Israel Venture Capital 2.0

Israel 60th Birthday

Today is Yom Ha'atzmaut (יום העצמאות), the Israeli Independence day. Gerald Segal and Izhar Shay (In Hebrew) already wrote about the great Israeli high-tech scene, and its wonderful achievements in the past 15-20 years. I want to focus on the future. With 60 years behind us, Here are 5 things that I am hoping to celebrate 10 years from today, on Israel's 70^th birthday.

1. In Israeli Internet: ICQ was $450M. Shopping.com was $620M. Hopefully we will see $1bn+ Consumer Internet companies emerge out of Israel. I think a good baseline was created in the past few years, with companies like Gigya, 5Min, Metacafe, EyeBlaster, and Supportspace (a Gemini portfolio company).
2. In Israeli Soccer: I am not wishing for World Cup championship. I actually don't mind if WE DON'T make it to South Africa (2010) or Brazil (2014). I hope that in 10 years we will see real soccer in Israel. High quality infrastructure, world standards in athlete education, and based on that, soccer that provides real entertainment, similar to Football in the US, or Soccer in the UK.
3. In Israeli Venture Capital: Israel has attracted a lot of venture money, and has showed some nice returns over the years. In the past few years, more and more US VCs have shown up in Israel, attracting some of the local GPs. I think Israel needs to have a long-term, stand-alone venture capital scene that is not affiliated with the US funds. I 2018 we should be celebrating 28 years of Independent, Israeli based, venture capital
4. In Israeli Education: The global economy is catching up in the high-tech world, and Israel is lacking in engineers. Hopefully, we will be smart enough to increase the overall number of Israeli engineers, while maintaining the current high-quality standards.
5. In Israeli (Green) Transportation: No cars in central Tel-Aviv by 2018. Huge increase in train transportation (7 days a week) by 2018. More Parking by 2018.

On purpose, I left out anything that is related to the Middle East peace process. Instead, check this site out: Goal 2018. Organized by One Voice, they are promoting the idea of a world cup hosted in Israel & Palestine by 2018. I am buying season tickets. See you in 10 years.

Adap.tv Launches OneSource

Adap.tv (A Gemini portfolio company), announced today a new product: OneSource, and also launched a new company website. I usually don't write cover every portfolio press release, but this one is a big deal.

Adap.tv started 1.5 years ago. During that time Amir and his team learned a lot about online video, video advertising, and issues that face the video publishers. In their own words: "publishers are struggling to find a simple and effective way to monetize their video content while maintaining control over the viewing experience."

What does this mean? Publishers want to minimize the number of ad networks they work with, but they still want to find the best possible ad for every video played (Both in content and in format). Publishers also want to push their own ads (when they have those). OneSource does exactly that: "Adap.tv OneSource leverages the collective wisdom of all advertising sources, including all major ad networks, for the benefit of its customers and provides them with a simple and seamless experience to get the most out of their online video inventory."

With supply from the 50 leading ad networks (including Google), strong classification technology and content rating, Adap.tv is able to provide the best online video yield.

The video advertising market is at an extremely confusing stage. There are many providers with many solutions, and all seem to be exactly the same. This confusion is a challenge, but is also an opportunity. Adap.tv is trying to provide clarity in this market, and hopefully make money for everyone during the process.

Earth Day – 10 Simple things that can make a difference

Today was Earth Day, and if you live in Silicon Valley you just can't miss it. Every offline and online property was mentioning earth day, and if Northern California is a reflection of the entire earth, Al Gore can probably calm down.

The reality of course is quite different. Most people still don't care, and do very little for the environment. Doing something is important, but a lot of environmental activists are pushing ideas and action that are just too much (I am not going to do-my-own-recycling any time soon). What am I trying to say? Here is a list of 10 SIMPLE things that can easily be implemented, and can make a difference. All of these are things that we have implemented in our own household:

1. Drive a hybrid (I have a Camry hybrid).
2. Walk to school (Easy to do for us. We are 5 minutes away).
3. Recycle (Easy in Northern California. Hard in Israel).
4. Dispose Batteries in designated areas (I keep them at home. I have a huge pile by now. My wife claims that one day they will blow up and I will become the Incredible Hulk).
5. Buy Organic food (Healthier) and locally grown (Takes less transportation to deliver them to the store, decreasing pollution).
6. Reuse shopping bags (The green kind) or use paper bags and not plastic.
7. Shut down the automatic watering system once it rains (Saves money too).
8. Use Environment friendly Compact Fluorescent Light Bulbs. They are quite ugly, but save energy.
9. Talk with the kids about the environment (Next generation needs to better than us, and way better than our parents).
10. Think of other things that can be done to make this list longer (Needed one more thing to make it to 10…)

There are still many things we can improve on: We create too much garbage, we don't save water, we still have one non-hybrid car, we use non-environment friendly diapers, and we still LOVE our fireplace. But at least we are improving.

