At the start ... attention ... up! Hi-tech in Israel: startups industry
This topic was chosen by us not by chance. The traditional seasonal downturn of business activity, combined with permanent economic instability, is forcing you to ask again sore questions and look for new ways of industry development. One of these ways is to create favorable conditions for the emergence of a segment of high-tech startups. Obviously, this requires a radical reform of the industry - both economic, technological, and social, not to mention the educational component and state support. That is why we offer a look at the historical experience of Israel - a country that has managed to make a revolutionary breakthrough in the development of the hi-tech industry - and extrapolate it, as far as possible, at post-Soviet realities.
Today, Israel boasts the highest concentration of startups on the planet - according to the Israel Venture Capital Research Center , there are more than 3,850 startups in the country, i.e. 1 for 1844 inhabitants. Two years ago, the amount of venture capital investment in Israel per capita was 2.5 times higher than in the United States, more than 30 times higher than in Europe, 80 times higher than Chinese and 350 times Indian. In absolute figures (we recall, the population of Israel is 7.1 million), the total investment is approaching $ 2 billion - the same amount is invested in the UK (with a population of 51 million) and Germany (82 million). Add to this that on the NASDAQ more Israeli companies are listed than all European companies combined. Even the war can not stop the rapid development of the industry. In 2000, Israel suffered not only because of the collapse of the “dot-com”, but also because of the beginning of the terrorist intifada (the most intense in the entire history of the state) - but the country's share in the global venture capital market did not decrease, but, on the contrary, doubled , from 15 to 31%. IT Business week will try to analyze the secrets of the successful development of the Israeli IT industry and raise the question of the possibility of using this experience in the post-Soviet space.
First of all, we should mention the unprecedented government support that was provided to both the technology industry as a whole (in the 1970s and 80s), and directly to start-ups (the 1990s). With state aid, technological greenhouses were created, which provided thousands of jobs for socially active groups of the population, including Russian-speaking repatriates. When forming the start-up industry, the state attracted foreign investors with extremely favorable conditions, taking on almost all the risks, but at the same time providing the investor with the opportunity to extract the maximum profit and buy out his share with minimal expenses. By the mid-1990s, Israel was already high-tech for even the most cautious investors. Israel Venture Association has 45 venture funds that operate today in Israel. And Ed Mlavsky , executive director of the BIRD (Binational Industrial Research and Development) foundation, says that from 1992 to 2009 in Israel, there were 240 venture capital funds that develop the IT industry.
Next, you must pay tribute to the Israeli education system. There are a large number of schools with a pronounced technical orientation. Pupils are given a certain freedom in the choice of disciplines, as well as the level of their study: for example, the humanities can study foreign languages ​​for "five units", and trigonometry - only for "three". Thus, pupils independently begin to form their future specialization from school. The university education system continues this tradition, expanding it at the expense of numerous “optional” courses, which are chosen by the student, based on their scientific and professional interests. Yes, and basic courses, despite the fundamental theoretical training, are more focused on the practical use of knowledge "here and now." Great attention is paid to the relevance of the subjects being studied - it’s not for nothing that the Technion University of Israel (Haifa) and the Weizmann Research Institute (Rehovot) are in the top twenty universities in the world in computer science (according to the Academic Ranking of World Universities ).
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Another factor that is sometimes undeservedly forgotten is the mental characteristics of the Israelis, elevated to the rank of peculiar cultural codes. From preschool age, children are taught to ask questions, to form their own opinions and not to be thoughtlessly about the majority. A culture of disagreement, as Dov Frohman , the founder of Intel in Israel, called this phenomenon, is capable of bringing up a generation for which innovation is an integral part of life. The most original solutions of seemingly impossible tasks are born only in an environment where each team member is a leader.
But the most powerful catalyst of Israeli technical progress is, sadly, war. The permanent threat to the existence of the state forced Israel to create an exceptionally developed military-industrial complex. A number of military technologies (and most importantly, ideas) were successfully implemented in “civilian” start-ups created by retired experts in the field of computer science, telecommunications, and cryptography. The computerized unit of the Israel Defense Forces - MAMRAM (Merkaz Mahshevim UMa'arahot Meida - Computer and Information Systems Center) - appeared in 1959, and since then its graduates have formed the Israeli technological community. If we talk about the technological elite, then, as a rule, it comes from the top secret intelligence unit 8200 , which is engaged in electronic interception. The best example (of hundreds of well-known) is Check Point and its founder Gil Shwed , who, after his dismissal from 8200, implemented military ideas for a wide audience by developing the world's first Firewall 1 firewall .
IT Business week proposes to get acquainted with the most vivid stories of the Israeli start-up industry, as well as learn more about the Israeli system of state support for technological innovations in order to try to simulate the effect of a similar model in the IT industry of the CIS countries.
The history of the emergence of Better Place is so characteristic of most Israeli startups that it can be called a textbook. The founder of Better Place, a company that develops infrastructure for electric vehicles, has never dealt with either cars or electricity. This did not prevent him from laying the foundations for a future empire capable of controlling a key part of a promising market segment. Shai Agassi (Shai Agassi) , founder and CEO of Better Place has considerable experience in building startups. In 1992 (at that time he was 24 years old), Agassi creates a startup, Quicksoft Development, later renamed TopTier Software . The company specialized in corporate portal solutions and occupied leading positions in its market segment, which allowed it to become a member of SAP AG in April 2001. Shai Agassi took over as president of the SAP product and technology group and was one of the key contenders for the CEO position; in 2007, he decided to leave the company and start his own business from scratch again.
