Finding by a survey conducted by the global accounting and advising firm

Looking ahead, 27% of surveyees said that beyond investing in their own country, they intend to increase investments in the Chinese market over the next five years. 16% said they intend to increase investments in the Indian Market while an additional 14% said that their investments will focus on the American market.

The survey revealed that Israel is no longer viewed as an attractive investment destination, with only 2% mentioning an investment in the Israeli market. It should be noted that countries who gained a simliar ranking are “High-Tech Superpower” Vietnam, whereas countries such as Switzerland, Germaby and Great Britain ranked higher than Israel.

Likewise, when asked if it is likely that VC partners will invest in funds outside their own country, over 50% of VC executives answered positively.

The high likelihood of such investments is evident in Israeli VC executives (70%). An inversion of this trend can be seen in the Chinese and Brazillian market, where only 23% and 32% (respectively) predicted an investment outside their own country.

Translated by Itai Rosenbaum

As part of the new version of the CMS we’ve built for our professional conferences we now allow the ability to coordinate consultation meetings with some of the professional speakers attending the OPEN convention. We will be adding this module to our upcoming professional convention’s websites.

Simply by clicking the name of a lecturer, lecture or company name in the convention’s Agenda page will lead you to a short form that will help you coordinate the meeting – either before the convention or during it.

It must be noted that not all convention speakers are interested in holding personal meetings, and the responsibility for organizing and holding the meeting is placed on the speaker and not the convention organizers.

Translated by Itai Rosenbaum

IBM has launched a new program meant to assist start-up companies around the world, and Israel is one of the seven countries in which the program will run first, along with the US, Sweden, England, France and Ireland.

The program, which will be managed in Israel by IBM’s Global Technology Unit (GTU), is meant to encourage and assist the next generation of start-ups to make the most of business opportunities in a wide range of fast-growing fields: communication, energy, water, health services and the government.

The GTU embodies and central communication hub between IBM and various high-tech and developers in Israel, who wish to do business and cooperate with the global IBM. According to GTU spokespeople it currently does business with roughly 150 Israeli companies and makes about 1.2 billion dollars a year from joint deals. Among the most successful partnerships with Israeli companies can be mentioned CommuniTake, the cloud-computing start-up Navajo and Takadu which deals in water infrastructure.

Within he framework of the program IBM, which invests over $6 billion in R&D and possess a vast knowledge in bringing new technology to the international market, will allow work with its sales, marketing and technical support sects, which are spread across the world. IBM’s “smart planet” strategy and years invested in research should especially help Israeli start-ups who wish to operate in “non-traditional” areas such as smart water systems, smart buildings and smart health services.

Michael Oran, GTU’s manager, mentioned that today, IBM is positioned in a unique position, which allows it to help start-ups with the vast resources, experience and infrastructure it possess.

Michael Oran

Oran added that the “uniqueness of the new program is in the fact that it is oriented towards industries in which IBM has the knowledge and experience that allow the young companies to understand the client’s language at the very onset and thus skip the “trial and error” phase which characterizes so many companies at their beginning in their attempt to bring their solution to the market as quickly as possible.”

Start-ups wishing to participate in this program must be young companies who are in operation no longer than 3 years, and developing a solution that works into IBM’s “Smarter Planet” focused areas. The program will give the start-up companies free access to IBM’s development tools including frameworks for various industry fields which allow significant acceleration of the development process, opportunities for exposure before IBM’s biggest clients, participation in IBM’s SmartCamp in the company’s innovation centers across the world (the event in Israel will be held at the end of June), and access to the developer network which IBM helps within DeveloperWorks, which brings together over 8 million developers and entrepreneurs from around the world.

________________

If you are working in a start-up which you think may fit into IBM’s program, and you would like to be introduced to GTU personnel, you can send me an e-mail and I will provide you with the necessary contact details.

