Israel Venture Capital 2.0

Israeli Startups Rejoice – The Dollar is back!

Last week, in the shadows of the falling stock markets, falling economies, and the overall constant competition for the "most pessimistic" medal, The US Dollar crossed the line of 4 Israeli shekels per dollar, for the first time in over a year. This is a 20% rise in the dollar since the summer (Check below the V-shaped graph of the dollar/shekel exchange rate as it changed in the past year).

Just a few months ago, the experts predicted that the dollar will crash completely (Read Globes here, in Hebrew – sorry). Globes had a real bad timing with that prediction; Michael Eisenberg was much more on track with his January blog here. But the graph below shows that the experts know very little, and relying on them can be quite costly. In addition, it shows that the exchange rate is extremely volatile, and can easily drift from highs to lows and back to highs. So, what can a CEO do?

I think the message is quite simple. The CEO (or the VCs) should not try and optimize on the exchange rate. When you get a new injection of capital (It will happen, even in 2009…), the best thing to do is to convert dollars to shekels based on the planned expense budget for the upcoming year. No hedging, no betting, just a simple conversion based on future capital needs. If the exchange rate goes down, you made a profit. If it went up, you left money on the table. But the most important – you used the capital you in the safest, most predictable way.

Beyond that, let's enjoy the good news, as we just found a new way to reduce burn rate: Pay less for Shekels, pay less for gas (oil).

Joining a winning team

The papers are all talking about the possibility that Hillary will join the Obama team as secretary of state. If that happens, it shows great leadership by both Barack and Hillary, putting aside their recent differences and focusing "doing" and "making things happen".

All this makes raises a familiar question in the startup world: What is more important, the team or the personal title? In other words, is it better to be a leader in a b-rated team, or to be second in a winning team? Is it better to be a CEO of a small, mid-tier company or a VP in a top-notch startup? I personally think it's always better to be part of a great team. Now you know what I think about Gemini…

Eyeview – A new investment by LGiLab

Today we announced a new investment by the Lightspeed Gemini Internet Lab. The company is called Eyeview, a young and exciting company based in Tel-Aviv. It's been some time since our last lab deal, and it's great that we are moving forward with new investments. With the current market conditions, I think early stage investing is the right strategy (Probably qualifies for a whole independent post on the topic), and we should invest in more companies like Eyeview.

Specifically on Eyeview, the company helps online businesses increase conversion through the usage of rich media. The idea is simple – when a user comes to your site, he will be compelled to interact with the site after he sees a short tutorial movie. In some ways, Eyeview offers a solution that complements the CPC model: You buy a lead, and then you invest in converting that lead to a sell. In their own words:

"Rich-media content, including video, audio and interactive flash applications, is the most effective communication tool for sites to educate and compel users into action. While dozens of companies around the world create tools for rich-media advertising, syndication and viral distribution, no tool has existed for online businesses to utilize the power of rich media for on-site conversion. EyeView is the first to provide an end-to-end service and technology solution that combines compelling rich-media content creation with the world's first rich-media conversion platform. EyeView's solution is ideal for a wide variety of websites and online businesses that seek to generate high conversion rates, such as: trading, gaming, software, shopping, banking, communication, eCommerce, finance, community, hosting and many more."

The company is lead by 4 founders: Oren, Yaniv, Tal, and Gal. Until recently, they were all in different geographic locations (globally). In the past few months, they gathered in Israel after relocating back from Sydney and Boston. This is Israeli entrepreneurship at its best: Executing on a vision to create an exciting company, based in Israel. The company has a history of success, winning the HBS Startup competition earlier this year.

Overall, I am quite excited about this investment. Will be great to work closely with the founding team, and wigh Gigi Levy, who also participated in this round.

To get a flavor of the Eyeview offering, check out this small video:

NewTeeVee Live! – Summary of the day

I spent the day at the NewTeeVee conference in San Francisco. It's a one day event organized by GigaOm's NewTeeVee blog, focusing on the world of online video. I sat in most of the sessions, and even participated on the VC panel that ended the day (Check a quick summary of the VC panel on NewTeeVee).

Overall, most of the sessions I attended were great. The highlight of the event was the conversation with Lucas 'Fred' Cruikshank. This 15 year old kid was a real natural in front of the crowd (No wonders – he does produce a megahit online show with millions(!) of viewers). He made me feel very old (I guess that's reality) while providing a real view into the future of online TV. The best part was his reply to a question on how Fred changed his life: "I get attention from the senior girls in school, which is cool". Excellent.

Beyond Lucas, I enjoyed the panel moderated by Mugs Buckley on broadband video and the excellent presentations by Reed Hastings (NetFlix), Anthony Zuiker (CSI) and Blake Krikorian (Sling media). The biggest disappointment was the online advertising panel. As a board member in Adap.tv, I had real expectations for this panel. Instead it was a real slow and boring discussion, led by 3 agency executives with no counter view from anyone from the ad networks or the publishers. Overall, zero insights on the space.

So – what are my key takeaways? 3 Points worth mentioning:

1. As Anthony Zuiker pointed out, the future lies in a converged multi-screen/multi-experience video solution. You watch an episode on TV, and then follow-up with additional clips online (or on the mobile) or with relevant games and quizzes. The PC will NOT REPLACE the TV, but will work together with it to create a better experience for the consumer.
2. Silicon Valley has no chance to compete in the content game. Hollywood rules in that space, and this means our best chance is to create the right underlying technologies that will enable the great Hollywood content to be more compelling to the user. I mentioned this point during my panel as well.
3. Finally, there are still real opportunities in monetization, beyond video advertising (which is going to be huge). Product placement, sponsorships, complementary products and other new business models will make the online video world extremely compelling in the next 3-5 years.

Yahoo! BOSS Hack Day in Israel

Next Thursday, Yahoo is organizing a Hack Day in Israel. This is the first international hack day, and is actually the first stop in an international BOSS world tour. Following Tel-Aviv, Yahoo will be doing a similar event in San Paulo, Paris, and London.

All that's great, but why am I blogging about this?

Gemini, together with Carmel Ventures, is the official sponsor of the Israeli Hack day. Eran Palmon (from Yahoo) asked us to help out in organizing this, and I thought it is a great opportunity. If you read this blog, you know that I am a big believer in the Israeli Internet scene. However, we are always in disadvantage in the market due to our poor geographical location (this is not a political comment). To overcome that, Gemini is always trying to create bridges between Tel-Aviv and Silicon Valley. Sometimes it's about bringing Israel to the valley (Israel Web Tour) and sometimes it's bringing Silicon Valley to Israel (Yahoo! Hack Day). Beyond that, this is the first official Yahoo! Event in Israel, and we are proud to take part in that.

So, what's this day all about? Yahoo will be showing developers how to create unique search applications based on their search engine. You can read more here. If you feel it's relevant (it's for developers), you can sign up on Upcoming.org.