Thoughts Following My 8th Trip To Israel — & Why It Was The Best Yet
When you visit a place eight times in two years, it starts to feel like a second home. So I went with that feeling and rented an AirBnB in Tel Aviv. Though I’ve AirBnB’d many times on vacation, I’ve never done so on business. It’s amazing how that simple change can make all the difference. It also helps when you’re AirBnB is across the street from the spectacular Tel Aviv beach:
My AirBnB was also across the street from one of the 200 Tel-o-Fun bike sharing locations around Tel Aviv. I had rented bikes in Tel Aviv before, but on this trip, I rode them every day between meetings. This gave me a greater sense of the geography of Tel Aviv, which made it feel more like home.
For the 1st time I had more meetings with my portfolio companies than with potential new investments. While meeting new companies is often exciting, and I invested in a company, Upstream Security, that I met on my last trip to Israel, hanging with portfolio companies is certainly more familial.
There were two great conferences in Tel Aviv during my visit. The first was Geektime Next, with it’s Startup Arena competition featuring 4 simultaneous open stages. It was a blast judging the final round won by the “adaptive lending” platform Wisor! But the highlight of Geektime Next was the after party, and hanging with the who’s who of the tech ecosystem (aka friends).
The other great conference happening during my visit was the annual Jefferies Israel Tech Trek, which I write about in greater detail below.
As always, the best thing about the trip is the deepening of friendships that comes with spending time with sabras you like and respect. And each trip gives me greater confidence in my core investment thesis that — as amazing as the world thinks the Israel tech ecosystem is, the world still has no idea of the massive innovation and value creation to come.
This post highlights five thoughts about the Israel tech sector that came in to greater focus for me during the trip.
Israeli Companies Are Killing It In FinTech
Israel has a long list of FinTech successes, from pioneers like Payoneer and eToro, to newer companies like FeeX and Lemonade. But nothing is hotter now than crypto currency, with Bitcoin and Etheruem trading at market caps exceeding $40B and $30B, respectively. Part of the enthusiasm is due to Tokens and ICOs (Initial Coin Offerings) that are being built on, and enabled, via the blockchains. In this dynamic ecosystem, it’s exciting that Israel based Bancor recently held the most successful ICO to date, raising $150M in 2 hours for its smart-contract-based token conversion standard. It doesn’t matter that (most of) you have no idea what that means. To some degree, that’s the point. This is cutting edge FinTech and an Israeli company is helping lead the way.
For those with an interest in learning more about crypto currencies, I’m hosting this conference call on June 29th, at 2pm EST (sorry Israel), with Geektime, featuring four industry thought leaders (including Eyal Hertzog from Bancor).
Israel’s Economy Is So Strong… That The Rising Shekel Is A Problem
So there’s this….
As the chart shows, the shekel has risen 10% relative to the dollar over the last year. As revenue for most Israel tech companies is received in dollars, while much, or all, of their expenses are paid in shekels, the rise of the shekel is a challenging problem for many Israeli tech companies. The good news is that the rise of the shekel is the result of a strong economy. The bad news is that the rise has not been slowed by the Bank of Israel’s $5 billion in foreign currency purchases since the beginning of the year, and Israeli tech companies, like all Israeli exporters, are paying the price.
One of the nice thing about Israeli entrepreneurs is, when you ask them what their biggest problem is, they actually tell you.
Jefferies Does A World Class Tech Conference In Israel For U.S. & Israeli Institutional Investors
In my post on my 6th trip, I wrote about how the world is beating a path to Israel to learn about innovation. On this trip, I spent time with U.S. investors who came to learn about Israeli innovation (and investment opportunities) by attending Jefferies’ 3rd annual Israel Tech Trek. Jefferies put on a great conference, part of which took place at the beautiful Ritz in Heziliya.
VC’s like Tal Barnoach with Disruptive and Michael Granoff with Maniv Mobility gave compelling presentations on the booming Israeli tech ecosystem. Tomer Bar-Zeev, CEO of Israeli unicorn ironSource, gave an inspiring talk, where he spent time explaining why all the CEOs of the companies he buys stay with ironSource (hint, he’s in to alignment instead of earn outs). I was impressed by Steven Schoenfeld of BlueStar whose broad based Israel Global Stock Index (BIGI, tracked by the ISRA ETF) has outperformed the S&P500 by a remarkable 4%+ per year for the last 15 years:
Jefferies also brought the group to leading tech companies like Wix and Mobileye. But the highlight of the conference, for me, was visiting with Gil Golan, Director of the GM Innovation Center in Herzliya. Listening to Gil talk about the future of cars, and the role Israel is playing in innovation at G.M., was inspiring. I’ve written about how Israel is a major player in AutoTech far beyond Mobileye. However, what I didn’t fully appreciate, was that the second largest car company in the world was developing the most important technology for the future of the company in Israel. The following week GM unveiled their first prototype of an autonomous car, and it was built in Israel.