Translated by Itai Rosenbaum

About a month ago I finally got an iPhone through work. Before that, I must admit, I wasn’t really excited about these tiny devices, or Apple’s general attitude, for that matter. They seem insistent on shattering the principles of anyone who believes in free choice and are intent on pissing people off by forcing them to install iTunes and its store on their computers. Somehow, however, they manage to stay away from a Microsoft-esque “evil corporation” image. I can’t even begin to fathom how they do it. Maybe it has to do with the fact they sell hardware and a design ethos rather than software.

Anyways, what I had my mind set on was a small laptop, 9-10 inches, that is always connected to the internet, and has a big enough keyboard. When the netbook market finally came along, with the lightweight, long-battery, 3G connected devices arrived, I thought I had reached Nirvana. No need to get a super-expensive ThinkPad X, Asus is giving me a product that’s not only a fraction of the price, but can run Linux!

What these compact computers don’t have, however, is a touch screen and don’t allow the user to “surf with a touch”. After being exposed to the touch-based interface and the various gestures that can be performed, I found myself on my couch, surfing the web with two fingers. My two desktop computers, one running XP and the other Ubuntu, complete with JBL speakers, 21” screens and a pair of orthopedic chairs, were left orphaned in the den. I, in the meanwhile, like the masses, am counting the days till the iPad comes along and I am hoping that the bigger touch-based keyboard of the iPad will indeed allow me to hammer out long texts.

After I’m done playing online, the next obvious step is downloading any and every israeli application written for the iPhone. I can’t help but think that if a few hundred thousand busy Israeli will leave their desktops, even for one hour, and while they’re standing in traffic or waiting in line at the post office, or even zoning out in front of the TV, and will start surfing through the iPhone and iPad, then the need for Israeli-oriented iPhone apps will skyrocket, apps that will replace the services previously offered through a plethora of websites.

Any self respecting organization will have to offer its iPhone users the same services offered to a desktop-surfer. They will have to write a matching iPhone application that will even have to surpass the website capabilities, and probably rework many of their website to support the iPhone format. All this future development activity is really interesting. Suddenly, developers will have new input devices, beyond the mouse and keyboard, to take advantage of. They will be able to make direct use of information coming from a camera, GPS, a compass and a ton of other sensors.

After realizing that I’m interested in getting up close and personal with the iPhone development community, I started playing around with some iPhone dev. tools and invited some like-minded people to start a blog about iPhone application development. Luckily, they agreed and so we are pleased to announce the launch of iPhoneInside.

Over the next few months, we will cover how to install an iPhone development environment (yes, it involves getting a new mac, or upgrading your old one, and a requires a $100 license – life with Apple may be pretty, but cheap or easy, it ain’t). We will also develop a StartUpMania iPhone application, and then tell you exactly how we did it – step by step, as well as interviews with the leading personnel in the Israeli iPhone development community. Lastly, we will provide news and coverage of all the latest iPhone happening from around the world.

Then the iPad will come along, and we’ll tackle that.

Translated by Itai Rosenbaum

Yossi Smoler, manager of the Ministry of Industry, Trade and Labor’s Greenhouse Program revealed data that shows that start-up companies approved to join the Greenhouse Program are having a difficult time returning the government-sponsored loans upon their completion of their Greenhouse stay.

Smoler presented the data to a Knesset finance subcommittee which discussed this week the Greenhouse Programs.

According to the agreement with the start-up companies which go into the greenhouse, Smoler explains, the stay lasts between 2-3 years, with few exceptions which last longer. After this time, the companies are supposed to raise funds from outside sources – venture capital totaling at least half a million NIS in a first fund-raising round.

Smoler’s reports shows that, by the end of 2009, about 31 companies operating in the Greenhouse were supposed to repay the government loans totaling 81 million NIS, whereas in reality, only 14 million were repaid. The reasons for this, he says, are the economic crisis and the fact that the venture capital funds are focusing on investing in their own portfolio companies and shy away from investing in SEED initiatives or companies which had just left the Greenhouse.

