Ampliphy Log in ampliphy logo
Aleph

High Fiving Israel’s Entrepreneurs Building Big Companies and New Icons: A response to Sarah Lacy

Here at Aleph, we are high-fiving Gilad Japhet, David Jackson and Avishai Avrahami for staying the course and building big companies while looking for the next entrepreneurs who want to follow these new “fathers” of Israel’s emerging big companies. And, we are high-fiving Noam and Uri from Waze for taking the most visible step in empowering Israeli entrepreneurs to strive for building meaningful value for consumers or businesses.

Screen Shot 2013-07-21 at 12.27.53 PM

We, Aleph, were the trigger for Sarah Lacy’s thought-provoking post on the premature celebration of Israel’s arrival as an internet/mobile “consumer” powerhouse. Pando Daily’s contributor Mick Weinstein, (full disclosure: He is a good friend and former employee at one of my companies Seeking Alpha) chose to lead his story with Israel’s Start Up communities’ basking in Google’s $1Bn purchase of Waze. He also chose to view it as a harbinger of Israel’s arrival as a consumer powerhouse. This, of course, implied that our fundraising was somehow tied to exit and also caused Sarah to correctly comment that “One $1 billion hit in a decade of attempts doesn’t prove a country as a whole can do consumer.”

As the guys who started the fund that sparked Sarah’s rant, we could not agree more with that last statement. However, as venture investors who look to the future, we could not disagree more with journalism that reports on the past. In fact, Sarah’s comments further down in the article subtly point to our thesis: Israel has finally arrived as a vibrant venture capital market in which you can build large and meaningful companies. Waze, in this case, is just the first visible icon and consumer is but one space in that narrative.

As with everything in life, you need a NorthStar, an icon, an inspiration that causes you to strive for ever greater heights and empowers you to take risks to achieve that. For years in Israel, that icon was ICQ, a company founded by four talented young guys and quickly sold for a few hundred million dollars to AOL. The sale of ICQ was a big “we can do it” moment for Israel and Israeli entrepreneurs and it created the narrative that you so correctly described in the name of Yossi Vardi at the bottom of your post, “Israeli entrepreneurs shouldn’t try to build globally dominant Web companies from Israel. Instead, they should try to build great products that Valley companies want to buy. He [Yossi] compares these products to “tomato seeds”– there’s a ton of good stuff packed in that little seed, but it needs an experienced farmer to grow it properly.”

Screen Shot 2013-07-21 at 12.36.13 PM

That “great product” narrative has held back Israeli entrepreneurs and venture investors for years, focusing them on “high-fiving” quick exits rather than building meaningful companies. Hence, Sarah’s retrospective is correct. The newsflash though is that Israel has already reached the turning point and IS building big consumer, PAAS and enterprise companies, but it has not been reported because the dominant iconography was still rooted in the late 90s and talked about great products and not great companies. I pointed this out to Microsoft’s Shai Tsur in my blog response to his “high-fiving” Israel’s small product exits of 2012:

“What was important about 2012 in Israel was what did not happen, not what did happen. Here is what did not happen in 2012: Ronen Shilo at Conduit did not sell (although they did distribute almost $400,000,000 in dividends to employees and shareholders). Avishai Abrahami at Wix did not sell. Micha Kaufman at Fiverr did not sell. Eyal, Eran and Rooly at Gigya* did not sell. Michael at FiftyOne  (BorderFree) did not sell. Yossi at Panaya did not sell. Yoav at Kenshoo did not sell. Guy at SolarEdge did not sell. Gilad Japhet and MyHeritage BOUGHT their big competitor (actually 8 competitors). All of these entrepreneurs and CEOs kept working to build really large companies. “

Waze, therefore, is just the first reported incident of a change in iconography but, as Sarah correctly points out, it was still an early product. However, Waze’s $1BN price tag is exactly the icon-replacement that Israel needed to empower the “big company” revolution that is well underway and well under-reported. Sarah asked for data, so here goes:

MyHeritage: Sarah actually reported herself on one of my favorites, Gilad Japhet. Gilad has raised $81MM to gobble up competitors and build the world’s leading online genealogy company. Gilad is succeeding with 75 Million members and I am high-fiving Gilad and have been since he started because he has not sold his company nor sold out to the “great product” narrative.