The goals of Better Place are very ambitious: the company plans to create an infrastructure for future owners of electric vehicles, in particular, a developed network of “gas stations”. It is noteworthy that the startup focused entirely on creating the infrastructure, leaving behind the development of electric cars directly, which companies are successfully engaged in at Tesla Motors level. "We will AT & T auto business." You buy miles from us. It will be possible to pay at different rates. There will be prepaid tariffs, this is roughly the current scheme: bought 20 liters of gasoline, travel, bought more. There will be fares at which a certain number of miles is available for free or for a fee. And there will be tariffs with an unlimited number of miles - it will be beneficial to taxi drivers and everyone who travels a lot. The main thing is that in terms of driving in an electric car it will be two times cheaper than a conventional car. This will be our competitive advantage, ”says Agassi.
Since 2007, Better Place has managed to attract more than $ 700 million of investments - a phenomenal result for a startup. In January 2010, the company announced it had signed an agreement with a consortium of investors led by the HSBC banking group on a record investment in the green sector: $ 125 million will be invested in the company in exchange for 10% of Better Place’s shares. Thus, the capitalization of Better Place is estimated $ 1.25 billion. Other Israeli start-up investors include Morgan Stanley Investment Management, Morgan Stanley Principal Invesments, Lazard Asset Management, VantagePoint Venture Parnters, Ofer Hi-Tech Holdings, Maniv Energy Capital and Israel Corp., whose head, Idan Ofer ) became chairman of Better Place.
Agassi's leadership and oratorical skills are often compared with the charisma of Steve Jobs. The head of Better Place was able to infect not only investors, but also the President of the State of Israel - Shimon Peres (Shimon Peres) with his enthusiasm after a brief presentation of the project: “What can I do to help?”. Peres organized more than fifty meetings of Agassi with top managers of the Israeli economic giants, as well as with government officials and even with the prime minister. “Every morning we met in his office and I briefly told him about yesterday’s meetings, after which he picked up the phone and started planning my meetings the next day,” says Agassi, “without the help of Peres, these meetings would never take place.” In addition, Shimon Peres sent messages to the five largest automakers, accompanying the Agassi concept with personal recommendations. Soon Agassi and Peres met with Carlos Ghosn, head of Renault and Nissan. It took the Israeli duo exactly five minutes to convince Gon of the promising ideas of Better Place. The argument of Agassi was simple: electric cars only look more expensive - this is due to the cost of batteries. But the sale of electric vehicles with batteries is similar to the sale of gas-powered vehicles, with a set of gasoline, designed for several years. The idea of ​​Agassi is that the retail price of an electric car can be significantly reduced if the owner of one of the most expensive items, the battery, is Better Place. The principle of the company, in fact, corresponds to the model of mobile operators - the user pays a reduced price for the finished product, and then connects to the "contract" with a certain monthly fee (or on prepaid-conditions). Carlos Gon was asked to produce electric cars in the territory of Israel. The head of Renault-Nissan agreed, but on the condition that he would be given the capacity to manufacture 50,000 cars a year. Shimon Peres doubled rates - and offered resources for the release of 100,000 electric cars per year. By the end of 2011, it is planned to start the network of “filling stations” Better Place and the appearance on the market of new generation cars - electric cars Renault Zoe, Renault Fluence ZE, new Kangoo modification and sitikara Twizy ZE.
Scott Thompson (Scott Thompson), president of PayPal agreed to set aside half an hour for Israeli start-up Shvat Shaked (Shvat Shaked). Thompson did not plan to spend his time, but Benchmark Capital, an eBay investor (the parent company of PayPal), nevertheless insisted on meeting. Benchmark Capital experts considered investing in Shaked Sciences , an Israeli startup company. The entrepreneur expounded his concept in one phrase: “Our idea is simple: we believe that the world is divided into good people and bad people - and the solution to combat online fraud is to separate them from each other.” The head of PayPal was furious with the obvious truism, but decided to sit out the promised half an hour. Responding to a question about specific methods of work, Shaked stressed that respectable users, as a rule, leave traces of their stay on the Web - the so-called “digital footprints”, while fraudsters seek to hide all information about themselves. The idea of ​​Fraud Sciences is to detect these very “digital traces” and reduce the risks of online fraud based on the data obtained. Thompson reacted very skeptically: PayPal had at its disposal a group of two thousand specialists in the fight against online fraud (including 50 doctors of science) - and the proposed idea seemed not just unworthy of attention, but infantile at all. “How did you come up with this idea?” Thompson asked caustically. “Hunting for terrorists,” Shaked responded. According to an Israeli entrepreneur, for 5 years of existence of Fraud Sciences, the company analyzed about 40,000 transactions and was wrong only 4 times. Thompson decided to get rid of the uninvited guest and offered Shakeda 100,000 PayPal transactions for analysis, hoping that the work would take years. This meeting took place on Thursday - and on Sunday morning PayPal was provided with a comprehensive transaction analysis performed by Fraud Science. PayPal experts needed a week to compare the results of Fraud Science with their own. The comparison showed that the quality of the analysis of an Israeli startup is 17% higher than that of the international giant of payment systems. Thompson was amazed: a startup of 55 people effortlessly managed to surpass a multi-thousand corporation. Thompson's conclusion for Benchmark Capital was concise: you should not invest in Fraud Sciences, you must purchase it as soon as possible. The head of PayPal, along with Meg Whitman (Meg Withman), the president of eBay, offered Shvat Shaked and his companion Saar Wilf $ 79 million for the incorporation of Fraud Sciences into PayPal. The founders of the company refused. As a result, Fraud Sciences was sold for $ 169 million (with an initial investment of $ 7 million) - this was the second Israeli acquisition of eBay after Shopping.com , absorbed in 2005 for $ 634 million.
