Hi-tech icons debate the merit of quick exits

To seek a quick exit or not? That is one of the questions Israeli start-up founders asks themselves, and one on which local hi-tech icons Zohar Zisapel and Ed Mlavsky could not agree Tuesday.

Quick exits are bad news for the economy, said Zisapel, who cofounded RAD Data Communications in 1982 and oversaw its expansion into a group of 14 companies with combined sales of $1.25 billion.

“It’s good that we have entrepreneurs and that companies are being sold,” he said. “But if you look at this from a national economic standpoint, it is better to have bigger companies. Bigger companies employ more people. It is better for the rest of the economy, not just for the elite – who are able to start new companies and new ideas.”

But Mlavsky, founder of Gemini Israel Funds and widely recognized as one of the founding fathers of Israeli hi-tech, begged to differ.

“The last thing I want to see in Israel is a Nokia,” he said, referring to Finland’s struggling telecommunications giant. “To have the economy dependent on one company is not a good idea.”

Matt Marshall, editor-in-chief of US online technology blog VentureBeat, moderated the debate, which took place at the opening of Bootcamp Ventures’s two-day Israel Innovation Marathon in Jaffa. The conference brought together dozens of Israeli start-ups from different industries and investors from 15 countries.

Zisapel said entrepreneurs would benefit from adopting a long-term strategy because it would encourage them to invest in sales and marketing rather than just focusing on developing their technology.

“If you are successful [in achieving an exit,] that is okay, but it is a bit of a gamble,” he said. “If there are no buyers at the time you want to sell, then you are stuck.”

Mlavsky said Israeli innovators tend to become repeat entrepreneurs, meaning the local economy does not suffer as much as other economies do from quick exits. He referred to a Harvard Business School study that found only 5 percent of American entrepreneurs founded another company after their maiden exit. In contrast, he estimated that about 35% to 40% of successful Israeli start-up founders become repeat entrepreneurs.

Israeli digital media, mobile, e-commerce and IT start-ups pitched to representatives from offshore venture funds Tuesday, and more were set to appear on Wednesday. Companies that pitched on Tuesday included: Ridefrog, a location-based marketplace for carpooling that leverages social networks; PlugWallet, which allows Internet users to buy and sell goods and services without paying commissions to a third party; and ShopZooky, a social-shopping app that allows local merchants and shoppers to interact with each other.

Eric Van Der Kleij, CEO of the UK government’s Tech City Investment Organization, was among the foreign visitors. He visited several start-ups on Tel Aviv’s Rothschild Boulevard before the conference and told mayor Ron Huldai that it should be renamed “Silicon Boulevard.”

Van Der Kleij said he was keen to encourage more cooperation among UK and Israeli start-up companies through the British Embassy’s new UK-Israel Tech Hub.