General Partner at Gemini Israel Funds providing here a perspective on Israeli venture capital, Israeli rock music, Rock concerts, and Consumer internet.
Last year, just before the holidays, I wrote a short post "Holiday Break (and Happy New Year!)". At that time I was just going away for a 2 week vacation, and as I was leaving, I wished for a few things:
Great and happy year (That works.)
No recession (Oh well.)
Strong IPO Market (What is IPO?)
and wishing the Patriots will be the world champions (Lost at the Super bowl to the Giants).
This year I am not wishing for anything. Happy Holidays.
In the recent weeks, we are starting to hear more and more about the intention of governments to kick start and/or revive tech innovation in their countries. The UK government announced a $1.2bn fund to support British startup companies. At Le Web, Ms. Christine Legarde talked about tax relief for startup investors (which is another way to help funding of early stage companies). In fact, Business week summarized some key takeaways from Le Web on that issue:
"Participants in the Innovation Board session recommended a series of measures to keep the money spigot open for small companies. They include:
- At a time when governments in countries such as France are planning to spend billions of euros on economic stimulus, they should include measures to ensure funding for innovation, research and development, and the growth of high-tech companies.
- Governments should provide matching funds to universities that find private investors for their new spin-out companies. There's already a track record for such experimental programs in individual EU countries. The innovation board is calling for an expanded effort, coordinated across the EU, to ensure that private sector funding for university spin-outs doesn't dry up.
- A pan-European initiative is needed to give special recognition, under EU state aids and member-state fiscal policies, to young, innovative companies. A French initiative begun in 2004 that Pouletty has been championing at the European level, has successfully benefited more than 1,700 high-tech companies with special tax breaks. If scaled up to an EU level, it could assist an estimated 5,000 to 15,000 new companies."
What about Israel?
In the past week, top Israeli executives have been pushing on the Israeli government to provide financial support to the Israeli high-tech sector. Well, Is government intervention in the tech economy a positive thing? I would love to hear your view on this (see below). Without sharing my own opinion, some points to consider:
The Pros
The Cons
In a global competitive market, with a crisis on us, local governments have to intervene and make sure their countries have the ability to compete. Recent studies show that in Israel, every $1 of government investment in high-tech returns 5x or 6x to the local economy.
Think: Yozma!
As Ouriel wrote, government intervention will artificially support mediocre companies. In addition, they will enforce policies and rules that will hurt the ability of startup companies to work in an open business environment. After all capitalism (In the pre-Sep. 2008 definition) is all about free markets.
Last week, before I flew over to Israel & Paris, I moderated the annual CICCVC Panel, held this year at the Nokia Siemens offices in Mountain View. The panel included representatives of top tier US funds with some current investing agenda in Israel. Those included DFJ, Battery, USVP, Norwest and Mayfield. Overall we had a good representation of Sand Hill Road.
Overall the panel discussion was good, as we focused on the natural key issues: the economic crisis, the ability of Israel to generate huge returns, the core competency of Israel in a world dominated by Cleantech and consumer internet. However, the real nugget of the discussion came at the end. Someone from the crowd asked the panel to talk about the negative aspects of working with Israelis. A few points came up: Cultural differences, being overly aggressive, and being too direct. In addition to that, one of the panelists had the following comment:
"Will you please stop negotiating…"
How true. I think the reality is that Israelis, weather VCs or Entrepreneurs are too hung up in the negotiation process. It can be seen by the overly complex term sheets that are handed by the Israeli VCs (Yes, we need to improve as well), and it can be seen by the desire of the entrepreneurs to focus on every little detail. In some ways, I guess that's part of who we are. Here is a great example of that, as seen in the classic Monty Python movie, the Life of Brian.
The 2008 version of Le Web ended, and it's time to summarize the key takeaways from the event. After 5 years, Le Web has become the premier web conference in Europe. There were more people than ever before (1600 and more), and the level of energy was quite high. Logistics were not great (food, room temperature, drinks), but its part of the startup/entrepreneurial feeling. So what are the key takeaways?