The history of this startup is no different from most Israeli success stories, but it was she who marked the new era in the development of the Israeli high-tech industry. In 1992, Orna Berry, together with five colleagues from the young Israeli company Fibronics, created a startup Ornet Data Communications. The company was engaged in the development of software and hardware for local area networks - Ornet Data solutions doubled the speed of data transmission in the network. Moreover, one of the company's developments has increased the network bandwidth 50 times. It was Ornet Data that became the first Israeli startup that was acquired by a European company - in 1995, Siemens paid $ 32 million for the brainchild of Orna Berry, opening Israeli high-tech to the world. It should be emphasized that the creation of Ornet Data itself would have been impossible without government support, in particular, without the Yozma and BIRD projects, which we will mention later.
The RAFAEL military-rocket scientist for more than twenty years has been carrying out the idea of ​​creating ... a medical gadget that can radically change the methods for diagnosing the digestive system. Gavriel Idan (Gavriel Iddan) implemented the concept previously described only in fantastic literature: he founded the company Given Imaging is engaged in the production of "tablets" with built-in cameras that allow you to accurately diagnose problems in the abdominal cavity. The miniature tablet contains a camera, a wireless transmitter, a backlight module, and a battery. The doctor can monitor the picture in real time: the camera transmits 18 images per second, and the battery charge lasts for several hours.
In 2001, Given Imaging was the first company in the world to make an IPO on Wall Street after the September 11 attacks. 6 years after the foundation of the company, about 100,000 PillCam “tablets” were sold in the world, and three years later, this figure reached 700,000. Today, renowned competitors appear in Given Imaging - not so long ago Olympus entered this market segment. However, this does not prevent the company to remain the undisputed leader in its niche and continue the development of a unique product.
A study by Professor Dan Breznitz (Dan Breznitz) , which he conducted while working at MIT, revealed that by 1992 about 60% of Israeli companies whose shares are listed on the New York Stock Exchange and 75% of companies belonging to NASDAQ were supported by the fund BIRD .
The BIRD (Binational Industrial Research and Development) Foundation with a starting capital of $ 110 million was created in 1977 by the governments of Israel and the United States to support joint technology initiatives. The size of grants ranged from $ 500,000 to $ 1 million, while support for projects was carried out over two or three years, after which the fund was deducted insignificant interest from the profits of companies that achieved success.
Since 1978, Ed Mlavsky has been appointed executive director of the fund, leaving the post of vice-president of Tyco International for a new venture. Mlavski called BIRD a “dating service” between American companies with access to the largest IT market and Israeli startups capable of providing unique technological solutions. During its existence, BIRD has invested over $ 250 million in 780 projects, whose aggregate sales today exceed $ 8 billion. Among US companies that have agreed to invest jointly with BIRD in Israeli high-tech are Avaya, Eastman Kodak, General Electric, IBM, Molex, Motorola, SanDisk, Texas Instruments, etc.
One of the key objectives of the fund was to teach Israeli companies the "rules of the game" in the US market. Young startups worked closely with US investors - not only to control the workflow, but also to get acquainted with the intricacies of the local IT industry. This made it possible to acquire a unique expertise even for those projects that were not justified economically.
The history of ICQ is certainly well known to everyone who is involved in the world of information technology, so we will focus on it only briefly, shifting the focus on the identity of one of the brightest Israeli investors.
The first version of ICQ was developed in 1996 by four students of Tel Aviv University : Arikom Vardi , Yair Goldfinger , Safi Vigiser and Amnon Amir , who created Mirabilis . Within six months, the company reported on the first million users, and after two years, the ICQ user base increased by 1 million approximately every three weeks. In 1998, Microsoft made an offer to acquire Mirabilis and the company had already started preparing for sale, as the father of one of the ICQ developers, one of the most successful Israeli investors, Yossi Vardi, entered the game. He firmly stated that Microsoft should not be considered the only company on earth that wants to get ICQ. Vardi was right - in June 1998, Mirabilis joined AOL, which paid $ 287 million for a startup.
Vardi’s Instor's grip brought him success in the future: he unlocked the potential of projects such as Answers.com (went IPO), Airlink (sold by Sierra Wireless), Tivella (sold by Cisco), Gteko (sold by Microsoft), Tucows (went to IPO ). Among other finds Wardi - fring , SpeedBit , SeeToo - projects that need no introduction.
While in Israel at a public meeting in Holon, Sergey Brin, co-owner of Google, said that it was Vardi who came up with the idea that made Google what the company is now: “Yosi gave us a magic formula, offering to occupy two thirds of the page with search results, and third to leave advertising. That is what we did. "
In 2008, the news of the acquisition of FoxyTunes by Internet giant Yahoo! although it was a surprise, but not a bolt from the blue. In this connection, the “parents” of the startup, our former compatriots, brothers Alex and Vitaly Sirota, did not get tired of accepting congratulations.
