Of missiles and chocolate – a tale of weight gain and war

There are those who would say “the first casualty of war is truth,” and there are even those who would say that what Israel is currently undergoing is not a war.

Whatever the case, I am here in Beersheva – on the “almost” frontlines of the conflict with Hamas – to tell you the first thing to go when missiles start to fall nearby, is your diet.

It could be the chemical high of the carbohydrates, or maybe the immediate kick of the sugar. It might even be the emotional pleasure of indulging in the chocolate in a guilt-free environment. I am no scientist, but my first-hand study has shown that when sirens are screaming, particularly if it is the second or third alarm in less than an hour, there is nothing more calming than a bite of fudge-filled chocolate cookie. Particularly when shared with the random gathering of strangers in the nearest bomb shelter.

Maybe it is different for people who are alone with the families in their residential “safe room,” but since I have spent most of the last week at my office at Ben-Gurion University of the Negev, in the heart of Beersheva, I have had an opportunity to research the dynamics of public shelters. All the more so as my office is on the ground floor, so each new alarm brings in a different collection of random passersby.

For even the toughest among us (and I am pretty tough), find it hard to maintain the stoic façade when faced with the group dynamics of panic and fear. Be it the child crying loudly in the arms of his panting father who has just done the 100 yard dash to the safe room, or the woman hunched in the corner with tears streaming down her face because she “heard the boom,” I have found myself passing out chocolate and cookies, jokes and silly stories. Anything to distract us all from the brutal reality that someone really is trying to kill us. And not just the immediate “us,” but the hundreds of thousands of residents in the cities of Beersheva, Ashkelon and Ashdod, and towns like Sderot, Gedera and everyone else in between.

Israel is not going to go away

According to my understanding of the world, it shouldn’t be this way. Israel left the Gaza Strip over three years ago, offering the Palestinians an opportunity to determine their own future. Unfortunately they chose Hamas, a party that advocates Islamic fundamentalism and a commitment to fight for the destruction of Israel. This agenda can only bring death and destruction as Israel is not going to go away. Nor will we average Israelis accept a reality where the Palestinians can shower a region with missiles and go unscathed.

The Home Front Command has closed all the local sports centers, closed the schools and canceled all afternoon activities. My children are now happily turning themselves into couch potatoes aware that no one will tell them to go outside and play. They are second-generation missile-dodgers: I met my husband in a sealed room during the first Gulf War.

Let me say loud and clear: my neighbors and I are willing to pack on a few pounds if it will mean the ultimate destruction of Hamas’ ability to shoot missiles at us. We are willing to sit in our safe room until the threat of missiles has been eradicated once and for all. (Maybe while Foreign Minister Tzipi Livni is in France this week, she can ask for a humanitarian shipment of quality chocolate to make it a bit more bearable…?)

Do not let the images on the news confuse you. Yes, there is suffering in Gaza. But Hamas chose to smuggle in weapons and ammunition to the Gaza Strip when they could have been supplying food, education, and health care to their people, developing their economy and working towards building a future for themselves instead of towards our destruction.

I blame them for my weight gain.

This article first appeared in Pajamas Media.

Why Israel is a Top Destination for Venture Capitalists

Everyone knows about Israel’s entrepreneurial spirit and great technology. Not everyone knows about the driving forces that created a climate where VC could flourish.John Lennon once said about the early years of Rock’n Roll, “Before Elvis, there was nothing”. On the success of venture capital and high tech entrepreneurship in Israel, to paraphrase Lennon, “Before Yozma, there was nothing”.

Yozma was a program that the Israeli government created in 1993 to develop a venture capital (VC) industry from scratch. Within a few years, dozens of local firms had been established and high-tech companies were routinely raising more than $1B a year on a collective basis from domestic and foreign sources. In 2007, the total figure was $1.76B, which in absolute terms, is comparable with the UK and France and greater than Germany, and per capita, comparable with the US. Since 1993, a number of major foreign VCs have set up branches in Israel, including Sequoia Capital (the firm behind Google and Apple), Benchmark Capital and Greylock Partners, while numerous others have provided financing to Israeli start-ups.

