting on the fly and that it broke the “real-time” barrier. While Facebook is a database of social connections, Twitter is a constant flow of content and ideas. Actual blogging is much slower but that is not to say that Twitter will be the death of blogging. It might mean less frequent updates or less people creating new blogs, but blogging will still remain part of the conversation.

At this point in time, it is imperative that corporations learn how to participate and use social networking with their branding and marketing. Companies need to learn to use the tools to listen to customers, and let the users know they are being listened to. What still needs to be determined is how to monetize microblogging sites such as Twitter and we have yet to see a business model. The question was raised by one of the panelists, that at this point, does Twitter even need a business model?

What was clearly a sign of the times was the scaling back of emenities commonly found at conventions such as these. Instead of coming home with an armful of gifts, I came home nearly empty handed. Most of the stands were giving away chocolate coins instead of shwag.

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

It’s hard to believe that anything else other than IBM’s acquisition of XIV happened in the technology sector in Israel during the week of December 30, 2007, but there was plenty other news. In the past week Giza Venture Capital raised funds for cleantech investments, Allot acquired Esphion, and the Jerusalem Post printed an expose on working in high-tech in Israel. This wasn’t all that happened during the week of December 30, 2007 though, so check out these headlines and the rest of this week’s 19 Israel-related technology headlines below.

Cleantech:
Israeli expert significantly boosts efficiency of solar cells

Israel’s Environmental Energy Resources signs waste treatment deal for $30 million

Taiwan helps Giza Venture Capital raise $150 million

Nanotechnology aids large-area solar cell

Investments and M&A:
Why did IBM buy XIV?

Allot Acquires Esphion for Network and Subscriber Protection Solutions

Customized advertising co Pudding Media raises $8m

NetApp to Buy Onaro

UK – Israeli video startup 5min signs with Encyclopaedia Britannica and raises $5 million

Israel Mix:
Inside the hi-tech bubble

Education ‘overhaul’ vital to expanding hi-tech exports

A leg up

90% of Israeli youth use Internet

Miscellaneous:
A Conversation with Yossi Vardi

JPMorgan Predicts 2008 Will Be “Nothing But Net”

Israel takes a lead on information security

Trojans 2 Crimeware Exploits Web 2.0 Technologies

Last Call: BluePhoenix Solutions Jumps

High-level group from Singapore to visit Israeli research facilities