Orphan's family arrived in Israel almost 20 years ago. Vitaly had by that time managed to graduate from Kharkov "Polytech" with a degree in computer science and instrument engineering, ran his own cooperative, and earned good money. Immigrant everyday life began for ex-Kharkiv citizens from the consequences of Operation Desert Storm, when several Iraqi SCADs fell daily on Israel, in retaliation for the American invasion. Then, in 1991, everything quickly fell into place - the family settled in Haifa, where Vitaly learned the course at Technion. Six months after his arrival, he already worked at IBM. In 1997, Orbot created Elbrus, a company that developed software for IBM and other IT industry giants. In 2003, Arcadia Medical Imaging appeared, and in 2005 FoxyTunes was registered.
Despite the possibility of receiving state support, the brothers chose FoxyTunes for a classic, market-based adultization scheme. And it involves, above all, the search for an investor. Today Orphans recognize that at first nobody believed in the profitability of their ideas, and appeals to numerous venture capital funds ended in nothing ... Others, having rested their head against the blank wall for the hundredth time, would have given up, but the brothers, apart from outstanding professional qualities, are distinguished by unprecedented persistence. Once they managed to get through to one of the get-togethers for investors arranged by the Israeli high-tech guru, Yosi Vardi.
The businessman immediately became interested in the development, and he offered disinterested help in promoting FoxyTunes. But, being consistent marketers, the brothers wanted to see Vardi as an investing partner. Having invested $ 3 million from his own funds, Vardi (more precisely, his name, reputation and connections) helped to attract additional investments from the USA. Seeing who is behind the young company, Americans often refused to check FoxyTunes. Suffice to say that Steve Case - the founder of AOL - was one of the investors. Today, Vardi assures that he “will beg to allow the Orphan Brothers to invest in the following projects”.
A unique state project aimed at the formation of the Israeli venture capital industry was originally created to help the adaptation of repatriates from the CIS. Yigal Erlich (Yigal Erlich) , the chief scientific adviser of the Ministry of Industry and Trade of Israel (the so-called "chief scientist") put forward the idea of ​​creating a state structure to support small and medium-sized businesses in the field of technology. Ehrlich's opponents offered another solution - instead of supporting a large number of start-up companies, strengthen partnerships with international corporations capable of employing Israelis in their branches.
As early as 1991, thanks to the Technology Incubator Program project in Israel, the first 24 technological incubators appeared in which engineers and scientists from the ex-USSR rushed. The scope of these incubators included not only the development of new projects, but also an assessment of their market viability. At that time, hundreds of IT companies appeared, supported by government subsidies and loans of up to $ 300,000. Soon it became clear that the state could not support such a large-scale project alone - and start-ups that could not create a commercially successful product began to massively close.
Ehrlich proposed to radically reorganize the entire system of state support for start-ups, introducing venture investments into it. The benchmark for him was Silicon Valley with superbly implemented technical, economic and social infrastructure. So in 1993, the Yozma project (the “Initiative”) appeared, providing for the investment of state funds in the amount of $ 100 million in the creation of ten new venture funds. Each fund was represented by three parties: an Israeli investment structure (a commercial company or a bank), a foreign venture capital fund and a professional Israeli venture capital investor, an ace of his / her business. Yozma 1,5/1 ( $1,5 , — $1 ), 2/1. , .
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According to Ehrlich, the Yozma project initially assumed that the state acts only as a catalyst. Ten funds created by Yozma from 1992 to 1997 attracted more than $ 200 million of investments, after which the government allowed them to be privatized. Today, the total capitalization of these venture funds is about $ 3 billion, and Igal Erlich joined the board of directors of Russian Venture Company last year and is trying to repeat Yozma’s success on the Russian market.
Looking at the success of Yozma, entrepreneur John Medved decided to go further and create a structure that will invest in the very early stages of the project. Medved learned that Yozma allocated $ 5 million in the budget directly for these purposes, and the share of participation in such projects was 50:50. Experts Yozma found that reducing risks will attract more investment - and were right. However, Medved was late in submitting an application to finance his own project and decided to start without state assistance. By that time (1994), American investors were so impressed with the achievements of the Israeli high-tech industry that they quickly raised $ 2.5 million to form a venture fund for Israel Seed Partners . 1999 . ISP $40 , 2000 . $200 .
: Israel Seed Partners , Shopping.com ( eBay), Compugen Ltd Answers Corporation ( IPO), Cyota Inc. ( RSA Security), Native Networks ( Alcatel), Xacct Technologies Inc. ( Amdocs Ltd.) Business Layers ( Computer Associates).
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A good example is the story of the appearance of the Pentium M processor and the entire Intel Centrino platform in the form in which it was born. But first, a little retrospective. Recall that Intel's Haifa division in 1980 developed the 8088 processor, which marked the beginning of a new technological era. The same Intel 8088 that IBM chose to build the first IBM PC. The next breakthrough in microprocessor technologies was also made in Israel: Intel's Jerusalem branch introduced 80386, the world's first 32-bit processor for the IBM PC platform. The industry developed in accordance with Moore's law, but by the end of the millennium many began to talk about technological impasse: along with an increase in the processor's clock frequency and a decrease in the area of ​​the crystal, the problem of extreme energy consumption and heat generation arose.This problem was particularly acute for mobile solutions - with limited space for installing a cooling system and limited battery life. The Israeli branch of Intel was so passionate about this task that the corporation decided to focus the development of mobile processors right here. “The Israel Working Group, before deciding that we were going to work on mobile solutions, promoted mobility ideas that went against Intel’s overall strategy,” says“The Israel Working Group, before deciding that we were going to work on mobile solutions, promoted mobility ideas that went against Intel’s overall strategy,” says“The Israel Working Group, before deciding that we were going to work on mobile solutions, promoted mobility ideas that went against Intel’s overall strategy,” says (Dadi Perlmutter) , - Intel Israel. (Rony Friedman) , , - , , , . - Intel - . , : « – , – ». (Paul Otellini), «PC and server microprocessor» . . Intel Israel , - - , « ».
