Israel Venture Capital 2.0

Deals you do, Deals you don't

Last week I had some drinks with a good friend from the industry. We compared notes on our respective portfolio companies, and like always, some are doing ok, some are lagging behind. Personally, I was mostly interesting to hear on 2-3 great companies that I could have an invested in (had access to those deals), but decided to pass on them.

All that reminded me of an old saying in the VC world: "Worry about the deals you did, not the deals you missed".

Is that true? I think our LPs expect us to be in the best deals in Israel. Not only that, there is a lesson to be learned from all the deals we rejected and that later became good companies (Examples include Actimize, Radware, Passave, and others). The reality is we have to worry a bit about the deals we didn't do, so we are sure we won't make the same mistake twice.

But overall, it's much more important to focus on the deals you did. Assuming there are enough good deals in Israel to support the leading funds (or most of the leading funds), it's important that we have a fair share of those great deals, even if it's not all of them. It's much more important to focus on current investments and make them great (future looking) than to analyze past investments and why we missed them (backward looking).

Isn't that true about life in general? Here is a short list of a few(Music & Sports) opportunities that I missed throughout the years:

• Dire Straits live in Tel-Aviv, 1985 (I decided that Dire Straits are too popular for me...)
• Pearl Jam live in Seattle, July 4th 1991(Instead, I went to see the fireworks with my parents)
• Hapoel Haifa Championship game, May, 1999 (I was living in France)
• Paul McCartney live in Tel-Aviv, 2008 (Living in the US)
• Led Zeppelin live in London, 2008 (I was in London on that same day!)

However, I had my fair chance of great moments, just to name a few

• Hapoel Haifa beating Maccabi Haifa 2:1, 1995 (After 20 years of no Hapoel victories in the city derby)
• Bob Dylan live in Beer Sheva, June 1993 (Could you believe it - Bob Dylan in the Beer Sheva soccer stadium)
• Pearl Jam live in Mountain View, 31st October 2000 (Seeing the go on stage dressed as the village people)
• Kaveret live in Tel Aviv, 1984 (Together with 500K other people...)
• Rush Live in Montreal, Canada, March 1986 (They were my favorites at the time, and I happened to at the right place at the right time).

The bottom line - you can't have all the good deals (or moments in the portfolio). Just need to make sure that you have some, and to optimize on those as much as possible.

Good Morning Obama

Today is January 20th, 2009. Today is a special day, one of those days that you will always remember. The US had 6 presidents since I was born (Nixon, Ford, Reagan, Bush Sr., Clinton, Bush Jr.), but this one is probably the most important. There are a few reasons for this: He is Black, He is a natural leader, and he is providing hope for a country that needs a lot of change.

But there is another reason why this president is so special. Obama is the first president that is truly from MY GENERATION. He is (almost) my age, he likes basketball, addicted to his Blackberry, and uses Twitter, Facebook and Linkedin. He even likes some of the music I love (Bob Dylan, Miles Davis).

I hope Obama will show the world that my generation can make a big difference. Unrelated to his political views, Obama has 4 key attributes that I really like; Charisma, Professionalism, Addiction to Technology, and the ability to create hope for people.

I truly hope that 20 years from now people will ask: "Where were you during Barack Obama's inauguration?". My answer is going to be simple: "In the US, watching the inauguration online".

A partial summary of CES (Consumer Electronics Show)

Last Friday I took a quick roundtrip trip to Las Vegas and spent the day at CES. It was a quick trip, and I probably missed most of the action at the show, but still, I thought it will be great to summarize my takeaways, as partial as they may be.

In general, I came to CES with low expectations. My previous CES visit was in 2005, so that was my point of reference. Everyone promised me a "slow and quiet" show. I guess it's all relative. Compared to 2005, it was just as loud, packed, and huge. I guess I skipped/missed the crazy years of 2007-8.