The country, Smoler says, enslaves the stocks of those start-up companies until the loan is repaid. The committee members informed him, however, that in the case where a company is having a difficult time raising funds, these stocks carry no real value, and put the money the country invests in these companies at risk.

Smoler says that the Ministry of Industry, Trade and Labor is currently working on new ways to solve the problem, such as prolonging the companies’ stay in the Greenhouse. These solutions, however, require an additional budget of 30 million NIS. Other solutions include starting privately sourced funds with government backing and providing initiatives to investors to put their money in SEED companies.

In Smoler’s review to the committee he added that the current Greenhouse budgets stands at 180 million NIS – a similar sum to the 2009 budget. He tells that the program, started in 1991 as a government initiative to encourage first-stage start-up companies and to create employment opportunities for the large influx of ex-soviet union immigrators arriving to the country. In 1993, the Greenhouses were privatized and are now run by private entrepreneurs.

Israel has 26 Greenhouses, which serve 179 companies – roughly 7-8 companies in each Greenhouse. According to Smoler, 90% of the start-ups successfully complete their Greenhouse stay, and so, each year sees 75-85 new projects. In total, 444 of the 1,209 companies which have “graduated” the Greenhouse Program are still active in the market today. “This is a testimony to the success of the program over time, especially considering that the program invests in first-stage companies, which are by the very nature more dangerous,” Smoler says.

Haim Kopans, a private partner in JVP, praised the Greenhouse Program, but claimed that dealing with the government is filled with beauracracy, and in light of the economic crisis there is a significant market failure in continued investments in Greenhouse graduates.

Itay Zandbank, manager of Platonix Joint Ventures, which “roosts” start-ups and does not enjoy a government budget, claims that entrepreneurs fear approaching the Greenhouse in light of their requirement of paying overheads: rent, law services, accounting, etc. The topic of overheads, he says, is decided upon at the CEO level, where the Greenhouses can charge the companies as needed. Furthermore, it seems that the Greenhouse, particularly those who don’t provide the added necessary funds, take advantage of this possibility and make a profit at the expense of the entrepreneurs.

Knesset member Robert Iltuv has issued a call to the Minister of Indsutry, Labor and Trade, the chief scientist and the manager of the Greenhouse Program to commit the Greenhouse to provide additive funds in all cases, something which will testify their seriousness and trust in the companies they invest in, and will prevent, even if only on appearance, taking advantage of the government and the entrepreneurs.

Translated by Itai Rosenbaum

Several days ago, StartUpMania paid a visit to Gili Raanan, the partner who joined the new Sequoia Capital Israel.

You do not see this in the image to the right, but Raanan’s office is about 3 meters away from the Ocean Hotel’s swimming pool in Hertzelia. The only thing separating the sofas we sat on and the pool’s chilly water is a clear pane of glass. If I were to pick my investors based on the potential… “people watching” potential, the type that calms all spirits in a heated meeting, I’d go to Sequoia, no doubt. They even have free parking.

More importantly, however, according to Raanan, Sequoia has a little under $200 million to spread around in investments. All you have to do is organize a meeting, show up, enjoy the view and convince the four partners that your initiative will change the world and you leave with a much heavier wallet, and a strategic partnership with one of the world’s strongest venture capital funds.

The key words in the above paragraphs is “the four partners”. According to Raanana, Sequoia does not employ any additional staff you need to get through and impress before you reach the senior partners. You’ll be speaking directly to Raanana and his two partners: Haim Sadger and Shmil Levy. The fourth partner, Randy Ditzler, is in the U.S. Of course, it’s not as easy as it sounds, as you still have to show the three that you have a new solution for a large, global market to gain their support. The bar is set pretty high.