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Today, Israel boasts the highest concentration of startups on the planet - according to the Israel Venture Capital Research Center , there are more than 3,850 startups in the country, i.e. 1 for 1844 inhabitants. Two years ago, the amount of venture capital investment in Israel per capita was 2.5 times higher than in the United States, more than 30 times higher than in Europe, 80 times higher than Chinese and 350 times Indian. In absolute figures (we recall, the population of Israel is 7.1 million), the total investment is approaching $ 2 billion - the same amount is invested in the UK (with a population of 51 million) and Germany (82 million). Add to this that on the NASDAQ more Israeli companies are listed than all European companies combined. Even the war can not stop the rapid development of the industry. In 2000, Israel suffered not only because of the collapse of the “dot-com”, but also because of the beginning of the terrorist intifada (the most intense in the entire history of the state) - but the country's share in the global venture capital market did not decrease, but, on the contrary, doubled , from 15 to 31%. IT Business week will try to analyze the secrets of the successful development of the Israeli IT industry and raise the question of the possibility of using this experience in the post-Soviet space.
First of all, we should mention the unprecedented government support that was provided to both the technology industry as a whole (in the 1970s and 80s), and directly to start-ups (the 1990s). With state aid, technological greenhouses were created, which provided thousands of jobs for socially active groups of the population, including Russian-speaking repatriates. When forming the start-up industry, the state attracted foreign investors with extremely favorable conditions, taking on almost all the risks, but at the same time providing the investor with the opportunity to extract the maximum profit and buy out his share with minimal expenses. By the mid-1990s, Israel was already high-tech for even the most cautious investors. Israel Venture Association has 45 venture funds that operate today in Israel. And Ed Mlavsky , executive director of the BIRD (Binational Industrial Research and Development) foundation, says that from 1992 to 2009 in Israel, there were 240 venture capital funds that develop the IT industry.
Next, you must pay tribute to the Israeli education system. There are a large number of schools with a pronounced technical orientation. Pupils are given a certain freedom in the choice of disciplines, as well as the level of their study: for example, the humanities can study foreign languages ​​for "five units", and trigonometry - only for "three". Thus, pupils independently begin to form their future specialization from school. The university education system continues this tradition, expanding it at the expense of numerous “optional” courses, which are chosen by the student, based on their scientific and professional interests. Yes, and basic courses, despite the fundamental theoretical training, are more focused on the practical use of knowledge "here and now." Great attention is paid to the relevance of the subjects being studied - it’s not for nothing that the Technion University of Israel (Haifa) and the Weizmann Research Institute (Rehovot) are in the top twenty universities in the world in computer science (according to the Academic Ranking of World Universities ).
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Another factor that is sometimes undeservedly forgotten is the mental characteristics of the Israelis, elevated to the rank of peculiar cultural codes. From preschool age, children are taught to ask questions, to form their own opinions and not to be thoughtlessly about the majority. A culture of disagreement, as Dov Frohman , the founder of Intel in Israel, called this phenomenon, is capable of bringing up a generation for which innovation is an integral part of life. The most original solutions of seemingly impossible tasks are born only in an environment where each team member is a leader.
But the most powerful catalyst of Israeli technical progress is, sadly, war. The permanent threat to the existence of the state forced Israel to create an exceptionally developed military-industrial complex. A number of military technologies (and most importantly, ideas) were successfully implemented in “civilian” start-ups created by retired experts in the field of computer science, telecommunications, and cryptography. The computerized unit of the Israel Defense Forces - MAMRAM (Merkaz Mahshevim UMa'arahot Meida - Computer and Information Systems Center) - appeared in 1959, and since then its graduates have formed the Israeli technological community. If we talk about the technological elite, then, as a rule, it comes from the top secret intelligence unit 8200 , which is engaged in electronic interception. The best example (of hundreds of well-known) is Check Point and its founder Gil Shwed , who, after his dismissal from 8200, implemented military ideas for a wide audience by developing the world's first Firewall 1 firewall .
IT Business week proposes to get acquainted with the most vivid stories of the Israeli start-up industry, as well as learn more about the Israeli system of state support for technological innovations in order to try to simulate the effect of a similar model in the IT industry of the CIS countries.
Better place
The history of the emergence of Better Place is so characteristic of most Israeli startups that it can be called a textbook. The founder of Better Place, a company that develops infrastructure for electric vehicles, has never dealt with either cars or electricity. This did not prevent him from laying the foundations for a future empire capable of controlling a key part of a promising market segment. Shai Agassi (Shai Agassi) , founder and CEO of Better Place has considerable experience in building startups. In 1992 (at that time he was 24 years old), Agassi creates a startup, Quicksoft Development, later renamed TopTier Software . The company specialized in corporate portal solutions and occupied leading positions in its market segment, which allowed it to become a member of SAP AG in April 2001. Shai Agassi took over as president of the SAP product and technology group and was one of the key contenders for the CEO position; in 2007, he decided to leave the company and start his own business from scratch again.