If it was purely about the technology, Israel would be an easy sell: some of the innovations emerging from this tiny country are mind-blowing. A great example is Given Imaging’s PillCam, a disposable pill-sized camera that is encased in a capsule and used to diagnose stomach disorders after being swallowed. Other Israeli developments have caused revolutions in their industries. Voice over Internet Protocol (VoIP) software, pioneered in Israel in the 1990s, has enabled tens of millions of consumers to carry out free telephone calls over the Internet. In addition, VoIP has had a major impact on telecom operators, many of which are converting their systems to transport voice calls via IP. In all, the list of highly influential innovations by Israeli companies is long and includes Internet security, voicemail, ICQ instant messaging and the disk-on-key, the flash memory device that has replaced the floppy disk as a method for saving computer files.

Success Stories in Succession

Although exciting technology is important, what also attracts VCs to Israel is the possibility of a successful exit. Israel has more companies listed on Nasdaq than any other country outside North America, and between 2004-7, Israeli firms raised $2.3B in IPOs on exchanges around the world. Moreover, the market capitalizations of many listed businesses have become considerable. Check Point Software Technologies, which pioneered Internet security, is listed on Nasdaq at a value of $4.1B, while Nice Systems, a leading supplier of digital recording systems, is worth $1.3B on the same exchange. Amdocs, a major developer of telecom billing software, has a market cap of $3.5B on the New York Stock Exchange.

In addition, many firms have been acquired in high-profile transactions, and between 2004-7, almost $18B was spent on the purchases of Israeli high-tech companies. The most significant deals include HP’s acquisition of IT optimization software firm Mercury Interactive for $4.5B and SanDisk’s buy of M-Systems, which invented the disk-on-key, for $1.6B. It is worth noting that these deals were announced during Israel’s war with Hezbollah in the summer of 2006, as was Warren Buffet’s acquisition of Iscar Metalworking for $4B. These are all extraordinary testaments to how the world’s top businesspeople view investment in Israel despite the geopolitical situation. Dozens of other multinational firms have made acquisitions in Israel as well, including Microsoft, Intel, IBM, Applied Materials, Siemens and Cisco Systems. This is important to VCs because it means they know that there is a long list of potential buyers for a successful start-up.

Many of the giant corporations that have bought Israeli companies also have research and development facilities in the country, attracted, among other things, by a superior workforce. As Bill Gates said, “For Microsoft, having an R&D center in Israel has been a great experience… The quality of the people here is fantastic”. This is also a factor for VCs, because they base their investment decisions on the caliber of a start-up’s management and the talent pool from which it can recruit. Per capita, Israel is among the leading countries in the world for the number of engineers, PhDs, patents, scientific papers published, and citizens with a tertiary education. The World Economic Forum ranks Israel highly for the quality of its research organizations, which include the Technion – Israel Institute of Technology, the Weizmann Institute, the Hebrew University and Ben Gurion University of the Negev.

In addition, compulsory military service helps Israelis develop strong leadership and teamwork skills at an early age, and allows them to put into perspective the pressures they face in business.

For some, these qualities are augmented through employment at large multinational corporations, where they attain skills that can be used in start-ups, while the connections made can help form partnerships and win clients. An excellent example is Moshe Yanai, who developed a technology for storage software giant EMC that generated billions of dollars in revenue. He later co-founded Diligent Technologies and joined XIV as chairman, with both firms being sold to IBM for a combined total of about $500M.

It would not be surprising if Yanai went onto form another start-up, as Israel is full of serial entrepreneurs who have achieved successful exits and are building their next companies. Because of their previous accomplishments, they more easily attract VC capital. One entrepreneur who has “done it before” is M-Systems founder Dov Moran. When he established his latest firm, cellular device company Modu, VCs queued up to invest.

Virtuous Circles for Venture Capital

Without taking anything away from Israel’s entrepreneurial spirit, credit is also due to Israel’s government, which established Yozma and other initiatives to help start-ups, support R&D and encourage investment in high-tech companies. And while Yozma and regulatory changes have directly stimulated VC investment, the government’s Office of the Chief Scientist (OCS) has indirectly encouraged this type of financing by running programs designed to increase the chances of success for high-tech companies.