To this day, Sequoia Israel, which raised the $200 million at the end of the first quarter of 2009, has invested in GameGround by Itzik Ben-Bassat, Guy Margolin and Shaul Olmert (son of former Israeli prime minister). GameGround offers a personal portal with personal services for gamers. Sequoia has also invested in VisualTao, founded by Tal Weiss, Iris Shoor and Jonathan Seroussi, which aims to create a web-based AutoCAD application, and allow users to share CAD and GIS information across great distances.

Sequioa also invested in publically-owned company Dmatek by Yoav Resiman, and returned it to a start-up status by paying a premium to investors and removed the company from the English stock-market. This type of investment in “mature” start-ups is an increasing trend among venture capital funds.

Raanan, in 1997, founded Sanctum (then Perfecto), which created an Application Firewall which was sold eventually to IBM. He also handled a nice exit with the start-up NLayers, which was sold in 2006 to EMC. He was in the process of building a third, in the e-commerce realm, when he received the offer to join the three partners in Sequoia Israel, and decided to “cross over” and join the other side.

“I’ve yet to make my first investment in a project,” he tells StartUpMania. “I’m currently meeting and interviewing dozens of entrepreneurs a month. I spend a lot of time looking at new projects, but we’re in no rush, we’ve secured the investment in the fund for a ten-year period.”

Raanan is looking for the right investment, and would love to “invest in companies at all stages, but especially in the earlier stages.” He is interested in entrepreneurs which have identified a large global market and offer a new way of coming at it. “We’ve learned in Sequoia that we do not set policies, it’s not our job to tell entrepreneurs which market they should be aiming at,” he explains, “unlike the entrepreneur, we’re not in the business of thinking what’s the next best thing and tell him to do just that. I look at people’s creativity, make sure that they are aiming at a large-enough market, and check which advantage they have over the competition Usually, it’s a technological advantage that needs to be tested and assessed, as well as gauging the team’s ability to overcome technological speed bumps they may run into.”

It seems that, in light of the spirit of the time where Sequoia has “reached into the vaults” for the $200 million, and just as he himself did at NLayers, Raanan is not planning on drowning his entrepreneurs in piles of unneeded money. “Many start-ups are biting off more than they can chew,” he says and explains that at NLayers he only raised about $9 million, before selling the company to EMC for $50 million.

“If you give entrepreneurs a lot of money, you don’t get any more than if you would’ve given them a little money,” he details his future investment policy. “There are, of course, special situations, where you are familiar with the sales model, are well aware of who you’re selling to, have the business model’s statistics and you need to pay sales people to get you $1.50 for every dollar. If a start-up is not quite sure what its sales model is yet, then bombarding them with cash is not the solution.”

If this sounds reasonable to you, and you have an idea that may interest the partners in Sequoia Israel, and you don’t mind not being showered with cash at the first stage – let’s see if you can convince Gili Raanan that he is worthy of his very first venture capital investment.

Translated by Itai Rosenbaum

We recently covered IBM’s Global Technology Unit (GTU), the people in charge of collaborations between IBM and Israeli start-ups interested in operating in the global marketplace.

This week (Nov. 2-5), GTU will hold a series of specialized industries week at their IBM headquarters in Kiryat Arye, Petach Tikva. The even will comprise of several daily events, each focusing on a different industry.

One day will focus on Telco, a second on the banking industry with a third in energy solutions. At the event, the global IBM will present its “road map” for the three afore-mentioned sectors, and IBM world leaders in the field will lay out the business framework and IBM’s work model with a start-up working on a solution for each of these specific industries. GTU personnel have told StartUpMania that they are very interested in hosting Israeli start-ups who’s products mesh with the different plans.

The next three days will see Drew Clark, Global IBM’s director of venture capital, Chae An, the man behind IBM US’s financial branch, and Rick Qualman – manager of IBM’s strategy and business development for telco solutions for the big-blue giant. These three are a group you’d be very interested in meeting if your start-up happens to deal with banking, telco or energy.

This is the website detailing the event, with a complete agenda and information for those who wish to sign up.