Wix*: This is the largest webtop publishing company on the web, growing both its free and premium members at an impressive rate (I cannot give numbers since I am on the board of directors and the Company has announced that is has filed for an IPO but you know what revenue numbers are needed to go public). Wix turned down the “great product” acquisition and raised the money from Benchmark, Bessemer, Mangrove, Insight and DAG to build the big company from Tel Aviv. It is going PUBLIC to build a great company and an Israeli icon. Wix has tens of millions of very happy customers, most of whom are small businesses. Avishai Avrahami and Gig Kaplan can be seen high-fiving through the all-glass windows in their cool beach-side office in “Tel Aviv’s Tech Scene” as they build an iconic Israeli big company.

Conduit*:  Like MyHeritage, they are also outside of “Tel Aviv’s Tech Scene,” and unlike the narrative Sarah has been fed, Conduit is a large business. Conduit is reported to have paid out $430 in dividends and that it was independently valued by investors at over $1.5Bn. As a recipient of those dividends and a board member, I can report that the “data” is quite accurate and that the company has turned down offers to be acquired because Founder and CEO Ronen Shilo wants to build a big company. Conduit recently disclosed that it was splitting in two to let its two businesses grow faster into independent large companies.

BorderFree (AKA Fifty-One): BorderFree was founded in 1999 as E4X. Like MyHeritage, it has stayed the long course to build a big borderless ecommerce logistics business. I don’t know if this is a consumer or enterprise business since they service consumers through big e-tailers because web is confusing like that. However, I do know that they have either confidentially filed their S-1 or will file it shortly and this could be another Billion dollar company.

wix - avish

I could go on and tell you about Yaron Galai of Outbrain and Adam Singolda at Taboola who are redefining content ads and building big companies. Outbrain and Taboola are each already valued at well over $100M and not selling out. How about David Jackson at Seeking Alpha*, whose “consumer” (to the extent Wall Street investors are consumers) crowd-sourced stock market research platform moves stocks as much or more than the WSJ does and is not selling out but instead building a big company. Yossi Cohen from Panaya* is not in consumer land but he is redefining how the biggest companies in the world upgrade their mission critical ERP systems that run their businesses and in the process building his own business. All of these businesses have tens of millions in revenue, many are profitable and all are building large businesses. In fact, these midlife Israeli entrepreneurs have inspired a new generation of Israeli entrepreneurs such as Omer Perchik of Any.DO*, Guy Rosen of Onavo and Yuval Kaminka of Joytunes* who are creating the new generation of deep-tech companies with beautiful UI and UX and an aspiration to be great companies when they grow up.

These are not necessarily consumer businesses because Israel is a different place than Silicon Valley. We have large concentrations of big data and machine learning engineers because the Army’s data center is at the scale of Google’s and Facebook’s. But, we have a lower concentration of people with American cultural-sense which means that we will not likely build the next Instagram. Israelis are experts at online marketing as shown by the plethora of online gambling companies and leading affiliate marketing companies in Israel. So we will play to our technology and marketing strengths which is exactly what these great entrepreneurs are doing.

All of these aforementioned founders are using Israel’s strength in marketing, big data and rocket science technology and redefining and replacing the “great product” icon that has defined Israel for the last decade and a half. In truth, they are exposing the fact that the quiet and reserved Gil Shwed and his $11Bn security juggernaut Checkpoint should have been the defining icon of the last decade but it wasn’t.

Here at Aleph, we are high-fiving Gilad Japhet, David Jackson and Avishai Avrahami for staying the course and building big companies while looking for the next entrepreneurs who want to follow these new “fathers” of Israel’s emerging big companies. And, we are high-fiving Noam and Uri from Waze for taking the most visible step in empowering Israeli entrepreneurs to strive for building meaningful value for consumers or businesses. Collectively, Waze, Wix, Conduit, Myheritage, Seeking Alpha and others are becoming the icons for Scale Up Nation and they are changing the narrative for the future more than they are correcting the data of the past. Our collective challenge in Israel was to change the icons, narrative and aspirations of Israeli entrepreneurs to build those big companies and that is what we are doing. And now, it is time to get to work with those great young entrepreneurs and build big Israeli COMPANIES “One cow at a time.”

