Exits, An Entrepreneur’s Perspective

As a current entrepreneur who recently raised money to start HeadSense Medical as well as a local industry veteran, my feeling is that exits are the only thing that matters for local Israeli companies. Without an exit plan, there is a very small chance of raising money for early stage Israeli companies.

An investor, who usually  sits on the company’s board, almost only cares about an exit as they need to justify their investment. Any investor who tells you that he believes in building a long-lasting company, and a long-term vision, is either a saint or a liar. They all want to invest as little as possible and earn as much money as quickly as possible. At lest the ones I’ve met.

From the company’s perspective, without an exit, it is almost impossible to expand. Most Israeli companies do not sell in high volumes. Other than Teva, Comverse, and Amdocs most local companies will never sell more than $10-$20 million every year. This is not enough for most companies to expand and sustain profitability. In many cases, selling the company to a bigger company is the only way to increase the business.

From the entrepreneur’s point of view, it is always better to exit, take the money and move on to the next challenge. The mythic exit of ICQ back in 1996 inspired many Israeli entrepreneurs. We dream of an exit, not about growing the company and getting a gold watch when we retire.

The Israeli government is trying to change this as they want companies to stay local and reap the tax benefits from both the company and its employees. But since the government has not done anything until recently the industry kept pushing for fast exits.

By the way, I am not sure that the European or American entrepreneurs do not think about exits in the same way. Most every small company in Silicon Valley craves to be bought by Google or Facebook in the same as their Tel Aviv counter-part.

Guy Weinberg
CEO, HeadSense Medical

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Diversity Breeds Israeli Innovation

Among the nearly one million Russians who fled the former Soviet Union and came to Israel in the 1990s, there were many physicists, mathematicians, and scientists. Israel quickly found a way to put them to work by creating the elaborate incubator system. The system gave these doctors and scientists money and support to launch all sort of new businesses based on their professional expertise.

As a nation of immigrants, Israel thrives on its diversity. You can feel it as you walk through neighborhoods and see Ethiopian, Russians, Iraqi, Indian, and American born Jews flowing through the streets. This diversity is not only good for the food in this country (which by the way is amazing) but the fusion of these diverse cultures contribute heavily to the massive amounts of innovation coming out of Zion.

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Bill Gates, Google, and Israeli Innovation

No less a ginormous entrepreneurial guru icon than Bill Gates has said that Israel, relative to its size, has done as much to spur the technology revolution as any other nation on earth.  See what I’m saying?

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Covertix Receives Red Herring’s 2011 Top 100 Award

I reported a while back on Covertix and its studly CEO Alon Samia.

But now Red Herring’s backing me up. Covertix, an innovative provider of Information Rights Management (IRM) solutions for sensitive data file-level protection and control, just received the 2011 Red Herring Top 100 Europe Award, a prestigious list recognizing this year’s most promising private technology ventures coming from Europe.

Red Herring selected Covertix from a pool of hundreds of companies from across Europe. The nominees were evaluated on both quantitative and qualitative criteria, such as financial performance, technology innovation, quality of management, execution of strategy and integration into their respective industries.

Covertix, based in Even Yehuda, develops solutions to equip enterprise organizations with independent file-level surveillance and control, protecting sensitive data, inside and outside the organization. Covertix’ flagship product – SmartCipher™ – is a file-level rights management application that secures and monitors confidential documents and sensitive data by traveling with the file inside and outside the organization. By doing so, Covertix provides enterprise organizations with the business agility to confidently share confidential information without being exposed to the risks of information abuse.

“Wikileaks and other related scandals demonstrate that existing technological approaches for information leakage prevention provide only limited security coverage and that organizations still need to better protect their sensitive data,” explained Samia, CEO and Co-founder of Covertix. “We are proud to be named a Red Herring Top 100 Europe company and see this award as recognition of the growing importance of Information Rights Management and our innovative approach to solving a problem faced by every organization.”

Previous winners of the Red Herring Top 100 award include technology leaders such as Facebook, Twitter, Google, Yahoo, Skype, Salesforce.com, YouTube, and Ebay.

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Where Israeli Innovation Goes To Die…Marketing

As a professional marketing and branding specialist with over 20 years experience dealing with major brands, I have a bit of a bias towards the branding/marketing/sales side of things. Having said that, I am a veteran of stubborn Israeli resistance to marketing any product–from the country itself to the various innovations stemming from here.

But the lack of polish and attention to marketing is done at each company’s and each innovation’s own risk. Guy Nadivi’s terrific piece in the Jerusalem Post underscores all of these points. I couldn’t agree more.

Innovation needs a market and branding, marketing, and sales are, like it or not, the funnel through which any successful innovation must flow. The sooner Israeli innovators (including the Foreign Ministry) learn this simple fact of life, the better. Otherwise all the lovely the fruit will simply die on the vine.

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Mantissa’s Game Changing Surveillance

The U.S. Special Forces taking out of Al Qaeda leader Osama Bin Laden reminded me of the incredible technological advances coming out of Israel due to nearly 5 decades of constantly combatting terror.

One such start-up is Mantissa which is developing a technological and application breakthrough that will change the rules of the game for surveillance, security, and “safe cities”.  Recently, Mantissa successfully completed the demo stage of its miniature radar, the size of a household camera. The patented system includes a sensor that combines high-frequency millimeter wave technology with innovative software algorithms that enable the radar to function in all-weather and to identify threats with great precision.

Mantissa’s miniature radar system is an order of magnitude less expensive than what is currently available on the market, possesses unique threat identification capabilities, and minimizes false alarms. This makes Mantissa’s security solution especially attractive for a wide variety of applications. Mantissa’s miniature MSHRS-300X sensor demonstrates the capabilities required for securing strategic facilities, critical infrastructures and borders. It works day and night, in all-weather conditions, and weighs a mere 490 grams. Its staring antenna enables vehicle recognition from a distance of up to 600 meters and can distinguish people from animals at 300 meters. The radar provides full information of target range, velocity, azimuth and heading. Thanks to its size and weight, it is portable and easy to install.

Mantissa is also developing a model of the radar for incorporation into Safe City systems which will enhance the war against crime and direct and supervise urban traffic more effectively and cost-efficiently than the cameras currently employed for the purpose.

According to Ehud Fishler, Founder of Mantissa, “Mantissa’s radars provide a solution to many of the drawbacks associated with security devices currently on the market, most of which are based on cameras. Camera usage involves costly personnel watching multiple screens. They have to work around the clock and are hard pressed to capture images at a great distance, track multiple objects, and work in bad weather or poor visibility conditions (like fog, dust and darkness). Our radars solve all these problems and outperform traditional VMD systems.”

Danny Seker, CEO of Mantissa, adds, “The capabilities, size, weight, and price of this radar make it feasible for use by every army unit, and military or civilian facilities. Our radar system supports a broad range of innovative functionalities and will usher in a new era for surveillance, security and urban safety. I have no doubt that within five to seven years radar-integrated cameras will be commonplace.”

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Spark Capital’s Big 5 Minute Impression

First impressions matter.

Spark Capital’s Alex Finkelstein claims to know in 5 minutes whether or not he will work with or invest in a company. When he met 4 guys in Tel Aviv with a similar vision as to aggregating cheap web content,  he knew was on to something. The first impression led to an inital $5 million investment in 5min Media, a company that was recently purchased by AOL to the tune of $65 million.

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