Translated by Itai Rosenbaum

Today we were invited to Deloitte Brightman Almagor Zohar’s Technology Fast-50, an event in which the accounting firm announces the Israeli start-ups who have shown the most significant income growth in the past year.

It seems kind of odd to us to rank start-up companies by sales, seeing how many of the high-tech exits are by companies who always lost money and spent it without end, some of which never sold a single piece of software or hardware in their entire existence. Furthermore, many start-ups prefer not to sell at all, opting for collaborations instead. Why deal with money, support, licenses and salespeople salaries when you’re trying to sell a dream?

Another point that’s important to understand is that your solution’s price tag, as well as its annual income and sales’ expenses, may even hurt a CEO who’s trying to explain to a potential buyer, such as AOL, Google or an international medicine conglomerate, that his product is the next big thing. The idea is to get the buyer to think that once they buy your product, and incorporate your life-changing service into their platform, their salespeople and their clients – then the sky’s the limit. In addition, investors can also read a spreadsheet, and once they see your numbers, they’ll start making complaints and possibly bring in their own people rather than yours.

Take Twitter for instance, who recruited about $100 million according to an estimated market worth of $1 billion, there is not a doubt in my mind that their CEO doesn’t care about his sales graph. His sales data, if he were interested in selling, would probably be more in line with an annual sales cycle of an upscale Manhattan restaurant, they’d only damage his presentation and ruin him when he releases his social -media beast on NASDAQ.

Another problem with the Fast-50 competition is the complete lack of annual sales figures. It’s true that accountants love accurate numbers and detailed financial reports, but in a company dealing with privately owned companies, and through occult manners finds out their annual revenue gain in a percentage, you can’t know if you’re dealing with a start-up that reported the sale of 3 water purification projects for a million and a half dollars and showed an astronomical jump from last ear, where they only sold for $100,000, or if you’re dealing with one of the best global security projects, that is selling to Fortune 500 organizations on a regular basis, and increased it’s revenue to $5 million in 2008. However, Joe the Security company’s CEO, who is on the verge of making a hunderd-million dollar exit, will only be ranked 40th, as last year, he sold $4 million of his security software. Not a significant percentile growth when compared with a start-up that sold next to nothing last year.

Of course, the simple fact that we’re dealing with start-ups, most of which are bleeding money and need constant cash-flow from investors, doesn’t help with revealing the losses that stand behind these sales. We’re greatly missing the relation between sales result, company life expectency and how long their solution has been on the market, regular expenses and lastly, how much money the venture capital funds have already spent on this company.

Despite all financial reservations, the Fast-50 competition shows us fifty Israeli start-ups (well, roughly 50… some are non-start-ups that somehow weaseled their way into the list) that have managed to sell their product to the outside world for real, actual, tangible money. A significant feat, performed by the people of Deloitte Brightman Almagor Zohar.

The fact they present to us the companies who managed to sell a product people were willing to buy in one of the hardest years for a start-up company in the entire history of man-kind, despite countless cut-backs and downsizes and in the face of endless competition by mega-corporations, is a tremendous accomplishment for these entrepreneurs and their employees. We tip our hat at accountant Yigal Brightman and the people of Deloitte Brightman Almagor Zohar for shining the spotlight on these companies, and letting us know who are the top companies who are out in the trenches, dealing with customers on a day to day basis.

To us, the fact that all these companies sell a product, and more so than last year, is the real importance of this competition. The actual ranking doesn’t matter all that much. We’re usually not in favor of these start-up competitions, and think they’re only worth is as a tool for marketing and networking in the closed community in which they exist. There is no question, though, that a contest like the Fast-50 is ten times better than those amusing competitions where a start-up who’s never created something a person would have any interest in buying takes home the grand prize. These are companies who win international awards and acclaim roughly equivalent with winning a nobel prize (back when it still mattered) based on a powerpoint presentation with a cute animation, a crowd-pleasing presentational ability, a fictive business model more suited for a C-list sci-fi movie, or, worst of all, “professional” advisors – who make a living off these types of situations. More often than not, the winners of such international competitions are the only start-ups who were willing to pay thousands of dollars in entree fees, flights and lodging. Just because their founders have yet to visit the golden state, or they don’t have any real clients they need to take care of.