So many people wrote about the various themes of CES (read more on Venture Beat). I can only repeat some of these themes. The 2 big ones, from what I saw, were the following:

1. 3D is happening. Similar to HDTV a few years back, 3D is gaining momentum from the TV manufactures and from the content providers. All the big companies showed various technologies around 3D, with various options (with/without glasses, with/without original 3D content). Overall, it seems that we are getting closer to the 3D images (similar to Minority report). The one big question in my mind - Does this provide an opportunity to VCs? So far, I can't see how startups will make money in the emerging 3D trend. (Check the excellent post on Venture Beat on this topic)
2. The connected TV. I have personally complained about the non-connectivity of my consumer electronic devices. Apparently, someone was listening. It was amazing how many TVs had Internet connectivity, enabling seamless integration to Youtube, and other video websites. I need to think about my wish for 2010 (folding displays?)

Beyond trends, I focused my time on 2 big companies. I spent a few hours at the (impressive) Microsoft booth. It was a nice show of the Microsoft consumer offering, with products ranging from Zune, through xBox and all the versions of Windows. Judging from the crowd's interest, nobody cares about the Zune (The booth was always empty), and everyone wants to learn more about Windows 7.

The most important gimmick at the Microsoft booth was the Microsoft enabled car (It's called Sync). If you haven't seen it check this video here. Microsoft is handling the driving interface (Music, directions, etc.), and not the "mission critical parts", but still, I get nervous thinking about a blue screen in my Toyota.

Beyond Microsoft, I was very impressed with the Samsung booth. 4 years ago, they were the powerhouse of CES with a huge booth. 4 years later, it was 10x bigger. Samsung seems to be the tech leader of the worlds (seriously). They showcased offerings in every category, including some very impressive large screen TVs, and beautiful LED based thin displays. Together with LG, it seems Korea is dominating the CE world.

Finally, a word about Israel. There were some cool Israeli related companies at the Sands, but overall, it seems that Israel has a long way to go before we can have mainstream CE products. At this point, we are much better in providing components and software. We should make sure that we continue to excel in those categories.

Web 3.0 is Coming?

Since the emergence of Web 2.0 in 2005, there was a debate on the definition of Web 2.0. There are various definition, on O'Reilly, Techcrunch, and also on Wikipedia. But I have a different definition. I think it's all about time gaps.

Web 1.0 was pre-bubble. From the emergence of the Web in 1994/5 to the huge collapse of March 2001. Clearly, there was a common thread to those companies (They do look very different than today), but it was part of evolution. After the bubble burst, investors walked away from the Internet space. Being an Internet investor was a huge no-no. With the investors, the entrepreneurs also left the space. But the users didn't, They continued to spend more and more time online, consuming and creating content, and also sharing content (mostly music and text on forums).

Web 2.0 emerged after the gap between 2001 and somewhere in 2004. With a clear time difference between the 2000 investments and the 2004 investments, it was easy to define the new generation as 2.0. Surely, these companies were different - after all, the users continued to evolve, so there was a lot to learn from. BTW - Some of the companies were the same as before. There are a few examples of "Web 2.0" companies that were created in 98/99 but were too early for the users (Israeli examples include EarthNoise, a YouTube like company, and also Contact.com, an early version of Plaxo).

So, what is Web 3.0? If Internet investing is going to stop, and if a gap in time will appear, we will see a whole new generation of companies appear in 2-3 years. Those companies will be different than the companies of 2005/6 because they will have the ability to learn from the changing investment criteria, but also from the evolving user behavior (The users are definitely here to stay, and their usage will continue to evolve). Web 3.0 has an official definition (Like the one on Wikipedia, based on The New York Times). But still, a more business description will probably focus on some key attributes:

1. Bootstrapped. As Internet seed is becoming really hard, we will see more companies that will develop on their time and cash.
2. Limited infrastructure. Usage of everything in the cloud infrastructure. Size matters, and Amazon has that size (and technology).
3. Beyond Advertising. I am still a big believer in advertising, but not every property can be monetized effectively. This is where the real future lies. How to you leverage engagement to turn on sales and sponsorships.
4. Cross Platform. Even at Commtouch, back in 1999, we developed online web email combined with mobile presence. But back then it was a joke. The future lies in unified interaction. Connected, integrated, high quality experience with the product on web, mobile, client, and TV. I am still amazed how bad is my mobile experience with some web properties that are so important to me (Linkedin! Typepad! Viigo!)