One of the most important is the Israel-US Binational Industrial Research & Development (BIRD) Foundation, which provides funding to joint projects between US and Israeli companies. Since its inception in 1977, BIRD has invested over $245M in 740 projects that have produced sales of more than $8B. Israel has similar bilateral arrangements with other countries, as well as agreements with multinational corporations whereby the OCS helps them identify Israeli R&D partners and provides financial assistance to the partnerships.

Many of the factors that make Israel a top destination for venture investment form interlocking virtuous circles: Israel produces great technology because it has great technologists, which has attracted the attention of multinational corporations. These corporations help improve the quality of the technologists and their commercial abilities, whether as partners, employers or clients, and this contributes to the formation and/or success of start-ups. After some of these businesses are bought by foreign firms, the circle repeats itself once again. And underpinning this whole construct is the government, which created the VC industry and has done much to help it succeed.

Disclosure

Gemini has invested in companies mentioned in this article, Modu and Diligent Technologies.

In tough times Israel’s high-tech sector thrives

Despite the straightened economic situation, investments in Israel’s high-tech industry will pay off for those willing to take the risk.From processors to software, from innovations in online video to security systems, from cell phone technology to better ways to stay safe on the road, Israel is there – at the forefront, designing and producing the high-tech wizardry that has changed the world.

Some of the products produced by the “Israeli brain trust” are well known – like the iconic ICQ chat program, which revolutionized communications, leading to the plethora of Internet-based chat and phone solutions available today.

ICQ is just a case in point: Many Israeli companies developed their “killer” device or application with assistance and investments from venture capital investors and funds – investments that paid off big time when the companies they worked with arrived at a successful exit, either getting bought out by a multinational, or going public themselves, turning into worldwide enterprises which, in turn, snapped up promising Israeli startup ventures. With over 100 Israeli companies trading on the NASDAQ – the majority of them in the high-tech business – Israel is one of the world’s technology powerhouses.

First, some stats: Over little more than a decade, Israel has grown into a high-tech powerhouse, with the technology boom fueling Israel’s amazing GDP growth of the past few years, according to the Ministry of Industry, Trade and Labor. Nearly three quarters of Israel’s $70 billion of exports last year were in the high-tech sector, ministry statistics indicate, and the country has one of the highest per-capita rates of patents filed. In its latest report, the Israel Venture Association (IVA) said that high-tech companies raised $600 million during the third quarter of 2008, an eight-year quarterly high and up 45 percent from a year earlier, and 29% more than the second quarter. The World Economic Forum in its 2007-2008 report called Israel one of the leading countries in the world in technological innovation, ranked first for availability of qualified engineers and total expenditure on R&D.

Strong economic growth

The high-tech boom, along with the solid fundamentals of Israel’s economy, has helped the country sustain strong growth for decades, with GDP rising in most recent years. Israel’s GDP in 2006 reached $195 billion, according to the International Monetary Fund, and GDP per capita was $31,767 in 2007, the IMF said. After adjusting its forecast to take into account the world financial crisis, the Bank of Israel still predicts that GDP will grow by 2.7% in 2009. Israel has free trade agreements with the European Union, the United States, the European Free Trade Association, Turkey, Mexico, Canada, Jordan, and Egypt, and last year became the first non-Latin American country to sign a free trade agreement with Mercosur, the South American common market. According to Bank of Israel statistics, industrial exports grew by some 27% since the start of 2008 and high-tech exports climbed at an annualized rate of 18.2% over the past three months.

From modest roots, many Israeli companies have grown to be world leaders in their specialties. One such company is Checkpoint Software, the creator of the modern commercial computer network firewall. Checkpoint was established in 1993 in a small Tel Aviv apartment, by Gil Shwed, Shlomo Kramer, and Marius Nacht – and today the company has some 100,000 customers and 1,900 employees worldwide, with a market capitalization of over $4b. and 1,800 employees worldwide.

