Israeli VC on Sand Hill road

Today GM, and tomorrow???

Not a day goes by without another company announcing lay-offs.  Big companies, small companies, tech companies, non-tech, etc., etc.., etc.   Just a few hours ago, Deutsche Bank adjusted the price target for General Motors to $0. Never a dull moment, who knows what tomorrow brings.

There are plenty of people dishing out advice on how to survive this crisis… so I thought to give a pointer of my own to those entrepreneurs that still monitor my not-so-active blog…

Spend every dollar (or shekel) as if it were your own.

Many people have repeated the famous lines “Cash is King”, “make sure to have 24 months of cash in the bank”, and so forth.  Rarely does a start-up raise enough money for 24 months of operation, so I think that is a slightly unrealistic approach, but sounds good.  As for Cash is King, it’s always true, crisis or not.

I believe in keeping things simple.  Believe me, if you were spending your own money, you would probably do things differently.  Anyhow, just food for thought from an ex-VC, formerly on Sandhill road.

Tags: Deutsche+Bank, General+Motors

Seeking the "Google of Water"

(English version of Globes article, published in print on May 26^th).

 

It’s been almost 5 months since I have adopted the new position of “ex-VC”. Amazing as it seems, there is an entire universe out there, which I have been actively exploring.  But this past week, I spent quite a bit of time hanging out in the same places that I used to, as it is clearly conference season.

 

From all of the events, I would like to discuss some thoughts following presentations by Al Gore and National Infrastructure Minister MK Binyamin Ben Eliezer.  This was the second time that I was privileged to hear Al Gore present the “inconvenient truth”.  First time was back in December 2005, when I was a co-sponsor for his Stanford event.

 

It is difficult to remain indifferent to the compelling data and reality of the world in which we are living.  Of course, it is important to change our behavior, adopting energy efficient lighting, driving fuel efficient vehicles and conserving water.  But what makes real impact is public policy.  Just see what’s happening in Spain and German both adopted aggressive programs encouraging PV installation for private and public electricity generation.  What about Israel?

 

I am puzzled by Ben Eliezer’s statements at the TAU Energy conference with regards to the ministry’s immediate plans. The focus being reducing electricity demand, by increasing tariffs to homes during peak hours, as well as building the disputed coal power plant in Ashqelon (even if “cleaner” technologies will be adopted). Ben Eliezer did announce a new renewable energy plan stating that by 2020, 20% of Israel’s electricity will be produced from renewable sources, but we all know how long these plans have been discussed, and how long will it be before they will be implemented.

 

Tachles, today we have solar water heaters, old news.  We are behind, so very, very behind).  I did not hear mention of incentives for installation solar panels like California, adoption of carbon taxes like Norway, nor aggressive feed-in tariffs like Spain or higher taxes for gas guzzling SUV’s, as in China.  I sit here in bewilderment. You would think that given Israel’s political reality, there would be no country in the world with a stronger motivation to move away from fossil fuels towards renewable energy

 

However, the entrepreneurial community is not standing still. It seems that every other person with whom I meet, seeks their next opportunity within the Cleantech world. Innovation and entrepreneurial culture, combined with management abilities, financial backing and this country’s reality, position Cleantech as the next growth opportunity for Israel.  

 

There are skeptics that think we’re in a Cleantech bubble. But just look at the state of our Kineret, or check out “Global Warming” on Wikipedia..  The climate crisis is very real, and big.  We have yet to see the “Google of Water”, nor the “Cisco of Solar”. There is a real opportunity for Israeli companies here, where not only can we make a difference, but be handsomely rewarded while doing so.  Let’s get to work!

Tags: Al+Gore, Binyamin+Ben+Eliezer, Inconvenient+truth, tau+energy+conference, coal+plant+in+ashqelon, global+warming, google+of+water, cisco+of+solar

IVA Day 1...

This morning started with Israel’s Cleantech meetup, and continued with Day 1 of the IVA conference.  Definitely a busy day for an “ex-VC” like me. 

Opening keynote by US VC Tim Draper, of DFJ. Tim demonstrated his presentation skills by describing the new type of entrepreneurs that he is seeking, the “super hero’s”, followed by a rock star performance of “Risk Master”. Lyrics by Tim, Music by Mystery Rock Star.

