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Erel Margalit’s powerful visions

Posted By ISRAEL21c Staff On March 30, 2006 @ 12:01 pm In | No Comments

An animated reception – (from left), acting prime minister Ehud Olmert; Max Howard, Executive Producer of feature length animations at Disney and Dreamworks SKG and manager of new animation studio; Erel Margalit, Founder and Managing Partner of JVP.The event was perfectly, quintessentially Erel Margalit.

Earlier this month, Margalit and his venture capital firm, Jerusalem Venture Partners (JVP) took over the open areas surrounding the old train station to launch Israel’s first-ever multimillion dollar animation and gaming studio.

JVP’s promotional materials promise that in southern Jerusalem, “where Hollywood Meets Silicon Valley,” JVP will establish “a creative hotbed in the Israeli field of animation to support original creativity in Jerusalem.”

When it reaches full operation capacity, in about 15 months, the studio is expected to employ nearly 200 people. Max Howard, who was involved in Disney hits such as The Little Mermaid and Aladdin, and Douglas Wood, formerly director of animation and story editor on Tiny Toon Adventures and Animaniacs while at Steven Spielberg’s Amblin Entertainment, will be heading up the project.

The politico’s were there, too – including Ehud Barak and Matan Vilna’i, who studiously avoided each other, while Acting Prime Minister Ehud Olmert spoke to the crowd, praising Margalit’s drive, vision, creativity and persistence.
Margalit was pleased. He had every right to be.

“I especially liked the mix,” he later said. “The major content people who came from Tel Aviv, the high-level investors from around the world and artists from here… The combination of people tells a lot about the direction we want to go and the vision we have.

“This is the point we want to make,” he continues. “There’s another dimension to the international business drive that Israel and Jerusalem could have. We could move beyond high tech and security, beyond technology, to other forms of creative ventures. Jerusalem has the energy.”

Ventures, vision, creativity, dimension, energy are the words that Margalit uses often as he describes his company, himself and his vision for this city.

He acknowledges that these may not be the words most commonly associated with Jerusalem, with its heavy burden of history, religion and conflict.

But when Margalit says them, these words are very convincing.

Erel Margalit, 44, is managing partner of JVP, a company valued at nearly $700 million. He is also chairperson of JVP Community, a nonprofit organization established by JVP to fund Margalit’s philanthropic activities. According to its own corporate overview, the bulk of the JVP’s activities are led out of its Jerusalem headquarters, where companies and management teams are created and built. JVP also has offices in New York and London, as well as portfolio companies in Tokyo and Shanghai. His personal capital is valued at well over $10m.

Margalit is compelling, passionate and engaging. Born on Kibbutz Na’an, he’s a former budding academic who today ranks 48th on Forbes magazine’s prestigious Midas List of 100 high tech investors with the “golden touch,” He’s the only Israeli and the highest ranking non-American on the list.

Trim, attractive and even sometimes self-deprecating in a Harrison Ford sort of way, Margalit’s energy is tightly bound; he studies, then pounces. As he probably did when he was a budding basketball cadet player for Hapoel Jerusalem nearly 30 years ago. As he probably does when considering an investment.

His offices in the Malha Technology Park are spacious but not ostentatious. True to creative fashion, employees, and Margalit himself, walk around in jeans and casual shoes and order take-out to the office. His own office is filled with pictures of his three daughters and his wife, Debbie.

Margalit’s visions and plans for Jerusalem are well-thought out and carefully articulated. Yet he doesn’t seem to mind in the least that his interviews are interrupted several times by his youngest daughter, who, she makes very clear, has every intention of keeping her daddy on the phone.

And just before he puts down the receiver and returns to exactly the point he was making before his cellphone rang, he doesn’t forget to ask her what she had for lunch, either.

Since he returned to Jerusalem from a two-year stint at JVP offices in New York – where he and his family, living in lower Manhattan, experienced the collapse of the World Trade Towers up close and very personally – Margalit has involved himself in everything from culture and media projects in southern Jerusalem, to nonprofits, to active financial and organizational support for Amir Peretz and the Labor Party.

He seems to be intent on acquiring social and political capital almost as quickly as he has acquired his financial capital.

Creativity is the new corporate buzz word these days and Margalit uses it freely. His vision for Jerusalem, he explains, has been changed by the writings of Richard Florida and his studies of what he terms “The Creative Class.”

“There’s something powerfully creative about Jerusalem,” he says. “Jerusalem is about content. Jerusalem has story-tellers, intellectuals, religious zealots, animators and entrepreneurs. Jerusalemites have a passion that is not quantifiable in business terms.”

Enthused, he continues, “We’re the people who told the greatest story to the world, and our story has been celebrated since antiquity. But we’ve copped out of all of that. We’re great at technology, but we’ve stopped telling our diverse stories. That’s what we have to bring back, because Jerusalem can flourish only as a multidimensional creative city.

“Sure, in Jerusalem we feel that we walk with a heavy burden and that our passions collide with each other. But that is because of the security situation. Today, Jerusalemites feel that our diversity is a liability, but it doesn’t have to be. Our diversity is our creative energy.

