IF A HOLLYWOOD PRODUCER ever chose to make a docudrama on Israel’s extraordinary high-tech triumphs, 51-year-old Erel Margalit could easily star in the film.An athletic and youthful-looking former basketball player, an articulate cheerleader for the start-up nation, he is a former kibbutznik who grew into the country’s most successful venture capitalist. It was an odd career choice for someone living in a socialist commune who, at age eight, tagged along to watch his father work in the kibbutz dairy farm.Because of Margalit and other high-tech titans, Israel ranks second only to the United States in high-tech accomplishments.Ensconced in socialism Nor does he mention that in November 2004 Forbes Magazine selected him as the highest ranking non-American venture capitalist on its Midas (Golden Touch) list, the annual ranking of high-tech deal makers. Nor that in 2010 The Marker, the business supplement of Haaretz, named him the number one venture capitalist in Israel.Margalit was born in 1961 on Kibbutz Na’an near Rehovot and remained there until age eight – too early for him to play with computers, but not too ensconced in socialism to dream of becoming a businessman. Moving with his family to Detroit, Michigan, where his father taught Hebrew school, he honed his athletic skills, playing junior-high school basketball, the only white player on the team.Unable to pronounce his last name, black team members dubbed him Earl the Pearl after 1970s NBA star Earl Monroe.On returning to Israel, the Margalits settled in the northern town of Karmiel, and then moved to Jerusalem. Margalit served in an elite combat unit during the Lebanon War in 1982. Then, after studying philosophy and English literature at the Hebrew University, he still had no idea what kind of business career he wanted to pursue, only that he wanted to found “a strong business,” he recalls.At age 24, he then moved to New York City where he earned a doctorate in philosophy and logic at Columbia University. His doctoral thesis was on “The entrepreneur as a leader in the historical process.” He says he loved studying. “I wanted to quench my thirst for knowledge,” Margalit tells The Jerusalem Report. During his studies, he worked for Moish Movers, hauling heavy furniture around Manhattan, living in what he describes as a “shoebox” apartment. Finally, upon his return to Israel in 1990, his career choice dawned on him: he would make his new hometown of Jerusalem into a high-tech capital. Not yet 30, he was appointed to head the City Hall Department of Business Development under then Jerusalem Mayor Teddy Kollek. He was in the ideal position to find local start-ups but the task of enticing major high-tech firms from the United States to establish branches in the Holy City had proven formidable to his predecessors. Known more for its piety and ancient history than its high-tech achievements, Jerusalem had watched disappointedly as the majors in high-tech gravitated toward Tel Aviv and Herzliya.Margalit’s notion of serving as a bridge between would-be high-tech investors and wannabe start-up brainiacs came to him as he and Kollek traveled by train between Maastricht and Amsterdam in The Netherlands in 1992. Their goal was to lure a few European brainiacs to Israel.Reading Robert Reich’s 1991 book, The Work of Nations: Preparing Ourselves for 21st Century Capitalism on the train, Margalit elicited this Reich takeaway: The money men eager to contribute to high-tech have had trouble finding the right match with potential start-ups. “The big capital was there,” says Margalit, “but those who had it could not look at all the ideas that were out there. There were just too many. These technology firms that we were trying to lure needed guidance and money. I tried to supply both.” He managed to entice 70 technology firms including Intel, Motorola and IBM to establish branches in the Holy City.New tone When he left City Hall in 1993 after Kollek lost the mayoral election to Ehud Olmert, Margalit shifted to the private sector, hoping to entice Israelis to design and execute websites that would revolutionize the Internet. “I wanted to find a competitive advantage for Israelis to come to Jerusalem and start their own digital initiatives,” he says.Margalit’s decision to establish JVP in Jerusalem fulfilled a promise he had made to Kollek to keep whatever high-tech firm he created in the city. It was one of Jerusalem’s first venture capital enterprises. Setting a new tone and model for Israeli venture capital investing, Margalit has used a handson approach not only to fund high-tech firms but also to help build them, a combination that made JVP unique.Viewing himself as a nurturer, Margalit sits in on weekly meetings with colleagues who oversee the start-ups. To Margalit, what Jerusalem uniquely offered to high-tech start-ups were its storytellers, intellectuals, and its religious zealots, who with their creative juices could ignite a new passion and creativity that would enable these startups to bolster their Internet-aimed content.Yes, high-tech firms need engineers and software geniuses, suggests Margalit, but they also need creative minds that understand consumer desires. What Margalit was saying: Ignore these creative types at your peril. Even the religious zealots can be creative. A philosophy student who steered clear of studying business, Margalit learned to appreciate combining disciplines such as engineering, philosophy and, of course, – storytelling. While employees of JVP’s companies work behind closed doors, the usual secrecy that prevails at other high-tech start-ups appears not to exist once the firm’s doors open. Mingling freely in the modest lunchroom, hiking twice a year to the Dead Sea, providing updates of