Deal at first sight? Foreign cash meets Israeli ideas

Tel Aviv dealmakers conference brings together start-ups, multinationals, investors.

February 28, 2012 21:05
Deal makers conference

Deal makers conference 390. (photo credit: Screenshot: Media Line)

TEL AVIV – It all happens in the hallways. More than a thousand start-up entrepreneurs and investors were in Tel Aviv in the business equivalent of speed dating – matching up capital with young companies developing innovative new products and services, sometimes in a matter of minutes.

The entrepreneurs – mostly Israelis –pitched their ideas in brief presentations to so-called angel investors, wealthy people ready to risk capital on a product just coming onto the market or not even off the drawing boards. In a few precious minutes one start-up makes its investment case and gets an offer from an American to kick in $15,000.

Be the first to know - Join our Facebook page.

The Israel Dealmakers Summit, sponsored by the New York-based strategic and financial advisory firm Landmark Ventures, met to bring together investors with promising new technology ventures produced by the fertile minds of Israelis, who have been behind groundbreaking innovations in medical devices, biotechnology, Internet and wireless.

More than 125 foreign executives and investors came from over 20 countries. Many were in Israel for the first time.

“This conference is designed to be a deal-making summit,” Zeev Klein, Landmark’s  general partner, told The Media Line. “The goal is to bring international corporations and investors to Israel, many of them coming for the first time, to really learn about the innovation here. This is actually our fourth year in Israel.”

Why travel thousands of miles to Israel when Silicon Valley is so close?

Investors and entrepreneurs say it is because Israel is the No. 2 place in the world as a generator of innovation. National expenditure for research and development is 4.9% of gross domestic product, the world’s highest rate.  The country ranks second in the world for the amount of venture capital (VC) invested in start-up companies. Last year, venture capital funds, the traditional source of finance for new companies, invested more than $2.1 billion in technology start-ups.

“In many ways it is as a country what Silicon Valley is to the region,” Saul Klein, a partner at Index Ventures, told The Media Line.

“It really has the full breadth and diversity of every single tech sector to invest in, so Internet, software, mobile telecom, security on the tech side and life sciences, medical devices, clean tech. There is a huge diversity of opportunities,” he says. “We have probably invested in 20 companies in Israel over the 10 to 15 years.”

Start-ups are the lifeblood of Israel’s economy. That why Finance Minister, Yuval Steinitz, told the conference he was counting on angel investors and others to keep investing to help maintain Israel’s 5% annual growth rate.

Some of the companies making pitches to investors came from abroad, like Canatu from Finland, which is developing a waterproof cellular phone. Others are Israelis, like On the Mob, which creates market strategies for mobile-applications developers.

“We advise on the user experience of the app, how to generate income from the app, if it’s on-line, purchasing the app itself to remove ads,” Barak Schneider, business developer for On the Mob, told The Media Line.

Top executives came representing of some of the world’s biggest companies, like General Motors, General Electric and Cisco. Jeffrey Swartz, former chief executive officer of Timberland, the US maker of iconic hiking boots and outdoor wear, has some advice for young entrepreneurs.

“I think actually every young entrepreneur knows the answer to the question -- they just don’t know the question. And I think that if young entrepreneurs would just spend a little bit of time -- a little bit of time -- to ask themselves not what am I trying to do, what market am I trying to serve, but what is my purpose? It’s a question of identity, personal, but it’s also a question of identity corporately,” he told The Media Line.

Israel has pioneered some of the most widely used technology, from the disk on key, instant messaging and Internet firewalls.

“It’s a great success in establishing connection between innovative thinkers in Israel, innovative doers in Israel and finders,” Swartz says. 

The impression is that entrepreneurs are younger and younger these days. But Zeev Klein says Israelis are getting more experience.

“In terms of the youth of the entrepreneurs, we’re seeing a lot of these [are] second and third generation. Early in Israel, you were seeing these first time out, really kids and, like many of us, they had to learn their ropes a little bit. So you’re seeing now more seasoned entrepreneurs and the major impact of these seasoned entrepreneurs is that they’re more globally sophisticated,” Swartz says. “They’re capable of walking into GE’s office or Sony’s office and actually pitching them about making an investment.”

And what are investors looking for?

“We’re looking at a lot of interesting new things in augmented reality,” says David J. Blumberg, managing partner of San Francisco-based Blumberg Capital. “Augmented reality is bringing the physical world of the sea view in front of us and giving the virtual world to enhance it, to augment it.”

A typical application, he envisions, is one where the user aims his or her cellphone at a street and it shows you where the nearest drugstore or café is located. “It’s bringing data from the web, from the virtual world, to bear into the physical world. And you can see the application in games when you can have a virtual opponent to play a game with you. And you can have a virtual obstacle course that you have to jump and run and play through and a number of companies work in that field.  It came a lot from the military so Israel has again an advantage,” he says.

Niall Maloney, vice president for strategic alliances and licensing at the U.S. publisher Houghton Mifflin Harcourt, flew over from his office in Dublin looking for new technology to augment the company’s line of elementary and high school textbooks.

“As a global-leading publishing house, our next 3-5 years will see a dramatic shift in the way our content is delivered. Kids expectations are digital. Israel has exciting and innovative companies,” Maloney says.

At last year’s conference Maloney closed a global licensing program with Ginger Software, an Israeli company whose software is like a spellchecker on steroids. Using proprietary algorithms, Ginger corrects major spelling and grammatical errors and revises them into natural English, a boon for people whose first language isn’t English.

“This year we are looking at several options, including a company with printing technology for small print runs in local markets as well as a   revolutionary digital platform for trade shows and marketing events called BlueStone.”

Avigdor Sapir, BlueStone’s founder, began this start-up a year ago and in October reached an agreement with a leading German trade show company, Hamburg Messe und Congress GmbH, to offer his platform to the trade.

“People give out brochures of their companies or e-mail them and most of the company representatives end up throwing them away. This technology enables the customer to show off their brochures on a smartphone and select which documents they are interested in and by pressing ‘sent,’ they are delivered to a spatial site which BlueStone builds for them.”

And what were the words of advice the funders had for the Israelis? Saul Klein has a simple one: “Raise just enough money so that you can get to your next major milestone.”

Jeff Pulver, an American angel investor who has put money into scores of Israeli start-ups and known as a pioneer in Internet telephony, describes what he looks for when he invests.
“I like to believe that we don’t know the next best thing but when I invest in start-ups, I look for the ruach [spirit] of the person,” he says. “I look for their soul. I look in their eyes and see their passion. I need to believe that this is going to be something terrific. If so and I have the chance to invest, I will. Because at the end of the day, I invest in people, not companies.”

Related Content

Anti-government protesters demonstrate on a street in central Ankara
June 16, 2013
Thousands take to streets of Istanbul, defy Erdogan


Israel Weather
  • 13 - 28
    Beer Sheva
    12 - 22
    Tel Aviv - Yafo
  • 13 - 23
    12 - 22
  • 18 - 31
    14 - 28