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.
CEO, HeadSense Medical