their companies at regular “happy hours,” workers feel more a sense of camaraderie than rivalry. Margalit’s start-ups have been around long enough to conclude that, to one degree or another, staffers are high achievers.Seemingly out of thin air, a commercial restaurant called Hasadna (The Workshop) and a music venue known as The Lab that now houses a local branch of the Tel Avivbased Zappa Club have blossomed on the grounds of the JVP compound, turning the once disused area into a new cultural and entertainment nightspot that is helping to revitalize Jerusalem.For Margalit, fund-raising has always posed one of his greatest challenges. Once, in 2006, Margalit was seated at a New York City bar with former Sony entertainment chief Michael Schulhof, hoping to lure big bucks from the Sony executive for any of a number of Israeli companies. But, locked into a view that the Israeli economy swirled around the Israel Defense Forces and its derivative high-tech products and not the civilian high-tech industry, a highly cynical Schulhof at first proved stubbornly resistant to Margalit’s overtures.Maybe it was the liquor. Maybe it was Margalit’s charm. Finally, Schulhof relented, asking: “What kind of Israeli start-ups are you talking about?” Acknowledging that he had no idea, Margalit suggested that they both write on a napkin the kind of start-ups in which they would invest. As the ink on their napkins began to dry, both men realized that they had nearly identical views: They had each described a company that on short notice would provide brief movie scenes for websites that required such items. Imagine a TV entertainment program wanting to show what a dumb idea someone just had, when suddenly Jerry Seinfeld and George Constanza pop up on a nearby TV screen in the program’s studio with George shouting, “Boy, was that a dumb idea.”Napkin scribbling The result of the napkin scribbling was JVP start-up AnyClip, which was founded in 2008 with backing from Schulhof. Three years later, it secured a major deal with Universal Studios to use favorite clips on the web taken from the film giant’s enormous library. Two other JVP start-ups are Double Fusion, founded in 2004, that inserts real ads into online games; and Qlipso, founded in 2007, which allows users to share and comment on their online social video experience.So financially rewarding has Margalit’s JVP proven that he has turned to philanthropy to implement his conviction that Israeli education, especially for the poor, needs improvement. His program, JVPCommunity, works to bolster the academic achievements of 3,000 underprivileged students in over a dozen Jerusalem schools.Convinced that leaders matter, as researched in his doctoral thesis, and seeking a national stage for his views, Margalit dipped his toes into political waters in April 2011, seeking to become the head of the Labor Party. It seemed a long shot and just 10 days before the party primary, he dropped out of the race and threw his support behind Knesset Member Isaac Herzog, who subsequently lost the leadership contest.Margalit offered no public explanation for his departure from the Labor Party race but the brief experience clearly whetted his appetite. He sounds enthusiastic about running for the Knesset in the next elections scheduled for October 2013, hoping to raise the consciousness of other politicians toward the high-tech sector.“Politics,” says Margalit, “is the only field in Israel that has not shown an entrepreneurial spirit for the past 20 years. What I hope to do is to inject into government the same spirit of innovation, daring, imagination, working together, and doing things internationally that we have been able to do privately.” It should not be surprising to find Margalit suggesting that such private sector high-tech all-stars would make fine political leaders.He certainly appears to have himself in mind as one of them.Though Margalit and Jerusalem Mayor Nir Barkat may appear to be two peas in a pod – both are about the same age, both were officers in the army and both became computer entrepreneurs only to turn to politics – they are not, at least for the moment, political rivals. Barkat says he wants only a career in municipal politics. Margalit hopes one day to become prime minister.Internet-related firms contributed $12.6 billion to Israel’s economy in 2009, a remarkable 6.5 percent of its gross domestic product.Margalit has spearheaded some of Israel’s most exciting high-tech deals and is a driving force in the industry. He steered Qlik Technologies to one of Wall Street’s largest initial public offerings in 2010 and oversaw the sale of Chromatis Networks to Lucent Technologies for $4.8 billion that same year.Over nearly two decades, Jerusalem Venture Partners (JVP) – founded by Margalit in 1993 – has invested in 90 startup firms, most of them abroad. Nearly 10 times that number apply for support from JVP, but Margalit is very picky. A short walk from Margalit’s office in the new JVP Media Lab overlooking the Old City of Jerusalem is a collection of 16 JVP-funded start-ups, some of the most thriving in the country. He monitors them closely, meets their executives regularly, and offers advice.The refurbished office building on Hebron Road once housed a British Mandate era mint that printed money. In effect, Margalit is still doing that. For all his achievements in the high risk, highly competitive, high-tech world, Margalit maintains a modest low profile.Over the course of an hour-long conversation in his simple office, he explains how he lures investors and assembles entrepreneurs for start-up work, but at no time does he mention his single greatest coup: selling Chromatis Networks – at the time, the largest ever sale of an Israeli company.