He continues, “When we talk about the creative class, we’re talking about people who are entrepreneurial in their thinking, whether they do it for profit or not for profit. These are the people who use their minds to reinvent or do something about their their society. These are people who are exciting and excited about their lives.”

JVP serves as an incubator for new technology companies, investing every year in five or six new start-ups. But Margalit’s real energies, it seems, are invested in what he views as the synergetic interaction between art, business and hi-tech.

“When you take your kids to a movie like Shrek, you start to realize – that character was not built by an engineer alone, and the story can’t be told by an animator or a story-teller alone.”
It takes all three, he says, to generate both capital and culture.

“More traditional technologies have somehow reached their glass ceiling in terms of the valuations you can get for them. You can still get very good valuations, but people invest with us from around the world because they expect phenomenal returns.

“You can get phenomenal returns when you invest at an industry at the moment of inflection. We sensed that shift in the world of media and content a few years ago. We planted some seeds and they’re growing very nicely.”

The synergy will generate profits and regenerate Jerusalem.

Building the media mecca in southern Jerusalem is a crucial part of this vision, as is the establishment of “The Lab,” which integrates theatrical art with cutting-edge technology.
Margalit has spent more than NIS 400,000 of his own money to renovate the old hangar to build The Lab and contributes an operating budget of several hundred thousand dollars.

But the progress has not been hassle free. Margalit has hired and fired two artistic directors, Oded Kotler and Opira Henig, at the Lab, as well as other senior artistic and administrative staff. Speaking anonymously, previous employees contend that he is unreasonable, capricious, and difficult to work with.

Margalit acknowledges that he is “very demanding.”

Undoubtedly, together with the Khan Theater, the Cinematheque, the newly opened restaurants and pubs and the open-space railway yards, used most recently for the ice skating rink, Margalit has, in fact, rejuvenated Jerusalem’s southern district.

As to his own profit, Margalit does mention, for the first and only time in the interview, the activities of JVP-Community, which is currently providing educational services to nearly 3,000 schoolchildren in more than a dozen schools in Jerusalem’s poor neighborhoods.

“It’s an amazing program. The Jerusalem Education Administration and the Education Ministry have gotten involved, and we have 40 kids who are doing a year of volunteer service living in apartments in these neighborhoods. So judge me by what I do.”

Margalit didn’t start out in the business world. After his family left Kibbutz Na’an, they went as Israeli emissaries to Detroit, Michigan, where Margalit perfected a mean game of basketball.

“The black guys couldn’t pronounce my name,” he recalls, “so they called me Earl the Pearl. Being named after a famous basketball idol really did help my game.”

The family came back to Israel, first to Karmiel, then to Jerusalem. Margalit attended Rene Cassin High School in its best days and served in a combat unit in Lebanon during the worst days.

After his army service, he studied math and philosophy at Hebrew University, where he met his wife, Debbie. His professors remember him as a sharp and determined student, with exceptional powers of concentration, and predicted that he would have a successful academic career.

After completing his undergraduate degree, the young Margalits went to New York City, where he continued his studies at Columbia University. He even did a nearly-obligatory initiation stint with Moish Movers, hauling heavy furniture throughout Manhattan.

He left New York and returned to Jerusalem with an idea – to turn Jerusalem into a high tech capital. Through his father’s Labor Party connections, he hooked up with then Mayor Teddy Kollek and Margalit, barely in his 30s, became responsible for development in the Jerusalem Development Authority.

For the next three years, Kollek and Margalit traveled throughout the world. Kollek was the seasoned symbol of Jerusalem and Margalit was the precocious entrepreneur who knew how to draw the investors.

Which he did. Yet, thinking retrospectively, he says that now he realizes that the city needs more.

“What I did with Teddy, 15 years ago, was great for what it was. I understood the revolution that was happening, and I wanted Jerusalem to be part of that. But high tech didn’t, and couldn’t, revolutionize the city.”

Maybe, he says, Herzliya Pituah could be developed around clusters of business, but to succeed Jerusalem needs to offer more than business.

“People have not come to Jerusalem for ages because of technology and defense. They have come because Jerusalem is ancient, theological, philosophical, spiritual – whatever it is. Jerusalem has inspired prophets, thinkers, mystics, artists and zealots.”

And, apparently, venture capitalists. When Teddy left the municipality, Margalit left, too, and established JVP. And with Margalit’s sense for the right investment and the best deal, JVP grew quickly.

JVP was responsible for what is reputedly still one of the biggest deals ever cut in Israel – the sale of Chromatis Networks, in which JVP had invested heavily, to Lucent Technologies, for nearly $5 billion.

Margalit is tremendously convincing when he talks about this city.

“Jerusalem is about ideals and passion, not just materialism. In other cities, when you go to a cafe, all you hear about is business dealings. But in Jerusalem, when you go to a cafe, you see someone working on his book, and at another table they’re talking about 15 ways to recognize God, and at another table they’re talking about an educational project. And that’s great.”

(Originally appeared in The Jerusalem Post’s ‘In Jerusalem’ supplement)


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