Europe is still searching for its internet destiny. Almost every session, every talk, every presentation was about the need for Europe to innovate, create startups, boost technology. Everyone is talking about the great activity in Germany, France and the UK, but the reality is that the European startup activity is still quite small compared to the valley. Europe can be the basis for great startups (The European-successful –Entrperneur panel was a great example of that), but it has to stop being US envy, and create its own version.
Governments are going to be key players. The UK government is setting up a $1bn fund… The French finance minister (Ms. Christine Legarde) announced French government support through tax cuts… The German government is creating a startup plan… The reality is that every country in the world understands that innovation is a key success factor for economic development. In a few years, we will be seeing Yozma programs all over Europe and beyond. Overall, it's good news, although governments usually interfere in the normal innovation process.
The return of the bootstrap. Every speaker was preaching to NOT take investment/venture money and develop as much as possible with your own money. I actually support this 100%. I much prefer to pay a higher valuation for a company with more business assets than to get a good deal for a company in its infancy.
Thought leadership is still coming from the US. How symbolic was the end of the Le Web conference. Steve Gillmore leading another Gillmore Gang debate – and all members, including Loic Le Meur, are US based. Going back to point #1, Europe needs its own Arrington/Scoble.
Where is Israel? Clearly not in Europe. There were some Israelis in the crowd, but overall it seems the Israeli web companies are not interested in Europe, and Europe is not interested in the Israeli web companies. There were 7 companies that won at TechCruch 50, and half the crowd was from Israel. Le Web was very different. I actually think this is the key negative point (from my own view). Israelis can do great in Europe. But most of them have better contacts and stronger relationships in the valley (24 hours away) than in Europe (4 hours away).
Contact was ok. Not great. The best, most inspiring presentation was given by Chris Anderson of TED. Check it below.
This post was written by Assaf Frenkel, an Associate at Gemini, following another Round Table event that we recently hosted (We have done a few of those in the past few years, focusing on various topics).
Gemini is increasingly looking at opportunities around cloud computing. We invested in companies that provide cloud services like IT Structures (cloud service for virtual sales engagement), and in companies like Outbrain (blog ratings) that utilize the cloud for getting an elastic IT platform. Last Thursday we had a round table on cloud computing, hosting several startup companies and guest speaker Martin Buhr, the European Business Development Director of Amazon Web Services. It was a great opportunity to hear Amazon's vision and specifically, to get Martin's insights on the market and to listen to real-life stories from the startups that use cloud computing and Amazon's web services.
Amazon is a leader in providing cloud services, provides companies a pay per use model and options to scale rapidly high and down, turning CAPEXto OPEX – all words investors like us love (Side comment here from Danny: In a panel 2 years ago I claimed, on stage, that using Amazon's services was a negative for startups. Clearly, I had no idea what I was talking about. At least we learn over time…).
Some key takeaways from the discussions:
Concerns for developers
Quality of Service/Availability – what happens when concurrent picks over the public cloud occur?
Dependency in cloud SP –since there are no standard APIs, and different clouds support different basic services (e.g. till recently availability of windows support), choosing the cloud provider is not only a commercial decision but also a technology choice with high migration costs
Licensing – how are 3rd party licenses of handled (e.g. Oracle DB), when current models are not pay per use?
Cloud infrastructure
Amazon is increasing their stack, currently providing monitoring services and load balancing. This might pose a challenge for companies that develop cloud infrastructure layers that may need to also increase their own to provide greater ROI.
Opportunities can come from cross cloud initiatives, or from vertical VAS which are less likely to be taken by the infrastructure players.
Cloud for Enterprises
Enterprises are slow in adopting public clouds. There is initial usage of public clouds by enterprises for non critical missions, or non sensitive data. En example could be a financial institute running analysis on historical data
Large Enterprises and government are starting to use private clouds
Recent Comments