But then again, as seen below, who cares about all this.

My favorite Silicon Valley (food) Places

After being here for more than 2 years, there are few places that have become regulars for me. These are places I visit often, and that I usually recommend to others when asked. Since a lot of Israelis that come over here ask me for local recommendations, I decided to list here some of my favorite locations. I also decided to map all the places. Check it on Live Maps.

	Most Favorite Place	Almost there - 2nd Place	Additional Places, if Needed
Coffee	Farley’s San Francisco: I was introduced to Farley by Zev Laderman (ex-CEO of Aduva), and I still think it’s the best tasting coffee in the Bay Area. Not a great place to sit, and clearly too far from the south bay, it’s a must stop on the way to/from the city back to Menlo Park	Caffe del Doge: This is the best coffee place in Palo Alto, and that’s why its packed with Israelis. Like a good neighborhood coffee, it’s the best place to run into Nadav or Omer or many other local Israelis. I love the coffee although it’s a bit too small	Coupa Café (Wifi and chocolates), Bellano Coffee Santa Clara (Been there once, but good coffee in the South bay).
Food Chain	Left Bank: Although it's an Americanized version of French restaurants, I still think Left Bank is a real pleasure. The highlight is the Nicoise Salad. Although they have a location not far from Sand Hill Road, I usually eat at their Santana Row branch.	The Counter: The all American Hamburger has seen some major updgrades in the past few years (and I loved McDonalds as a kid). The Counter provides great burgers, combined with a create-your-own-topics combination. Bring on the Chedder Cheese and Avocado.	PF Chang, Outback are always good options for Gluten Free stuff, a personal choice that puts them high on my list.
Restaurant	Evvia: Always packed, always fresh, always delicious. Their fish dishes are amazing, and I love the Greek salad. Clearly, that place has a nice flavor of home (Israel).	The Village Pub. My friend Oren says that this place is way too high-end, and its usually filled with VCs at lunch time (Can be seen as a pro or a con). But the food is good, and the coffee at the end is excellent.	Red Currant. A hidden gem in Menlo Park, the place is run by Ayelet & Nir, and it has a strong Israeli influence. Food is great, but the place is a bit off the path to become a regular.
Breakfast	NO PLACE. Nada. I still can't find a good place for a nice (and tasty) breakfast place. I think that a good breakfast place is not part of the West Coast culture.	Cafe Borrone. Another packed place, the food is quite good, and although its a bit casual (A bit self service), it's a nice option for a breakfast with a friend.	Sundeck, Il Fornaio, Buck's. 3 of the more common VC places are all located somewhat around Sand Hill Road. The problem is that all 3 provide food options that are below par.
Sushi	Fuki Sushi. Ahh. My favorite place in Silicon Valley. By far. I eat there 3-4 times a week and I am still not tired. The Hamachi is great and I love the Salmon-Avocado hand roll.	Kitsho. Located in Cupertino, the place is very authentic, yet not as tasty as Fuki. They usually have some rare fish selections, so its a great place for trying new things	To be honest, I am so addicted to Fuki, so I can't think of others in this category.
Supermarket	Andronico's. Sometimes lunch is just a salad. Andronico is a bit on the expensive side, but provides has a great salad bar, and some nice Sushi selections	Whole Foods. Another good place for fresh dishes, usually Gluten free.	Safeway? Never...

Predictions 2009 - The Israeli Version

It seems that in the past month, every blogger/journalist/expert/VC/alien wrote something about predictions for 2009. Some examples include Lightspeed, Venture Beat, John battelle. Some are totally against that, like Brad Feld (and Fred Wilson), but also my good friend Ouriel.

I personally love Predictions. It's like a game, and at the end of the year you look back at it and realize how stupid and/or ignorant you were, 12 months earlier. I also like it when it becomes a tradition, where people do it constantly year over year, and try to evaluate their results with an honest and critical view.

Anyway, although I am 5 days late, I decided to enter this game as well. Of course, I will focus on the Israeli market. Not only because this blog is about Israel Venture Capital, but also because I can't stand the predictions in the Israeli papers. Most of them are so obvious and boring. I hope I can provide a bit more color than the usual "there will be no M&A a lots of layoffs".