For a video of one of his previous gigs (Stanford, Singapore, Mountain View, New York), click here.

During Tim’s performance, I was sitting next to a buddie of mine that also spent many years in Silicon Valley.  We both looked at each other and pondered how this same performance delivered here in Israel, would feel TOTALLY different when delivered in the US…  Yes, culture is culture; not always transferable from one place to another - even if it is only a song.

Next up, Mike Moritz of Sequoia Capital, who promised his feet would not leave the ground (or something to that extent…).  His presentation, entitled: “Size Matters, How to get it, How to keep it”, discussed what it takes to build enduring, sustaining companies that can grow to be multi billion dollar companies (not those sold for a mere $200,$300,$400M).  Using examples from successful companies such as P&G, Walmart, News Corp, Fedex, Nike, Amazon, Intel and Apple, Mike’s presentation was both insightful and inspiring.

Key points delivered:

• Pursue billion dollar possibilities


• When you run out of market, expand into another such opportunity


• Expand with care - there are no shortcuts


• No need to be a public company to grow and become a significant company


• Examine your company as an outsider


• Foreigners can win in the US


• Skeptics are often wrong


• Never bow to setback


• Capital intensity sometimes does work


• Lack of money breeds ingenuity


• Invest during downturns


• Make the founders spirit live !!!

The last part of Mike’s presentation really drove that last point home, when he discussed Apple.  We all know that Steve Jobs was fired, apparently because he required “Adult Supervision”.  Adults were brought in (3 different CEO’s actually)… the company almost died.  The return of Steve Jobs brought us products that have become such a basic part of our day-to-day.  The big question is how did Steve make this transition from what was a “rotten Apple” to where the company is today.  The presentation highlighted the following points:

• Be realistic (know what is really going on)


• Focus on a few things


• Start with small wins (remember, the first products that Apple released post Steve, were essentially just better versions of what was already out there)


• Focused on the product and develop things people want (there came iPOD).


• When lightening strikes - strike (iPOD’s success, brought quick new iPODs to market, riding on this unexpected success)


• Design what you want to use (Personally - this could be a bit problematic at times…. I recall quite the number of products developed by techies to their spec, without thinking about what a user really wants)


• Stay right in front of the customer (In Apple's case, this was achieved via the Apple retail store)

Mike certainly touches on a sensitive point for the Israel venture industry.  I have blogged about this subject before, and hopefully the mindset of the VC as well as entrepreneur is changing.  Presentations like these certainly help to drive the message home. Thanks Mike!

The rest of the afternoon was busy with panels, presentations, awards, start-up presentations, and a schmoozfest (which I missed, as I had an important parent meeting back home).  But no worries, tomorrow is another day with IVA Day 2, as well as Ness Technologies “We Make it Happen” Summit, featuring (or shall I say staring?) Al Gore. It’s going to be a long week…

 

 

Tags: iva, mike+moritz, sequoia+capital, tim+draper, DFJ, ness+technologies, steve+jobs, apple+computer, riskmaster, cleantech+meetup

Cleantech group meets in Ramat HaSharon

Today’s morning started with the 3^rd Cleantech Israel “meetup” . The group found a new venue, since it is quickly outgrew Herzelia’s Max Brenner cafe… Each meetup brings new faces, eager to get involved in Israel’s renewable energy, water and environmental technology sectors.

Event speaker this time was Mike Granoff, President of Maniv Energy Capital and an investor in Shai Agassi’s Project Better Place, who gave his perspective on the venture and it’s potential.  Personally, I’m a fan!

There is no doubt that the Cleantech buzz (and real activity, not just buzz) here in Israel is growing. We are seeing hi-tech executives venture away from traditional IT industries, into this new field.  In my opinion, this is great news.  We have technology from the Universities and research institutes, and are now bringing management skills acquired from traditional fields into Cleantech.  Growing as well are funding alternatives, although this still lags IMHO.

Thanks again to Israel Cleantech’s Jonathan Shapira and Gene Dolgin for organizing.