Please come back and visit so you can tell the world about Israel’s new icons.

Michael and Eden, Aleph

* indicates companies where Aleph’s partners have invested.

  • hilzfuld

    Amen. And looking forward to more awesome content.

  • Leon Markovitz

    Excellent piece. Beautifully defended and rationally optimist.

  • http://nivcalderon.com Niv Calderon

    Great piece, great response. I’m looking forward to more interaction between the two of you and the world around us, it’s important. Enjoyed it a lot. Thanks

  • Eliav Alaluf

    The writers smartly refer to the Waze acquisition as a sign of an industry which is maturing and moving into its next level. It’s True: 10 years ago, everyone “knew that Israelis cannot build consumer
    brands” and “500 years ago everyone knew the earth was flat”.
    We should all thank Sarah Lacey for giving Israeli Internet community this opportunity to feel proud in its achievement to date (as well as its achievements to come).

    Thanks for a great post guys!

  • http://www.mediabox.io/ Nir Dremer

    Great Post.

  • Yotpo

    Great post, keep them coming

  • whadar

    Great post. This sentence surprised me “We have large concentrations of big data and machine learning engineers because the Army’s data center is bigger than Google’s and Facebook’s combined”. The data center is not that big and also the reason is not because the data center is big.

  • S. Daniel Leon

    fantastic post.

  • Ron Gura

    hear hear!

  • Mitch Schneider

    Fantastic post! Keep them coming please.

  • Andrey Shirben

    Good one guys! I’m pretty sure, there are a bunch of people in Israel who took the “Israel can’t do consumer” pretty personally and are now on a mission to prove they certainly can. It would be interesting to see in 2020 what’s the score in this game. Reporting the past, same as raving past investments is pretty useless, as it’s not our past actions or luck define us, but our current actions and decisions. I’m confident that you were able to raise Aleph not because of past investments and definitely not because of Waze exit, but because of you you are and the vision you have, oriented towards the future. I very much hope there will be more funds like Aleph in Israel, so I’ll enjoy referring entrepreneurs to them and really believe they can make a difference.

  • alephvc

    appove

  • David Fogel

    A very true summery of the changes happening in the last decade in IL and its entrepreneurs mind set. It’s all part of a maturing ecosystem. I think you can also look at Aleph as a very good example how the Israeli VCs are developing new models to face these changes.

  • Michael Eisenberg

    Eliav – I love that “500 years ago everyone knew the earth was flat!!!”

  • Michael Eisenberg

    Andrey – Thanks. We don’t need to prove anything to anyone else. We should prove to ourselves that we can build big companies with great values and value to customers!

    Thanks for the High Five!

  • StoreYa

    Startup Nation – The sequel!
    Big like, keep it coming.

  • John

    I’m sorry but I don’t see the point of this post (and I’m not writing this to offend anyone – clearly you guys are awesome :)

    Why do you care about her? Why are you wasting your time and energy with responding to an idiotic, troll-ish post? Who cares? Do your work and prove her wrong. I just don’t get these idiotic PR fights, it just appears to me as a children’s fight over the kindergarten’s playdough.

    The companies you’ve mentioned are indeed doing great work and probably overlook these so-called news-reporters anyway, so don’t become one of them. Be better. And I’m sure you’ll prove her wrong :)

  • Shefa Weinstein

    I totally agree. We should do this for ourselves! Great post!

  • Guest

    Hi , can I please get Micheal email at aleph?

  • Yoran Bar

    Good post guys. I hope young and mature entrepreneurs read this piece.

  • Jonathan Levi

    Fantastic post – I’m glad someone finally said it. Israel’s startup economy has matured far beyond the $20-30M “quick exits,” and now has the capacity to produce the next generation of juggernauts. While you say that we’re not going to build the next generation of consumer tech, I think this trend will be the next thing to change. There are more and more Americans flocking to Israel’s tech scene (myself included), and more and more Israeli’s building sales offices in the states (Omer Perchik is one example you named). While I agree it’s not going to happen tomorrow, I wouldn’t be surprised to start seeing huge consumer companies coming out of Israel in the next 5-10 years.

Subscribe