Nice Systems, which is involved in everything from telephony to Web, radio and video communications, has been trading on the NASDAQ since 1996, and has over 24,000 customers in 100 countries, including over 85 of the Fortune 100 companies. Both companies subsisted on investments in their early days, going on to far exceed the expectations of early investors.

In addition to private funding, the government of Israel runs a number of programs that provide help to promising startups. The Office of the Chief Scientist, the Israeli Industry Center for R&D (MATIMOP), and programs like the Israel-US Bi-national Industrial R&D (BIRD) Foundation, among many others, lend a helping hand with logistics, advice, and even funding.

The BIRD Foundation was established by the US and Israeli governments in 1977 to generate mutually beneficial cooperation between the private sectors of the US and Israeli high-tech industries, including start-ups and established organizations. BIRD supports approximately 20 projects annually with a total investment of around $11m. per year. To date, BIRD has invested over $245m. in 740 projects, which have produced sales of over $8b. Since the establishment of the Foundation 30 years ago, the accumulated repayments have totaled $82m.

A bright spot on the world high-tech map

Israel, in other words, is a bright – very bright – spot on the high-tech world map, with so much innovation going on, many entrepreneurs who take their companies to a successful exit come back for another round, hoping to build yet another startup into a successful world-changing company. In an interview with the Israel Investment Newsletter earlier this year, Gemini’s Carmel Sofer said that the rise of the “serial entrepreneur” was an increasing factor on the Israeli high-tech scene. “We were some of the earliest to spot a key trend we see playing out right now: the return of successful entrepreneurs,” Sofer said. “We’re seeing serial founders of startups rebound off successful exits and with money in pocket, begin building new businesses.

“We’re seeing more and more of this caliber of professional starting new companies. They’re not necessarily interested in the money. They have a strong commitment to building a company and they’re coming from a variety of different fields.”

One such “serial entrepreneur” is Zohar Zisapel, one of the most successful and prolific high-tech entrepreneurs in Israel, or anywhere. With 27 startups under his belt, Zisapel’s RAD Group of companies, which he co-founded with brother Yehuda, is considered the top developer of telecommunications startups in the world. In an interview this week with The Jerusalem Post, Zisapel said that he has worked with nearly all the VC companies in Israel, plus a good number from the US.

“In the early days, before there were VCs, we raised money ourselves. We got some help from the Chief Scientist on some projects as well,” he said.

In fact, Zisapel said, the assistance the government offers encourages VC investors to do business here.

“The Chief Scientist and others run excellent programs, which pay off for the country, encouraging not only specific projects, but an atmosphere of development, and a feeling that with enough hard work, a company can succeed. That drive encourages VC investors, to be more willing to put money into startups, and in the end, when there is a successful exit, both the investors and the country benefit. Even if a company doesn’t make it, the technology they developed will find its way into another project,” Zisapel said.

But hasn’t the world financial crisis changed the rules? What are the prospects for Israeli high-tech in the coming years?

Zisapel remains optimistic, saying he expects growth to continue. “So far, I haven’t seen a falloff in technology sales, at least by established companies, although I do expect a dip next year. But things will definitely not get as bad as they were in 2001,” when the dot com bubble burst.

“This bubble is for the banks and real estate, so it will affect high-tech less,” Zisapel says. While VC “angels” may temporarily be intimidated by the market and may hold off on their investing activities in the short term, and some brand new and almost-mature (pre-exit) companies that have a high burn rate may face real problems, he expects most well run developers to survive the crunch.

Invest when times are bad

“If anyone asked me, I would tell them that the time to buy or invest is when everyone else is afraid to, because you can get better terms,” Zisapel said. “Those investing in new companies now are looking at exits in perhaps five years,” when things should be looking much better, he said.

And if there’s one thing Zisapel has proven, investments in Israeli tech pay off for those willing to take the investment risk. When it comes to the innovation that is a feature of Israel’s high-tech developers, nothing’s changed, he says; the fundamentals remain the same. “What’s changed is the market, but the ideas are still out there,” he says.

And those ideas are as great as ever, according to Gemini’s Sofer. “We’re now witnessing the emergence of the mobile Internet, and this is coming from Israel. The mobile phone is no longer being looked at just for its voice capabilities, it’s being considered as a data device,” he toldIsrael Investment Newsletter.