 

Tags: cleantech+israel, michael+granoff, project+better+place, maniv+energy+capital, cleantech, israel+cleantech+ventures, jonathan+shapiro, gene+dolgin

Dollars and Israeli start-ups

Who would’ve imagined that in March 2008, the Dollar/Shekel exchange rate would be less than 3.5!  For most Israeli’s, the dollar was always considered a very conservative and safe investment.  Not anymore!  In the past year, the dollar has lost ~20% of its value.  Of course, there are always those who win and those who loose from these types of fluctuations.  But for Israeli start-ups, this is not good.

Our companies have always prepared their budgets in US dollar. When the dollar weakens, it means that more cash will be used to make payroll, effectively reducing the time that a company has to operate.  This means that it will require more capital to reach the same milestones as before, or in other words, makes it more expensive to operate.

I’ve been asked by blog readers if the dollars’ nose dive impacts company valuations.  Indirectly it does, as companies need to raise more money than before.  In some cases, this will mean higher dilution for founders, in others, more capital invested by the venture capitalists to buy the same ownership. 

Another question relates to how these start-ups should manage their money.  Should they convert their dollars to shekels?  A few years ago, this would’ve been unheard of.  These days, not sure it’s such a bad practice.  By investing your capital according to your exposure (meaning if 20% of your expenses are in the US, and 80% in Israel, perhaps keep 20% of your funds in US dollars) you at least guarantee that you can meet your expense plans.  But if the dollar regains its strength, you will not benefit from that if you choose this approach.

There are so many things that start-ups have to deal with. Now another issue joins the list of things to worry about.

Tags: dollar+shekel, manage+your+investment, dollar+impact+on+israeli+startups, startups+and+weak+dollar

Guys, guys, guys pay attention...

This is NOT the message that we should be delivering to tomorrow’s entrepreneurs.

This is a photo from yesterday’s Themarker, after the acquisition of Yadata was announced.  The articles’ headlines: The new millionaires. It is true that only $4.4M was invested in the company, and that investors made a nice return, but this is not what will create a sustainable business in Israel folks.  Isn’t anybody listening??? 

We need to be able to build companies that will be sold for hundreds of millions, not tens of millions.  Yes, a few new millionaires, local heros, etc., etc., etc.  We have only ourselves to blame, as such exits are not something we should be proud of - at least not when there was venture capital money working.  Bootstrap – that’s a different story.

Probably an unpopular thing to say at a time when these 3 very smart and talented guys have stepped up a notch in terms of their net worth; I am expecting better.  Much, much, much better.

Sigh.

Tags: Yadata, yadata+acquisition+by+microsoft, themarker

A start-up with a view

These days, I spend a lot of time in “meetings”.  No specific agenda, just busy exploring my future as an “ex-VC”.  As such, the other day, I met with the CEO of a recently VC-funded startup.  This wasn’t our first meeting, so it presented a nice opportunity to see how slideware has become a working demo, soon to be a launched product. I was thoroughly impressed. But something didn’t feel right.

Yesterday, during a board meeting in Rehovot, I figured it out.  Their office had too nice of a view (actually, quite like the view from the Gemini office…).  Other than the view, the office was pretty ordinary (with the exception of a fussball table…).  But it didn’t feel like a start-up.  I have been to visit many companies in the past, and have personally worked at start-ups in their very early stage.  When Mercury was a start-up, we had a villa in Herzelia for home.  My office (as Ms. Marketing) was in one of the living rooms, with a very flimsy divider separating me from one of the engineers next to me.  Basic desk, basic chair, basic computer.

As an “ex-VC”, I think that an entrepreneur that selects such an office is making a mistake. It might be “hardly a difference in cost”, or it might be “ready to go”, but in my mind, just doesn’t create the environment of a start-up. 

Call me old fashioned, but I’m still a believer in the “garage” mode.  Even if you have $3M in the bank, you shouldn’t behave like you do.  You need to make ever $ count - and that is reflected in everything that a company does. Not just selection of furniture and computer equipment, but what kind of car do you rent when traveling, where do you stay, what food do you bring to the office, etc., etc., etc.

I know that VC’s are criticized for living “with a view”, while expecting entrepreneurs to sit in the garage.  But lets think about that for a moment.  The objective of an entrepreneur should be to make that $ last as long as possible, make as much progress in the business as possible, to get to the next funding point stronger, which allows to raise more money, at a higher valuation, and enables to attract better quality investors. 