The goals of Better Place are very ambitious: the company plans to create an infrastructure for future owners of electric vehicles, in particular, a developed network of “gas stations”. It is noteworthy that the startup focused entirely on creating the infrastructure, leaving behind the development of electric cars directly, which companies are successfully engaged in at Tesla Motors level. "We will AT & T auto business." You buy miles from us. It will be possible to pay at different rates. There will be prepaid tariffs, this is roughly the current scheme: bought 20 liters of gasoline, travel, bought more. There will be fares at which a certain number of miles is available for free or for a fee. And there will be tariffs with an unlimited number of miles - it will be beneficial to taxi drivers and everyone who travels a lot. The main thing is that in terms of driving in an electric car it will be two times cheaper than a conventional car. This will be our competitive advantage, ”says Agassi.
Since 2007, Better Place has managed to attract more than $ 700 million of investments - a phenomenal result for a startup. In January 2010, the company announced it had signed an agreement with a consortium of investors led by the HSBC banking group on a record investment in the green sector: $ 125 million will be invested in the company in exchange for 10% of Better Place’s shares. Thus, the capitalization of Better Place is estimated $ 1.25 billion. Other Israeli start-up investors include Morgan Stanley Investment Management, Morgan Stanley Principal Invesments, Lazard Asset Management, VantagePoint Venture Parnters, Ofer Hi-Tech Holdings, Maniv Energy Capital and Israel Corp., whose head, Idan Ofer ) became chairman of Better Place.
Agassi's leadership and oratorical skills are often compared with the charisma of Steve Jobs. The head of Better Place was able to infect not only investors, but also the President of the State of Israel - Shimon Peres (Shimon Peres) with his enthusiasm after a brief presentation of the project: “What can I do to help?”. Peres organized more than fifty meetings of Agassi with top managers of the Israeli economic giants, as well as with government officials and even with the prime minister. “Every morning we met in his office and I briefly told him about yesterday’s meetings, after which he picked up the phone and started planning my meetings the next day,” says Agassi, “without the help of Peres, these meetings would never take place.” In addition, Shimon Peres sent messages to the five largest automakers, accompanying the Agassi concept with personal recommendations. Soon Agassi and Peres met with Carlos Ghosn, head of Renault and Nissan. It took the Israeli duo exactly five minutes to convince Gon of the promising ideas of Better Place. The argument of Agassi was simple: electric cars only look more expensive - this is due to the cost of batteries. But the sale of electric vehicles with batteries is similar to the sale of gas-powered vehicles, with a set of gasoline, designed for several years. The idea of ​​Agassi is that the retail price of an electric car can be significantly reduced if the owner of one of the most expensive items, the battery, is Better Place. The principle of the company, in fact, corresponds to the model of mobile operators - the user pays a reduced price for the finished product, and then connects to the "contract" with a certain monthly fee (or on prepaid-conditions). Carlos Gon was asked to produce electric cars in the territory of Israel. The head of Renault-Nissan agreed, but on the condition that he would be given the capacity to manufacture 50,000 cars a year. Shimon Peres doubled rates - and offered resources for the release of 100,000 electric cars per year. By the end of 2011, it is planned to start the network of “filling stations” Better Place and the appearance on the market of new generation cars - electric cars Renault Zoe, Renault Fluence ZE, new Kangoo modification and sitikara Twizy ZE.
Fraud sciences
Scott Thompson (Scott Thompson), president of PayPal agreed to set aside half an hour for Israeli start-up Shvat Shaked (Shvat Shaked). Thompson did not plan to spend his time, but Benchmark Capital, an eBay investor (the parent company of PayPal), nevertheless insisted on meeting. Benchmark Capital experts considered investing in Shaked Sciences , an Israeli startup company. The entrepreneur expounded his concept in one phrase: “Our idea is simple: we believe that the world is divided into good people and bad people - and the solution to combat online fraud is to separate them from each other.” The head of PayPal was furious with the obvious truism, but decided to sit out the promised half an hour. Responding to a question about specific methods of work, Shaked stressed that respectable users, as a rule, leave traces of their stay on the Web - the so-called “digital footprints”, while fraudsters seek to hide all information about themselves. The idea of ​​Fraud Sciences is to detect these very “digital traces” and reduce the risks of online fraud based on the data obtained. Thompson reacted very skeptically: PayPal had at its disposal a group of two thousand specialists in the fight against online fraud (including 50 doctors of science) - and the proposed idea seemed not just unworthy of attention, but infantile at all. “How did you come up with this idea?” Thompson asked caustically. “Hunting for terrorists,” Shaked responded. According to an Israeli entrepreneur, for 5 years of existence of Fraud Sciences, the company analyzed about 40,000 transactions and was wrong only 4 times. Thompson decided to get rid of the uninvited guest and offered Shakeda 100,000 PayPal transactions for analysis, hoping that the work would take years. This meeting took place on Thursday - and on Sunday morning PayPal was provided with a comprehensive transaction analysis performed by Fraud Science. PayPal experts needed a week to compare the results of Fraud Science with their own. The comparison showed that the quality of the analysis of an Israeli startup is 17% higher than that of the international giant of payment systems. Thompson was amazed: a startup of 55 people effortlessly managed to surpass a multi-thousand corporation. Thompson's conclusion for Benchmark Capital was concise: you should not invest in Fraud Sciences, you must purchase it as soon as possible. The head of PayPal, along with Meg Whitman (Meg Withman), the president of eBay, offered Shvat Shaked and his companion Saar Wilf $ 79 million for the incorporation of Fraud Sciences into PayPal. The founders of the company refused. As a result, Fraud Sciences was sold for $ 169 million (with an initial investment of $ 7 million) - this was the second Israeli acquisition of eBay after Shopping.com , absorbed in 2005 for $ 634 million.