Samsung NEXT Is a Truly Unique Software Innovation Ecosystem
Since starting my first company, .tv, out of the idealab incubator, I’ve had a fascination with innovation ecosystems. Israel has many great ecosystems, including MassChallenge & The Junction . On this trip, I had the pleasure of meeting Eyal Miller, a founding member of Google Israel in ‘06, who left in 2015 to be the founding Managing Director of Samsung NEXT Tel Aviv.
Samsung NEXT launched 5 years ago in Silicon Valley to help Samsung drive innovation in the software side of it’s business. Today, Samsung NEXT is also in Korea, S.F., NYC, Berlin, & Tel Aviv.
NEXT Tel Aviv brings a range of activities to the Israeli ecosystem, including early stage venture investments and acquisition capabilities. However, the most unique part of Samsung NEXT is it’s EIR (Entrepreneur-in-Residence) program, which let’s entrepreneurs become part of the Samsung ecosystem, able to leverage the vast assets of Samsung and Samsung NEXT, while earning a salary and developing their ideas. The program seeks entrepreneurs with previous start-up experience, who want to build products strategic to Samsung’s current and future product roadmaps. EIRs benefit from leveraging the resources of Samsung as an employee, while maintaining the flexibility and focus of a startup, along with the potential for a Samsung acquisition. From day one, not only does the EIR get a salary, but they have a team at Samsung NEXT to help execute their plan as they build their own team, paid for by Samsung NEXT. Since launching last September, Eyal has recruited three EIRs to the Samsung NEXT program.
The ultimate objective for both Samsung NEXT and the entrepreneur is to build a product with clear market validation that is then incorporated into the Samsung ecosystem. Some EIRs with traction may instead spin-out to raise money externally with the support of Samsung NEXT. The EIR program focuses on fast iteration (targeted on average for 12–24 months of development) that leads to meaningul results, saving entrepreneurs from wasting precious time and avoiding the typical 5–7 years that it takes most successful startups to exit. Miller and Samsung NEXT offer entrepreneurs a new path to entrepreneurship and success that is benefiting the entire Israel Tech ecosystem.
Mobileye Is Throwing Gasoline On Jerusalem’s Sizzling Tech Ecosystem
Since visiting Jerusalem on my 6th trip, and experiencing the vibrancy of it’s tech ecosystem firsthand, I vowed to spend at least one day in Jerusalem every trip. Jerusalem’s tech vibrancy became apparent to the entire world in March, when Intel announced the $15B acquisition of Mobileye. As I wrote then, that deal is poised to dramatically accelerate the growth of the Jerusalem tech ecosystem, and that impact can already be felt.
I caught up with Yaron Ben-Shaul and Moe Mernick and got an update on the torrid growth at DIY video community Hometalk, a poster child of Jerusalem’s tech vibrancy. Another highlight was visiting Yonatan Wexler at Orcam (a sister company to Mobileye), which makes a clip on to glasses that looks at the world and tells vision impaired/blind people what it sees. Orcam is planning to IPO before year end. In this short video, an Orcam user talks about how the device is profoundly changing her life.
Venture capital is flourishing in Jerusalem. In addition to stopping by Cornerstone, OurCrowd, and JVP (where I visited siftech), I caught up with Ben Weiner of Jumpspeed Ventures, the only VC focusing exclusively on Jerusalem software startups. Jumpspeed’s 12 investments include air quality data aggregator Breezometer (named “Most Promising Startup in the World” by the White House when the White House still cared about air quality). I also met Zaki Djemal of fresh.fund, Israel’s first student-focused VC. Zaki, an impressive Israeli Harvard grad, raised money for his startup during college from First Round’s Dorm Room Fund- one of the pioneers of the “for students, by students” venture fund model.
Best Trip To Israel Yet
For many of the reasons stated above, and for many not mentioned, I remain hugely optimistic about the Israel tech ecosystem. It was another amazing week. I learned so much. I met so many great people and saw so many great companies. So why was it the best trip yet? I inferred that it was the best, simply because it was, by a wide margin, the saddest I was to leave. I missed my family back in NYC, and was excited to see them, but I was deeply saddened to have to leave what has truly emerged as my second home.
I can’t wait for my 9th trip to Israel in September.
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