So, here are 7 key Israeli predictions for 2009 (And on purpose, not a word on Gaza and layoffs):

1. No new VC entrants: In the past 2 years, we saw more and more US VCs entering the US market. Look at 2008: Battery increased their local presence, Norwest hired an Israeli partner, and DFJ affilated themselves with Tamir Fishman. We will see none of that in 2009. Existing players will probably stay, but will not see new office openings other funds. Kleiner Perkins Israel will wait for 2010/2011. What does this mean? With no new entrants, and with less Israeli VCs, entrepreneurs will compete for less investment dollars in the market.

2. Cleantech is Semiconductor 2.0: With the strong decline in the semiconductor market, and with the hype around cleantech, more and more Israeli executives will move from the semiconductor industry to the cleantech industry. We already saw some of that in 2008 (Solar Edge is a company in both markets), but we will see much more of that in 2009. All this much better than the previous trend: Semiconductor executives becoming Web 2.0 entrepreneurs.

3. Google (and Microsoft) will (finally) acquire: With the tough funding environment, and with the rise of free talent in Israel, Google will finally make its move and acquire an Israeli company. This is good news, with the exception being price related. These will not be a sweet exit, but something to small to begin with.

4. There is a world beyond Atlanta, New York, and Silicon Valley. We will see a rise in the number of companies that will start in Israel and will market in Asia directly, without touching the US market. We have seen in that in our own portfolio (Massive Impact) and in other Companies (Koolanoo), but the majority are still US oriented. That ratio will shift from 90/10 to 70/30.

5. Yozma 2.0. With a lot of mixed reviews, the Israeli government will push money to the startup world. Most of it will be put directly into companies, but a small portion will be given to the VCs.

6. Web 2.0 Acquisitions. one of the leading Israeli Web 2.0 Companies will be acquired (Metacafe? Oberon? Fixya?), although I don't think it will meet the expectations of the local swamp (Well, at least not the 2007 expectations). What does this mean? It will take time before we see the (next) big Israeli web exit.

Reading all these, it sounds pretty gloomy, so I will try to put 2 positive notes. I do believe 2009 will not be as bad as we think (Again, not a word on Gaza or on layoffs) and that we will see exciting new startups emerging (and WITH funding). I also think my blog will reach a huge number of subscribers (In other words, will I pass the 1K mark?)

The future of my music collection

In the past 20 years I have built a nice music collection. A lot of CDs, tapes, albums, and online music. All now represented in about 40GB of music. I still consume it in all formats (Even cassettes sometimes...), but mostly on my iTunes/iPod (Usually when running and when traveling). So far so good.

But lately, I am starting to get frustrated with the level of understanding/interaction I have with my own music collection. There are great technologies out there that help me find music that I may like (of course, there is a business model in that). Those include Pandora, Last.fm, and even Amazon.

But I am looking for something different. I want a technology that will help me discover and understand my own music collection. Apple recently launched Genius, which is a first step in that direction. The problem is that Genius is very predictable. I pick a Led Zeppelin song, and it doesn't matter what song, I get the same suggestions: Jumping Jack Flash by the Stones, Highway Star by Deep Purple. I don't need to be a Genius to do that.

So here are the 3 elements I want from my iPod in the future:

1. True (Business) Intelligence: What do I listen to? Not only the songs, but Genres, Albums, Artists. In what songs do stick till the end, and what songs do I skip? All that information is there. I want it.
2. True Discovery. What are some songs that I ALREADY HAVE, and that are left behind? Based on what I listen to, what songs I may actually enjoy (and are a bit less obvious than Light my Fire by the Doors).
3. And finally, a bit unrelated, Additional information on the Albums (and the bands). Can't I have on my iPod a bit of information (from Wikipedia?) on the band and the album? Here is an example. I started listening to the Silos. To be honest, I know nothing about them (I do own the album). Some local information would have been great, and would have helped me engage more in listening to the music.

Anybody interested to take the these ideas and implement them? Maybe there is a business there... The only company I know that is somewhere in the area is TuneUp. Maybe they will add what I want.