Ornet data
The history of this startup is no different from most Israeli success stories, but it was she who marked the new era in the development of the Israeli high-tech industry. In 1992, Orna Berry, together with five colleagues from the young Israeli company Fibronics, created a startup Ornet Data Communications. The company was engaged in the development of software and hardware for local area networks - Ornet Data solutions doubled the speed of data transmission in the network. Moreover, one of the company's developments has increased the network bandwidth 50 times. It was Ornet Data that became the first Israeli startup that was acquired by a European company - in 1995, Siemens paid $ 32 million for the brainchild of Orna Berry, opening Israeli high-tech to the world. It should be emphasized that the creation of Ornet Data itself would have been impossible without government support, in particular, without the Yozma and BIRD projects, which we will mention later.
Given imaging
The RAFAEL military-rocket scientist for more than twenty years has been carrying out the idea of ​​creating ... a medical gadget that can radically change the methods for diagnosing the digestive system. Gavriel Idan (Gavriel Iddan) implemented the concept previously described only in fantastic literature: he founded the company Given Imaging is engaged in the production of "tablets" with built-in cameras that allow you to accurately diagnose problems in the abdominal cavity. The miniature tablet contains a camera, a wireless transmitter, a backlight module, and a battery. The doctor can monitor the picture in real time: the camera transmits 18 images per second, and the battery charge lasts for several hours.
In 2001, Given Imaging was the first company in the world to make an IPO on Wall Street after the September 11 attacks. 6 years after the foundation of the company, about 100,000 PillCam “tablets” were sold in the world, and three years later, this figure reached 700,000. Today, renowned competitors appear in Given Imaging - not so long ago Olympus entered this market segment. However, this does not prevent the company to remain the undisputed leader in its niche and continue the development of a unique product.
BIRD
A study by Professor Dan Breznitz (Dan Breznitz) , which he conducted while working at MIT, revealed that by 1992 about 60% of Israeli companies whose shares are listed on the New York Stock Exchange and 75% of companies belonging to NASDAQ were supported by the fund BIRD .
The BIRD (Binational Industrial Research and Development) Foundation with a starting capital of $ 110 million was created in 1977 by the governments of Israel and the United States to support joint technology initiatives. The size of grants ranged from $ 500,000 to $ 1 million, while support for projects was carried out over two or three years, after which the fund was deducted insignificant interest from the profits of companies that achieved success.
Since 1978, Ed Mlavsky has been appointed executive director of the fund, leaving the post of vice-president of Tyco International for a new venture. Mlavski called BIRD a “dating service” between American companies with access to the largest IT market and Israeli startups capable of providing unique technological solutions. During its existence, BIRD has invested over $ 250 million in 780 projects, whose aggregate sales today exceed $ 8 billion. Among US companies that have agreed to invest jointly with BIRD in Israeli high-tech are Avaya, Eastman Kodak, General Electric, IBM, Molex, Motorola, SanDisk, Texas Instruments, etc.
One of the key objectives of the fund was to teach Israeli companies the "rules of the game" in the US market. Young startups worked closely with US investors - not only to control the workflow, but also to get acquainted with the intricacies of the local IT industry. This made it possible to acquire a unique expertise even for those projects that were not justified economically.
ICQ / Yossi Vardi
The history of ICQ is certainly well known to everyone who is involved in the world of information technology, so we will focus on it only briefly, shifting the focus on the identity of one of the brightest Israeli investors.
The first version of ICQ was developed in 1996 by four students of Tel Aviv University : Arikom Vardi , Yair Goldfinger , Safi Vigiser and Amnon Amir , who created Mirabilis . Within six months, the company reported on the first million users, and after two years, the ICQ user base increased by 1 million approximately every three weeks. In 1998, Microsoft made an offer to acquire Mirabilis and the company had already started preparing for sale, as the father of one of the ICQ developers, one of the most successful Israeli investors, Yossi Vardi, entered the game. He firmly stated that Microsoft should not be considered the only company on earth that wants to get ICQ. Vardi was right - in June 1998, Mirabilis joined AOL, which paid $ 287 million for a startup.
Vardi’s Instor's grip brought him success in the future: he unlocked the potential of projects such as Answers.com (went IPO), Airlink (sold by Sierra Wireless), Tivella (sold by Cisco), Gteko (sold by Microsoft), Tucows (went to IPO ). Among other finds Wardi - fring , SpeedBit , SeeToo - projects that need no introduction.
While in Israel at a public meeting in Holon, Sergey Brin, co-owner of Google, said that it was Vardi who came up with the idea that made Google what the company is now: “Yosi gave us a magic formula, offering to occupy two thirds of the page with search results, and third to leave advertising. That is what we did. "
Foxytunes
In 2008, the news of the acquisition of FoxyTunes by Internet giant Yahoo! although it was a surprise, but not a bolt from the blue. In this connection, the “parents” of the startup, our former compatriots, brothers Alex and Vitaly Sirota, did not get tired of accepting congratulations.
Orphan's family arrived in Israel almost 20 years ago. Vitaly had by that time managed to graduate from Kharkov "Polytech" with a degree in computer science and instrument engineering, ran his own cooperative, and earned good money. Immigrant everyday life began for ex-Kharkiv citizens from the consequences of Operation Desert Storm, when several Iraqi SCADs fell daily on Israel, in retaliation for the American invasion. Then, in 1991, everything quickly fell into place - the family settled in Haifa, where Vitaly learned the course at Technion. Six months after his arrival, he already worked at IBM. In 1997, Orbot created Elbrus, a company that developed software for IBM and other IT industry giants. In 2003, Arcadia Medical Imaging appeared, and in 2005 FoxyTunes was registered.