If I was an entrepreneur, I’d skip the view.  Go to Rehovot.  Bring Shnitzel, Rice and Tehina to the office from a local foodery for lunch and really watch that $…  It’s an old saying, but still rings true “Cash is King”.

Tags: cash+is+king, garage+mode

Common thread for uncommon ideas

Modu’s big 3GSM launch, combined with recent comments re: Shai Agassi’s Project Better Place, drive me to the keyboard this time.  What do these companies have in common? 

1. Game changing plays
2. “Out of the box” thinking
3. Dare where others dare not
4. Extremely successful entrepreneurs

Sitting somewhat on the sidelines these days, I hear criticism about both.  In Hebrew, we have a word “Firgun”, which like “Huzpah” doesn’t really have an appropriate English translation.  Essentially, it’s to compliment, show support, congratulate, etc., for no specific reason. (BTW - Ideas for synonyms are welcome.)

For some reason, when talking about such successful individuals as Dov Moran and Shai Agassi, the word Firgun seems rarely used.  Au contraire.  However, those same critics I’m sure say in their hearts “if anybody can do this, those guys can…”.

My thoughts: for the Israeli industry to thrive, we MUST have those individuals thinking out of the box about huge game changing opportunities. Those that have the potential to become multi Billion plays, with revenues measured in the hundreds of millions and higher.  All that’s remains is to put together world-class teams that can execute on these dreams.  Simple? Hardly.  But absolutely essential.

Good Luck!

Tags: modu, dov+moran, project+better+place, shai+agassi, israeli+startups, building+big+companies

Modu teaser...

For all those out there wondering what Modu (formerly Infone) is doing, here’s a teaser:

3GSM is nearing… so it won’t be too much longer to wait!

Tags: modu, infone, dov+moran, gemini+israel+funds, 3gsm

Day 1...

Many have been asking if the blog lives, so here’s proof. The question is what am I going to write about?

I was thinking of blogging about taking a 9AM Yoga class, or what is it like to pick up 4 year olds from school, but that hardly seems blog worthy (even though it’s definitely ‘hot news’ from my side of town).

So instead, let’s discuss strategic corporate investments.  These past 2 days have been quite hectic for me, between the MANY MANY MANY emails that I have been receiving, meetings to start “exploring new opportunities”, and that mid morning Yoga class… but I was confronted with a situation that prompts me back to blog.

The start-up in question has a partnership with a large corporation, and was now approached to consider a strategic investment by said corporate.  The question being: What should they do?

From the perspective of the paranoid, the corporate is just looking to get as much information about the start-up as possible (financials, projections, etc.) to weaken the position of this start-up in future negotiations.  Of course, in exchange for a potential investment, the corporate will probably want some sort of Right of First Refusal (NEVER GIVE THAT!).  Perhaps the corporate just wants to invest a bit of money, spending a fraction of what it would need to acquire the company, or in other worlds “buy the milk instead of buying the cow”.  To make matters even worse, this start-up doesn’t need the money, and the entrepreneurs see no reason to be diluted.

True as this all may be, we can put on another pair of shades and think that this just might be the first step in the direction that is significantly more appealing.  So, the recommendation is start to discuss this option, as who knows where it may lead.  Keep in mind that for a deal to happen, both sides need to want to do it. 

There are many problems to deal with along the way.  Not the least of which is that large corporations are like big elephants, and one must be careful not to get stepped on.  Right of First Refusal is something that I would NEVER EVER agree to!  A more acceptable version is RIFN (Right of First Notification), meaning if somebody else offers to acquire the company, you notify them, giving them an opportunity to respond. 

Corporate investors can add a great deal of credibility to a small company, significantly more than just a partnership agreement.  With added credibility, you can increase your revenue, and thus value.  I have had situations where we’ve had a strategic investor in a company, and the company was ultimately acquired by a competitor.  In the past, one would say that a corporate investor is less sensitive to the value of a company than a strictly financial investor.  Not sure that still applies, but again another consideration.

I grew up in the school that said take $ when you can, and don’t think of dilution.  Use it to continue to grow the company, make it successful, leveraging the partner.

Plenty of more to say on this subject, but blog posts are supposed to be short…. 

Tags: corporate+investors, strategic+investment, right+of+first+refusal, right+of+notification