“Many are trying to take Web applications and make them work on the phone. This is just part of the story. Those companies, and many of them are located in Israel, who can start developing mobile applications from the ground up as they look how users will interact with the Mobile Internet are going to be the winners. These companies are working on application development as much as building sustainable businesses.”

Regardless of investment climate, that development will continue – and investors like Gemini, who know a good thing when they see it, will continue to bring the future Israeli “stars” to successful exits.

Printed by courtesy of The Jerusalem Post.

Israel: The history of an economic miracle

Israel, like the rest of the world, faces serious economic challenges in the years ahead, but it does so from a position of strength.In Israel at 60, we are witness to an economy which has proven its prowess and competitiveness on the global scale, as evidenced by a shekel which is one of the world’s strongest currencies, backed by a surplus in the balance of payments.

A closer look at many of Israel’s companies shows numerous examples of the successful transformation from local enterprise to multinational firm. While one used to speak exclusively about high-tech and startups, today one sees Israelis involved in all sorts of ventures, displaying impressive managerial and entrepreneurial skill.

Last year, the Tel Aviv Stock Exchange chose five companies traded on the exchange that exemplify the trend towards global excellence. Teva, the world’s largest generic drug maker, is headquartered in Israel, while Strauss Group, which began as a family dairy, has expanded to Latin America, Eastern Europe and elsewhere. Elbit, a defense electronics maker, understanding that countries purchase arms only from “local” companies, set up international subsidiaries. Ormat, the geothermal energy producer, has manufacturing and research centers in the country while the actual power plants are built overseas, and Israel Chemicals exports the country’s natural resources around the world.

Aside from manufacturing and high-tech, Israelis are also active overseas in real estate, with Israeli magnates involved in projects in London, Toronto, Eastern Europe and the US. And bankers, lawyers and accountants are intimately involved in overseas dealings.

Israel underwent a wrenching economic crisis in the early 1980s whose roots were in the 1973 Yom Kippur War and the ensuing oil embargo but which continued until 1985. This “lost decade” of the Israeli economy saw near-zero per capita growth, inflation at dozens or even hundreds of points a year, and terrifying deficit and national debt levels. During this time, both the business sector and the quasi-governmental sector (health insurance, pension plans, kibbutzim) became completely inefficient and almost entirely dependant on the government, which at the time accounted for 70 percent of GDP.

Israeli industry received generous credit subsidies and tariff protection, while the financial sector was largely nationalized (with “special [government] bonds” receiving large tax breaks) while the markets were all but closed. Israelis generally refrained from foreign commerce, while foreign investors shied from commitments in the politically and economically unstable atmosphere.

At that point, the popular joke had it that the only way to make a small fortune in Israel was to come here with a large one. By the height of the crisis, in 1984-5, Israel was a total economic failure, requiring two major reforms to get the country back on track.

Stabilization program – 1985

The stabilization program passed by the government in 1985 managed to rein-in inflation from some 400% to a more manageable 20%, stabilized the balance of payments, but most importantly brought the deficit down from 15% of GDP to a surplus of 1%. By 1986, government expenditures had been cut back, and the government was legally prohibited from printing money to cover deficits, forcing it to rely on publicly traded bonds.

The massive reduction in spending forced the private and quasi-public sectors to become more efficient, as the government could no longer be relied on to provide funding. The years 1985-90 saw the private sector make great strides in efficiency and worker productivity while the labor unions were weakened and management was given the capability to fire employees at its own discretion.

Market liberalization 1991-2004

In 1991, Israel made a major strategic decision to gradually open the sectors of consumer goods, currency and investment to international competition.

Customs were slowly decreased to the point that the effective tariff protection today is less than one percent. Meanwhile, currency markets and, later, investments were also liberalized, and in 2004 Israel equalized taxation on foreign and domestic investment.

The liberalization of financial markets was finalized with the advancement of the stock exchange, as all financial instruments, including retirement funds, were made completely market-dependent. Such areas as telecommunications, the port system and the banking system were privatized.