Despite the possibility of receiving state support, the brothers chose FoxyTunes for a classic, market-based adultization scheme. And it involves, above all, the search for an investor. Today Orphans recognize that at first nobody believed in the profitability of their ideas, and appeals to numerous venture capital funds ended in nothing ... Others, having rested their head against the blank wall for the hundredth time, would have given up, but the brothers, apart from outstanding professional qualities, are distinguished by unprecedented persistence. Once they managed to get through to one of the get-togethers for investors arranged by the Israeli high-tech guru, Yosi Vardi.
The businessman immediately became interested in the development, and he offered disinterested help in promoting FoxyTunes. But, being consistent marketers, the brothers wanted to see Vardi as an investing partner. Having invested $ 3 million from his own funds, Vardi (more precisely, his name, reputation and connections) helped to attract additional investments from the USA. Seeing who is behind the young company, Americans often refused to check FoxyTunes. Suffice to say that Steve Case - the founder of AOL - was one of the investors. Today, Vardi assures that he “will beg to allow the Orphan Brothers to invest in the following projects”.
Yozma
A unique state project aimed at the formation of the Israeli venture capital industry was originally created to help the adaptation of repatriates from the CIS. Yigal Erlich (Yigal Erlich) , the chief scientific adviser of the Ministry of Industry and Trade of Israel (the so-called "chief scientist") put forward the idea of ​​creating a state structure to support small and medium-sized businesses in the field of technology. Ehrlich's opponents offered another solution - instead of supporting a large number of start-up companies, strengthen partnerships with international corporations capable of employing Israelis in their branches.
As early as 1991, thanks to the Technology Incubator Program project in Israel, the first 24 technological incubators appeared in which engineers and scientists from the ex-USSR rushed. The scope of these incubators included not only the development of new projects, but also an assessment of their market viability. At that time, hundreds of IT companies appeared, supported by government subsidies and loans of up to $ 300,000. Soon it became clear that the state could not support such a large-scale project alone - and start-ups that could not create a commercially successful product began to massively close.
Ehrlich proposed to radically reorganize the entire system of state support for start-ups, introducing venture investments into it. The benchmark for him was Silicon Valley with superbly implemented technical, economic and social infrastructure. So in 1993, the Yozma project (the “Initiative”) appeared, providing for the investment of state funds in the amount of $ 100 million in the creation of ten new venture funds. Each fund was represented by three parties: an Israeli investment structure (a commercial company or a bank), a foreign venture capital fund and a professional Israeli venture capital investor, an ace of his / her business. Yozma 1,5/1 ( $1,5 , — $1 ), 2/1. , .
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According to Ehrlich, the Yozma project initially assumed that the state acts only as a catalyst. Ten funds created by Yozma from 1992 to 1997 attracted more than $ 200 million of investments, after which the government allowed them to be privatized. Today, the total capitalization of these venture funds is about $ 3 billion, and Igal Erlich joined the board of directors of Russian Venture Company last year and is trying to repeat Yozma’s success on the Russian market.
Israel Seed Partners
Looking at the success of Yozma, entrepreneur John Medved decided to go further and create a structure that will invest in the very early stages of the project. Medved learned that Yozma allocated $ 5 million in the budget directly for these purposes, and the share of participation in such projects was 50:50. Experts Yozma found that reducing risks will attract more investment - and were right. However, Medved was late in submitting an application to finance his own project and decided to start without state assistance. By that time (1994), American investors were so impressed with the achievements of the Israeli high-tech industry that they quickly raised $ 2.5 million to form a venture fund for Israel Seed Partners . 1999 . ISP $40 , 2000 . $200 .
: Israel Seed Partners , Shopping.com ( eBay), Compugen Ltd Answers Corporation ( IPO), Cyota Inc. ( RSA Security), Native Networks ( Alcatel), Xacct Technologies Inc. ( Amdocs Ltd.) Business Layers ( Computer Associates).
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A good example is the story of the appearance of the Pentium M processor and the entire Intel Centrino platform in the form in which it was born. But first, a little retrospective. Recall that Intel's Haifa division in 1980 developed the 8088 processor, which marked the beginning of a new technological era. The same Intel 8088 that IBM chose to build the first IBM PC. The next breakthrough in microprocessor technologies was also made in Israel: Intel's Jerusalem branch introduced 80386, the world's first 32-bit processor for the IBM PC platform. The industry developed in accordance with Moore's law, but by the end of the millennium many began to talk about technological impasse: along with an increase in the processor's clock frequency and a decrease in the area of ​​the crystal, the problem of extreme energy consumption and heat generation arose.This problem was particularly acute for mobile solutions - with limited space for installing a cooling system and limited battery life. The Israeli branch of Intel was so passionate about this task that the corporation decided to focus the development of mobile processors right here. “The Israel Working Group, before deciding that we were going to work on mobile solutions, promoted mobility ideas that went against Intel’s overall strategy,” says“The Israel Working Group, before deciding that we were going to work on mobile solutions, promoted mobility ideas that went against Intel’s overall strategy,” says“The Israel Working Group, before deciding that we were going to work on mobile solutions, promoted mobility ideas that went against Intel’s overall strategy,” says (Dadi Perlmutter) , - Intel Israel. (Rony Friedman) , , - , , , . - Intel - . , : « – , – ». (Paul Otellini), «PC and server microprocessor» . . Intel Israel , - - , « ».
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Source: https://habr.com/ru/post/95650/
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