So after this long winded introduction, we’d like to present to you the fifty start-ups who did manage to sell their product in 2008. Their not all actual start-up companies, most lose money by the truck-load, a vast majority won’t make it through the economic crisis and the venture capital funds will cut them off, but there is one thing they can own to – according to Deloitte Brightman Almagor Zohar’s report, there exist actual organizations with actual IT managers, who decided to pay actual money for the actual products the company actually developed.

And so, without further ado, here is the list of the fifty Israeli companies that sold original products in 2008 (in no particular order):

• InfoGin
• Voltaire
• Telmap
• PineApp
• TeleMessage
• EZchip
• Alma Lasers
• Enzymotec
• Exent,Silicom
• Runcom
• Mobixell
• Mellanox
• BigBand Networks
• Clicksoftware
• Oridion
• Celltick
• NICE Systems
• iMDsoft
• STARLIMS
• Vision Technology
• AVT – Advanced
• BioView
• Chip PC
• Top Image Systems
• Orpak Systems
• Ophir Optronics
• Babylon
• Discretix Technologies
• Wintegra
• BATM
• Vizrt
• Incredimail
• PNMSOFT
• IDIT I.D.I Technologies
• Safend
• Ceragon Networks
• Itamar Medical
• Espro
• SerVision
• Zend
• Eyeblaster
• Radwin
• PicScout
• Dune Networks

One of the big advantages a venture capital fund can offer a young start-up company is a complex weave of contacts and connections, both professional and strategic. There’s also the small matter of the millions of dollars they can invest in a company, but there’s those contacts! Many entrepreneurs tell of their early days, when the people working in venture capital helped them out and dedicated days upon days in order to promote the start-up in which they invested.

One of the things a strategy-oriented investor can do for its company is to take them to special events held all around the world where the company can be exposed to potential clients or important business partners. Meeting other start-ups, as well, can help a CEO seeking a collaboration or business model that will serves as his next stepping stone.

Yossi Vardi, who invests in dozens of internet companies, has made a tradition of taking “his” young entrepreneurs on the road. He takes them across the United States, arranges meetings with world internet and media executives, and helps them collaborate with each other. Other Israeli venture capital funds, likewise, organize such networking meets-and-greets for their portfolio company.

Intel Capital, the venture capital arm of the Intel corporation, does one further. It send hundreds of start-up CEOs from all around the world to a dedicated annual convention – CEO Summit. At the convention, attended by Intel’s CEO Paul Otellini, features over 400 of Intel’s portfolio company’s CEOs. Intel Capital’s Israeli Branch CEO Uri Arazi makes sure that “big name Israeli companies such as Amdocs, Teva, Checkpoint and others” are also invited. All are large scale, global companies who may be very interested in the developments made by Intel-supported start-ups.

This year’s CEO Summit, to be held on November 11th at Huntington Beach, South California, Arazi is planning a big group of Israeli start-up CEOs. Among them are Yuval Bar-Gil of Aeroscout, Issac Mazor – CEO of Jordan Valley, Trevor Matz from Aternity, Zeev Bokowski of GigaSpace, Mobixell CEO Amir Aharoni, Safend’s Gil Sever, and many more. Each will be able to present his solution before hundreds of other CEOs and try and search for that next big break.

Among the Israeli high-tech elite slated to join the Israeli delegation are Amdocs Business arm president, Zvika Nagaan and the man behind Amdocs’ start-up investments – Ariel Efrati. From Checkpoint – Dorit Dor, its VP of Products as well as Sachi Gerlitz, Ness Technologies’ CEO. All these will arrive at CEO Summit in order to search for the next best start-up solution.

Translated by Itai Rosenbaum