Happy Earth day.

Diligent – Sold!

Right before the holiday (Passover), IBM announced it has acquired Diligent Technologies, a Gemini portfolio company. The deal terms were not disclosed, but I can definitely say that it was a good exit for the company, for Gemini, and for our LPs. My partners Adi Pundak Mintz and Avi Hasson were responsible for Diligent. For Adi this is the second exit in the past 6 months.

About the company: "Diligent is a world-class innovator in enterprise-class disk-based data protection solutions. Diligent's ProtecTIER platform is the industry's most cost-effective and robust disk-based data protection solution on the market. Powered by HyperFactor, a revolutionary "game-changing" inline data de-duplication technology, ProtecTIER eliminates redundant data and radically reduces the amount and cost of physical storage required. A first-of-its-kind technology, the platform provides a single instance store for backup and recovery, archive, and compliance applications."

In other words, Diligent is all about backup and de-duplication. Congratulations to Doron Kempel, Ron Asher, and the rest of the Diligent team.

One more thing about this acquisition. It's amazing that IBM acquired 3 Israeli storage companies in the past few months. They are basically creating a large scale storage play out of Israel. Will be interesting to see if this trend continues in 2H 2008 and in 2009.

The return of “The VC”? Hopefully not…

Do you know The VC? Back in the late 90's, Robert Von Goeben and Kathryn Siegler wrote a great comic, describing the life of a VC. They were "on the money" on each one of their strips, making a good laugh of everything related to the world of venture capital. Like most Web 1.0 sites, The VC was based on editorial content, and could not survive the burst of the bubble. The Web 2.0 relative of The VC is probably The funded, a site that contains a lot of VC criticism, but is mostly based on user generated content and reviews. For an entrepreneur, both are great resources to understand VCs – Their general behaviors (The VC), and their specific ones (Funded).

I was introduced to The VC right when I joined Gemini, back in 2001. My old friend Ron Yachini showed me the book, and said 2 things about it:

1. It's a great source for VC education (kind of VC 101).
2. The VC is a great book to show the bad behavior of VCs, and those usually emerge in a down turn.

With the current economy downturn, the fund raising environment may become harder and the power may shift (back) toward the VCs. Back in 2001-2, VCs used that power to create unreal deal terms, focusing on short term returns and not on long-term value creation. On top of that, most VCs did not invest during those times, thinking that ANY potential vertical will generate negative returns. Here are 2 "The VC" strips that joke about those times. Let's hope 2008-9 is not going to be 2001-2.

If I previously outlined the potential positive side of a downturn, the examples below are truly the dark side. Let's hope those will remain just "Tales from Internet Era 1997-2000".

 

Eddie Vedder – Live in Santa Cruz!

A week ago, I went to see Eddie Vedder play live (w/o Pearl Jam), here in Santa Cruz. I wanted to post about it right after the concert, but the day-2-day hit me hard this week, and I got to it a week later. I guess I will never be a good reporter, as timing is the most important factor in making things interesting. At least Eddie Vedder is still on the road, so SEO will continue to work well in the next couple of weeks.

First of all, a word about "Into the Wild" – the album (not the movie). I spend a lot of time buying music and listening to old and new stuff. It's always in search for the great emotional uplift that you get from great songs. Unfortunately, it's getting harder and harder to find the right song for the right moment, let alone the right album for the right week. Eddie Vedder's Into the Wild made that happen. I have owned it for the past few months, but only started to listen to it a few weeks before the concert. The timing was perfect. I have been constantly listening to "Society", "Guaranteed", "Hard Sun" and others, Enjoying every second of the album.

This gave a perfect setting for the Vedder concert. After an excellent (yet experimental) show by Liam Finn (Second time I have seen him play live, last time was with Crowded House), Eddie Vedder took the stage and played for 2 hours, dividing the music into 3 sections: Pearl Jam (Highlight being Porch from Ten), Into the Wild (Highlight being Society), and covers (Beatles, Cat Stevens, Bob Dylan). The real gem of the night was Eddie's special song for Santa Cruz "I can feel the lifting of my blues, pulling into Santa Cruz."

