Been there, done that

Hi-tech will skirt war's fury, Red Herring's Alex Vieux says.

By JOHN BENZAQUEN
alex vieux 88 298 (photo credit: Courtesy)
alex vieux 88 298
(photo credit: Courtesy)
The Israeli hi-tech scene in July 2006 is one of contrasts. On the one hand it is a dynamic thriving industry, which a very important part of the global hi-tech industry. On the other hand, Israel is a country at war with its North practically paralyzed by rocket attacks. Can a global industry exist in a war zone? Alex Vieux, chairman and chairman and chief executive officer of Red Herring, one of the world's leading hi-tech publications doesn't see why not. JP: We are conducting this interview in the shadow of the current Israeli war in Lebanon. Given that the hi-tech industry exports over 90 percent of its products and is heavily dependent on foreign capital inflows, do you think the present situation will be harmful to industry? Vieux: Why should it? I have been involved in the hi-tech industry for 25 years and have watched with keen interest the development of the Israeli hi-tech industry into a global leader in research and development and innovation. During this time, Israel has been involved thrice in violent clashes and this has not affected the hi-tech industry. Israel has a strong technological and scientific base that is the grass roots of the hundreds of start-ups founded every year. Furthermore, the industry has proved through the years that fast or feast it stands by its commitments - it delivers on time and the VC funds generate profits for the investors. And that is what Israel's "partners" are interested in. Investors are interested in returns and the overseas clients want to know that the Israeli companies deliver on time. JP: But is not the fact that the industry is so dependent on overseas markets a source of weakness? Vieux: On the contrary, it is a source of strength in the present situation. If the current situation continues, it will have a negative affect on consumption and the economy. I hope this will not happen, but if it does the hi-tech industry is completely insulated from these effects. Its markets are outside Israel so it has nothing to worry about on that count. JP: Do you mean to say that if a certain Israeli VC fund is trying to raise money today investors will behave in a "business as usual" way? Vieux: No, I do not. The war in Lebanon will not have a negative long-term affect on the Israeli hi-tech industry, but at these immediate times Israeli VC funds will find that it is more difficult to raise money and hi-tech companies will find it is a bit more difficult to arrange new contracts. But this is a passing phase. Such a reaction is perfectly normal. When things of this kind happen there tends to be an over-reaction, but then things settle down and they go back to normal. But, even at these times, companies who are buying Israeli hi-tech products or Israeli know-how will carry on buying and Israeli VC funds will be able to call in funds even at these difficult times. JP: You know that in 2001 and 2002 at the height of the Intifada overseas investors and buyers were afraid to come to Israel. Vieux: Israel had the bad luck of having two crises at the same time - the burst of the hi-tech bubble and the Intifada. With regard to people coming to Israel at these times with rockets falling and the falls being graphically depicted by the TV, perhaps not many will brave it. But business has a tendency to go on, and I believe that these investors and overseas buyers will not stay away for too long because Israel generates a lot of hi-tech business a lot of profits, JP: Will not India and China take this opportunity to make inroads into Israel's markets? Vieux: I do not think that these two countries are a serious danger to Israel. These are vast countries that will have to divert most of their produce for home consumption. Furthermore, Israel as a small country with a very high reputation in hi-tech innovation can hold its own in niche markets.