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Israel: High-Tech's Promised Land From ChannelWeb News
May 5, 2000
But small letters on the door of this particular building
read "Israel Seed." Inside is the office of Israel Seed
Partners, an early-stage venture capital firm with
investments of more than $200 million in 35 countries. It is one of the more well-known firms in a
country overflowing with similar companies.
A newcomer to this tiny country could easily miss the signs,
but only minutes from some of the world's most revered
religious and historical sites, a high-tech environment that
many observers consider unparalleled in brain power and
opportunity has emerged.
The numbers tell much of the story: In a nation of just 6 million
people, officials here boast that Israel has more publicly traded
companies on the Nasdaq stock market than any country
outside North America. Even more revealing, they say, Israeli
start-ups take in more venture capital funding than any country
outside North America.
"Israel is more like Silicon Valley than any other place in the
world," said Jonathan Medved, general partner of Israel Seed.
Medved would know, having spent time in the United States
before moving to Israel.
Like start-ups elsewhere, Israel's high-tech industry suffered
its share of setbacks, but there are countless more start-ups.
Officials put the number at 3,000, with new companies
sprouting up every day, each with its own "killer" technologies.
While many of these companies are just beginning to sell product, they already are seeking solution
provider partners in the United States, the biggest market for their products.
Take Alchemedia Ltd., located in the small city of Beit Shemesh, between Jerusalem and Tel Aviv.
The company developed technology to prevent replication of images on the Web. Alchemedia
Co-founder and Chief Executive Daniel Schreiber said he sees unlimited potential for businesses
looking to protect their images online. The company already is talking to Warner Brothers.
Alchemedia just hired a channel manager and plans
to begin speaking to solution providers this quarter,
Schreiber said.
It was not always easy for Alchemedia, though.
When the company needed to make its technology
work on Macintosh computers, it searched far and
wide until finding a programmer in Russia who
could help. Alchemedia brought him to Israel.
"There's no word like 'failure' here," said Ori
Mazin, Ori Mazin, founding partner of Emicom
Group, Ramat Gan, an operating company that
provides start-ups with venture capital funding and
other guidance.
"We don't have a lot of natural resources here," Mazin said. "The main resource we have here is
knowledge. High-tech fits with Israeli capabilities."
There is also Human Click, Human Click, located near Ra'anana, one of the high-tech hubs
outside Tel Aviv. Eitan Ron, Human Click's co-founder and chief executive, helped develop
technology for small businesses to provide live support on the Internet. The technology tries to
bring the feel of a small store to the Web.
Mercado Software Ltd., Tel Aviv, specializes in database searches. Net Talk Inc., with offices in
New York, Los Angeles and outside Tel Aviv, provides Internet conferencing solutions.
The list goes on, leading to Tradeum Inc., based in Jerusalem and San Francisco, a company that
powers business-to-business exchanges and recently agreed to be acquired by VerticalNet Inc. for
about $475 million in stock.
The success stories of companies such as Tradeum, and Ramat Gan-based Check Point Software
Technologies Inc., one of Israel's most successful high-tech companies, continue to spur the
start-up frenzy. After all, if one company can do it, so can another.
But it also is the culture and the society here that fuels the high-tech community, industry leaders
say.
Israel is a small country where everyone seems to know everyone else. You can drive almost
anywhere in less than a day, allowing for human networking and idea sharing. "We have no
unknown soldiers and no unknown millionaires," Medved said. "Gossip is a national sport."
But perhaps most important, Israel is a country where every
young adult is required to serve in one of the most
technically advanced armies in the world.
The Israeli Army hand-picks the brightest students and puts
them to work in its high-tech operations. After a few years
working on national security and learning about leadership
and teamwork, these students become well-versed in
technology, especially complex, security-related areas.
That is where Zohar Pearl, chief executive of Expand
Networks Ltd., Tel Aviv, traces his roots. "Like 95 percent
of the people in high-tech, I started in the army computer
division," he said.
Expand's technology is designed to move data over networks more efficiently by representing the
data in different ways. Subsequently, "we can move more data on the same bandwidth," he said.
ISPs will have an interest in the technology because they will not need to spend as much money
leasing phone lines to move their data, Pearl said.
Expand also is working with the U.S. Department of Defense and Texas Instruments Inc. "They
buy our technology to move data faster" internally between data centers around the world, Pearl
said.
Some of Israel's entrepreneurs had different experiences in the army. Izhar Shay, chief executive
and president of Business Layers, Ra'anana, was a paratrooper.
"Entrepreneurs learn to do things on their own," Shay said,
while remembering what it was like jumping out of planes.
"You have to be creative, independent and achieve your
goals."
Now running a start-up, Shay's goals at Business Layers
include developing applications around directory services.
The products automate a new hire's profile for a company's
IT departments.
Business Layers is looking to the channel, especially Novell
Inc. solution providers who may add features before selling
a complete package. The company will consider licensing
the technology through ASPs, Shay said.
Meanwhile, Foxcom Wireless Ltd. is working to solve coverage problems for wireless companies.
The company, based in Lod, offers low-cost, high-performance fiber-optic solutions, installed in
large office buildings, tunnels and other areas that normally provide challenges for cellular phone
users.
If there is one thing Israeli high-tech companies lack, it is the ability to transform a great
technology into a usable product with a human interface, especially one suited for the American
market, industry leaders said.
That is where companies such as Emicom come in. With a background that includes founding a
start-up, taking it public and selling it, Mazin knows the process, and his company hopes to invest
in and aid others with potential. Emicom, which is less than a year old, hopes to take about 10
companies under its wing each year. The company, which has no public relations department, gets
between 30 and 40 calls per month, he said.
Once they get started, the companies usually set up offices in Israel for sales and marketing in the
United States.
As Ofer Ronen, chief executive and president of Foxcom Wireless said: "The combination of
Israeli technology and the American marketing capability is a killer combination."C
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