A few weeks ago I was asked to give a keynote at a venture capitalists conference in Israel. Given I was never funded by any Israeli VC I thought the honor was worth the afternoon . For the sake of full disclosure, one of the best local VCs – Yaffa formerly from Star Ventures - did want to invest and we just couldn’t get it done due to some technicality (She did introduce me to her brother in law, Leo Apotheker, and years later we ended up being co-presidents at SAP for a great couple of years). In any case, I wanted to share with you this presentation, as a broader vision for what I believe the next wave of Israeli technology and investments should become.
For those who are not familiar with Israel, the country is now entering its 60th year, which I divide into three generations, roughly 20 years in length each. If you add to these 60 years the generation that preceded the formation of an independent state in 1948 as “Generation 0” we get four very different set of periods, different drivers and, interestingly enough, very different technology industry in each.
Generation 0 was all focused on the creation of an independent state – and so the technologically minded folks (most educated at the Technion and Weizman Instititute) were all working on establishing the primary tools a state would need. The best evidence as to the importance of science on the this generation was the selection of a scientist, Chaim Weizman, as the first president of Israel (Einstein rejected an offer to become president later).
As the state achieved independence and was thrown into a battle for life, Generation I focused most of their efforts on survival of the state. A single galvanizing vision of survival sent every tech savvy youngster into science. The defense forces together with the universities served to assimilate the waves of immigrants into society and acquired knowledge became the equalizer in this nascent society.
My father, who immigrated from Iraq after the state achieved independence, became a communication officer in the army (where he met my mother, an immigrant from Morocco who served as a wireless communicator, for which I am thankful to this day). The army paid for him to get a bachelor’s degree, and he signed up to become a career officer – that was the deal, we educate you, and you serve the state for life (well for 16 years…). His first job out of college in 1972– build a wireless network across the Sinai peninsula. The same network served to defend the state and lasted the entire war in 1973. I was born as he started his university years in the Technion and returned to the same school a few years later to get my own bachelors degree in the same house my parents rented.
Somewhere after the six day war, or at the 1973 war, a new generation of Israeli technology emerged. The new companies took a lot of the knowledge the military developed for defense purposes and started exporting it to other countries through 10 or so large hi-tech companies. Generation II was asked to grow an export economy, and improve the Israeli economy. As the state started feeling more secure about survival, growth was the top requirement for a country that found its way into the global economy, at first with military oriented companies like Tadiran and Elbit, who branched out to civilian technologies as well, but later on with purely civilian giants like Scitex, and Daisy. Generation II had very few business leaders, some of them coming from Gen I companies (lik Uzia Galil) others representing the new Israeli Entrepreneur – like Efi Arazi.
My father, who retired from military service in 1981, transitioned just like the state from communication officer to exporting communication equipment in south America, first for Tadiran later for Elbit. I watched him go from military service into business and got exposed to the American culture and to my first Apple II computer in the American high school of buenos Aires.
Generation III started to emerge somewhere in the late 80s, and took shape in the happy days of the 90s internet bubble. It was a generation of individual risk takers, young, aggressive, techno-geeks. Some of the more successful members of the club are the Checkpoint founders - Gil Shwed, Shlomo Kramer (we both went to the same elementary school, he was one year ahead of me), The Chromatis guys, Mercury’s Arie Feingold (of Daisy fame) and Amnon Landan, Yossi Vardi and the ICQ boys, and so many others.
In my own family journey, after being part of a less than stellar startup in educational software, I decide to start a new company, and convince my dad to do the unthinkable – leave the security of a technology giant to the uncharted water of a 1989 startup - Quicksoft. That company spawned 3 more startups we both shared, two of those sold later to SAP, and one still runs to this day as Adobe’s distributor in Israel. That small startup we started in my parents basement, grew after many acquisitions and changes to be SAP lab in Israel which hosts almost 1,000 engineers who write software for companies around the world.
Generation III was catalyzed by two actions taken by the Israeli government – in particular one person in the public Sector – Yigal Erlich – at first the chief scientist of Israel, who granted many startups, including Quicksoft the funds that made the difference between closing the doors and exporting software. Yigal then started "Yozma" a fund of funds – where he co-invested the state together with 7 international VC funds, and created the VC industry in Israel investing well over $2B a year in the state - making Israel the second most exciting region for high tech innovation after the silicon valley, my adopted home for the last 12 years. As an observer in both worlds, with the luxury to travel back and forth (well, most of the years, I traveled without luxury in coach…) I can see how Israel evolved along the same patterns as the bay area, with a very slight phase delay between the two centers of technological gravity.
It is common to ask in Israel, “ how come there is not one Nokia in all these startups?”. Israel did not grow a Microsoft, a Google, or an SAP out of all these great startups. The most successful got acquired early, and the ones who stood on their on, like CheckPoint remained leaders in their market, but the market did not become a giant market like cell phones or search. The two biggest technology companies in Israel are Teva and Iscar – one leads the world in generic drugs, the other makes carbide cutters that serve every metal cutting industry in the world. Both of these are considered giants in Israeli terms, both need lots of technology, but none of them is as sexy as Nokia, or Google. I keep asking myself whether Israel needs a Nokia?
- What will make Generation IV, the one starting roughly arond now, a better one than previous generations?
- What are the challenges and where is the path to growth, and dare I say greatness for Israel?
- With the emergence of two Asian giants in China and India, with their infinite talent pool, and equally infinite markets, what is Israel to do to stay relevant, virant and growing?
- Which technology will fuel this growth?
More in the next few posts.