On that point, a small connection to Israel (really small). 7 years ago, Ehud Banai played in Santa Cruz, mumbling the words "Blues in Santa Cruz" between every 2 songs. I guess Eddie Vedder didn't invent that phrase...

Overall, I had a great time. Eddie Vedder is an excellent performer, and it seems he can do a great job with his band and without. I left the concert with a big appetite for more, but to be honest, I would still prefer to see the rock version. It's called Pearl Jam.

Image details: TIFF 2007 "Body of War" Premiere served by picapp.com. My Comment: This photo is served by Picapp, a service provided by an Israeli company that lets bloggers use official photos for free (With embedded ads). Very cool.

The bright side of 2008-2009

I hate economic downturns. There is nothing fun about opening the TV and seeing commercials about "manage your money wisely", "managing your debt", "saving extra". In our business, this also requires caution. In the past 2 months I have seen a number of articles about the need to cut down, reduce, and save. (Check this one by Izhar Shay In Hebrew).

But not everything needs to be dark and depressing. Here are some thoughts about the positive side of a down turn:

1. Higher quality deals: In harder times, many wannabe entrepreneurs pass on their desire to start a venture. The only startups are created by the die-hard innovators, people that can't help starting their new company. This usually means higher quality deal flow with less noise.
2. Lower Prices: Valuation is never a reason for not doing a deal. Saying that, the current economy may push prices down, which is a nice bonus.
3. Less Competition: As less startups are funded, the ones that do start see more of a "blue ocean".
4. Downturn? Why now?: Actually, if we see the positive side of the down turn, we can now feel good in any scenario. Worst case, the economy will recover fast, and the good times will continue.

Be careful what you wish for. We may still have expensive deals in 2009.

Internet Connected Devices - CD Player 2.0

"One of the hottest items we saw at the Consumer Electronics Show in January, the Internet-connected Dash Express GPS navigation system, is finally on sale. For the next 30 days, it will be available exclusively at Amazon.com's electronics store (and Dash's own site), for $400." (Check out the rest of the article on PC World).

I haven't bought the Dash yet (I will do it at one point), but at first glance it looks like a great product. GPS 2.0 – Internet connected GPS. Great idea, but why is it coming out only in 2008? Why are so many CE devices still not Internet enabled? I have been asking this question for at least 8 years (Since 2000). Take CD players as an example. Although iPods are taking over the world, most people still buy CDs (and a lot of them). Wouldn't it make sense to have a CD player that connects to the internet and displays CD information from Gracenote? I would have expected this functionality to be in every music-playing system, from my home stereo to my car, to my Bose iPod speakers.

I did a quick search on the internet, and the top CD players (like the one below, Onkyo DX-7555) are still exactly the same as they were 15 years, displaying songs in a "modern" 1-1 format. There are some products out there like the Olive Symphony CD Player, but those are very expensive systems with integral hard drives. All I want is an old-fashioned CD player with an internet jack.

Now that we have GPS 2.0, I am waiting for CD Player 2.0, DVD Player 2.0, and Alarm Clock 2.0.

MSN Street Ad reveals VC truth

As I was driving to San Francisco yesterday, I spotted the following MSN advertisement. What a simple, short way to describe the VC business. Unfortunately for MSN, I still use Google to fake my own knowledge.

Menashe Ezra – New Partner at Gemini

Yesterday we officially announced that Menashe Ezra will join Gemini as a General Partner, focusing on semiconductor and communications related investments. Needless to say, he is a great addition to our team. Menashe has a great track record in management (His military service), entrepreneurship (Founding and selling WaveAccess to Lucent in 1998), and venture capital (Invested in Oplus that was sold to Intel in February 2005 and in Passave that was sold to PMC Sierra in April 2006).

Potentially, this information is telling enough. In Soccer terms, Menashe is a proven scorer and could have found a place in any VC in Israel. But being a successful investor (and soccer player…) is not enough.

The great thing about Gemini is its partnership. I truly believe that each team member is excellent, but it's our synergy that makes us proud, successful, and unique. We spend hours together, trying to help each other on every deal and opportunity. In the past few months Menashe spent many hours with all of the Gemini partners. During that process we learned a lot about each other and found a great fit in ethics, personality and views regarding the future of venture capital. In other words, we have not only added a great investor to our team, we added a real partner. For me, that's the most important thing.

Menashe – Welcome and good luck.