The effects of globalization

Over the past five years, the Israeli market has become totally globalized, and the success has been impressive. The Israeli entrepreneur and businessman have taken full advantage of the possibilities of global commerce. The government has kept to policies of a stable budget, debt reduction and low inflation, while foreign investors have begun viewing Israel as a prime investment target.

The country’s success can also be seen in its performance in leading economic indicators: Number one in per capita R&D investment, and number one in startups, per capita. The business sector is also ranked very high (8th in the world) in measures of creativity and business savvy, as well as technological-readiness, widespread higher education and more.

Challenges ahead

Despite these impressive achievements, Israel faces serious economic challenges, primarily from the ongoing global financial crisis, which seriously affects globalized economies like Israel. Israel will face a test of fire for the entrepreneurial and commercial skills of its business leadership. Another challenge is the reform of the public sector, which, while financially stable, has shown poor results in such areas as educational achievement (40 in a ranking of 57 countries), infrastructure and environmental protection. The social inequality in Israel’s workforce is one of the worst in the world, and there is a low level of economic participation.

The revamping of the public sector is critical to the nation’s economic success – it is one of our key challenges in the coming years.

Printed with permission from The Jerusalem Post.

It’s an Israeli thing

For a foreigner, the Rabin memorial ceremony seemed a bit like Woodstock. Something like that wouldn’t have been possible in my homeland of Germany.

For someone who does not understand any Hebrew and is in Israel for the first time, the memorial ceremony for Yitzhak Rabin held in Tel Aviv recently seemed to me at the beginning to be a purely political event: Something which politicians use as a platform to express their opinions. So, I didn’t expect much.

But I was proved wrong.

As I was walking to the Rabin Square through Gordon Street I had to pass through several security control points manned by the police and army. I heard a helicopter hovering over me. They checked my bag, which felt strange, because although I have already been here a week, I’m still not used to it. And I am also not used to the guns. In Germany the police do not carry machine guns in public and the army is never present at such events, so the atmosphere is much less militaristic. But I do understand the necessity for it in Israel, or at least I accept it as necessary. I mean, I am just a foreigner here, what do I know?

As I reached the square I was astounded by the huge number of people who were standing there peacefully. Although I didn’t know what was written on the banners and the signs held by the crowd, I was encouraged by the number of young people around. I expected a mourning ceremony, not something like Woodstock. Well, of course it wasn’t Woodstock, nobody was naked or banging their heads to the music, but the general atmosphere and the feeling at the square seemed to be similar: A yearning for peace and for the world as a better place.

One banner, which I could read, said: “This is the time: Choose peace”. It was written by some American youngsters who joined a group of Israelis. They wore blue shirts and were part of a youth movement. They sang together the songs of freedom Israeli artists performed on the stage. And I thought how nice and warm it was – young people standing side by side is always the foundation for peace and understanding.

I asked the people around me to explain what the politicians were saying and what the songs were about. Nearly everyone in Israel speaks English; you must have a good education system!

One man on stage was the US Teamsters Union President James P. Hoffa, who brought greetings from the new US president-elect Barack Obama. It was okay, but his attempt to encourage the crowd to chant Obama’s campaign slogan, “Yes, we can”, was a bit over the top. This evening was not about Obama or about motivation for peace. I felt the people here were already very motivated.

I was especially moved by the song for peace, “Shir LaShalom”, and the national anthem, “Hatikva”. The people sang together, something which rarely ever happens in Germany. The people in my country seem to be too reserved for such a thing and they have also had bad experience with mass events and chanting and singing crowds. We are more a society of individuals, but we long for something like what was going on at Rabin Square. Maybe this is one reason why the Germans were so hyped up about the FIFA-World Cup 2006, which was held there. They could celebrate and sing their national anthem without feeling guilty. It was just sports, not politics.

As the Rabin memorial was over the organizers played “Imagine” by John Lennon in the background, and I became a part of the people around me. I know this song and I joined the singing people while they were already leaving the place. I sang phrases like “Imagine all the people, living in a world of peace,” and went home humming the melody.

Reprinted with permission from YnetNews (www.ynetnews.com).