Israel Venture Capital 2.0

A Small Rule for Cellular Disconnects

With the US on the brinks of bankruptcy, it can be expected that the investments in any sort of infrastructure will be minimized to zero. No better roads, no fiber to the home, and no additional base stations on Hwy 280. This means that every call I make to/from work will be disconnected at some point. That's a sure thing, as sure as the sun rising in the east.

Since these disconnections happen to me every single day, and since this will not be fixed anytime soon, I want to sure a small related problem. What happens after the call is disconnected? The 2 people on the line start calling each other back. They both voice mail messages and after a few tries they give up, although they paid for at least 6 calls combined. It's small but annoying, and costs both time and money.

So, here is my small proposal: Let's agree that ALWAYS, when a call is disconnected, the ORIGINAL caller is responsible for calling again. The other person waits for that call to happen. Simple, elegant, and saves time & money. I will definitively adopt it as of tomorrow, when I get disconnected again somewhere in Silicon Valley.

Good times R.I.P – The Israeli version

It's been a brutal week, and the local Silicon Valley investors are all sending messages regarding the future of the economy and what needs to be done. Every VC/tech blog has published the Sequoia presentation, the Benchmark blast email, and the Ron Conway "Important Please read ASAP" message. The messages are all the same: The big downturn is here - It's time to tighten the belt, cut costs, increase runway. All markets will be softening and everyone will get hurt.

I think this realization is clear, but like any global message, its need to be localized. How will the Israeli startups be affected by all this? Here are some Israeli-related questions (and answers):

1. Can I raise money for my startup? In the past few years we have seen a strong consolidation in Israeli VC scene. Many local VCs left the business (Israel Seed, Walden, Concord, and Star to name a few). Many of them were replaced by the Israeli reps of US funds. In good times it worked well – Israeli startups got funded by the local VCs or by the US VCs. In the downturn, the early stage companies in Israel will suffer. The Israeli US funds will stay away from early stage, A-round deals. This will create a larger gap for the early stage startups, and this gap cannot be filled by the decreasing number of pure-play Israeli funds. This means that fundraising will take longer – at least 6 months.
2. Should I target the US market? One of the big advantages for Israeli startups – the ability to go after any global market. Compared to the local Silicon Valley firms, the Israeli firms can easily shift their marketing strategy and go after Europe or Asia. Although we are entering a global recession, the US market seems to be the worst. It's time to work on your French/Spanish/Polish/Chinese.
3. Should I open a US/European office/HQ? Planning to relocate the management team to the US? Might be a good time to think again. The 2 office structure creates a huge overhead, and with the current soft markets, working out of Israeli can be good enough.
4. What should I know about finance? Everything. A few years ago, life was easy: Raise money, put it in the bank, use as needed. Now, everything is different. Every aspect of financial management should be looked upon. Examples: How are you protected against a potential sharp change in the Dollar-Shekel exchange rates? How are you protected against the potential disappearance of your bank? Are your liquid assets truly liquid? 
5. Do I have an advantage as an Israeli? We have a great ability to innovate and bootstrap. On the other hand, scale is not (considered) our thing. Usually – bad news. Right now – great news. Fast maneuvering is a great capability in hard times, and all Israeli startups should leverage that. I have seen that in the past: In 2001 I worked at Commtouch, a growing .com with 500 employees. With the 2001 downturn, the company headcount was reduced to 20+ people (!). Gideon & Amir, the company leaders refocused the business and create a healthy, profitable company. I am sure we will hear more Israel-based stories like this one in the coming years.

Do you have any other Israeli-specific recommendations? Please comment/email.

All Apologies

As today is Yom Kippur, it's a good time to say sorry. I can probably fill a whole book with all my mistakes, but instead, 4 key apologies:

1. I apologize to all the entrepreneurs that got a slow answer, or did not get an answer at all. A fast answer is crucial to entrepreneurs, and we know that. However, we sometimes miss. That's definitely something that shouldn't happen.
2. I am sorry for some deals I should have done and didn't (Gigya as an example).
   
3. I definitely regret that I didn't do more sports. That's something that will benefit myself, but also people around me (Being more calm, more focused…)
   
4. And finally, I feel sorry about all the business mistakes that I did last year, as a board member, and as an investor. With the current hard times, these mistakes will have a much higher impact than before. We began 2008 in "greed" mode, and are finishing it in "fear" mode. The swing will have its consequences.
   

Gmar Hatima Tova.

Forever Young (The Israeli Hall of Fame)

I went to see my beloved Patriots play the 49ers at Candlestick Park. The Patriots rarely make it to the bay area, so I couldn't miss the opportunity to see them playing live. However, I am not going to talk about the game. In 2 sentences: I had fun, the Patriots won, it's still not the same without Brady, and the first touchdown (Cassel to Moss for 66 yards) was amazing.

But the best part of the game was at half time. The 49ers officially retired Jersey #8 in honor of Steve Young. It was a very emotional ceremony with fireworks, and a lot of kids on the field wearing a red, #8 shirt. The crowd was extremely supportive (of course, why not?). Overall, it was well done, in good taste, and I am sure it was fun for Steve Young himself AND for the crowd.

Now, here is a question? Why don't we have events like these in Israel? Specifically in sports (Why can't we have our own Israeli soccer version of the football hall of fame), but not only in sports. I think we should put a lot more effort in honoring successful artists, writers, businessmen, and even politicians. We do have the Israel prize, but we should have much more than that. It creates a sense of belonging (affiliation), and it teaches the importance of respect. My partner Adi Pundak Mintz quotes Bill Clinton about the importance of respect. If we will respect our past heroes, it will help us respect one another (especially true of VCs).

With the New Year just starting, and being inspired by Steve Young today, I thought of 4 people that are "must haves" in my personal hall of fame.

1. Shalom Hanoch – for creating the Israeli rock music.
2. Ed Mlavksy (from Gemini) – for creating the Israel Venture Capital industry, and for founding Gemini.
3. Ruby Shapira – for making my Hapoel Haifa dream come true (at least for a short while).
4. Dov Lautman – for showing that peace is something that needs to be created, and not just received