Last Tuesday - July 6th - the Smith team drove down to Herzliya - a suburb of Tel Aviv - for a series of meetings and company visits. Our first stop of the morning was at Better Place, which I've already detailed in two previous posts (here and here). After finishing our meeting at Better Place, we traveled to Benchmark Capital. Later in the afternoon, we had our final visit of the day at the offices of Pitango Capital.
Upon arrival at Benchmark Capital, our first visit was with Shai-Lee Spigelman, the Marketing Manager for Microsoft's Israel R&D Center. Shai-Lee talked with us about the Microsoft experience in Israel. In other words, the when, why, and how they entered the market. She focused primarily on the most relevant aspects related to research and in particular research for a larger multinational corporation. It was my takeaway that Microsoft (as do a lot of other companies) rely on their Israeli team for some of their most difficult problems and tasks. They also see Israel as a focal point for innovation, as exemplified through their ThinkNext conference. All that aside, there are at times difficulties both cultural and logistic in coordinating between headquarters and Israel.
"Microsoft's Shai-Lee discusses R&D in Israel"
Photo by Kristin Thompson
Photo by Kristin Thompson
Following our talk with Shai-Lee, we heard a series of impromptu comments by Ellie Wurtman, a general partner at Benchmark. Ellie briefly talked to us about Benchmark's current investment portfolio, as well as the perceived risks he sees going forward for both his firm and also the broader venture capital market, given current conditions. Ellie then introduced us to the second presenter of the day, Avichay Nissenbaum, the country manager for AOL Israel and the CEO of Yedda Inc.
"Avichay Nissenbaum giving his start-up to buy-out story"
Photo by Kristin Thompson
Photo by Kristin Thompson
The Yedda story is a prime example of a start-up success - and more specifically a start-up that succeeded through the investment and backing of venture capital. The name Yedda comes from the Hebrew word for "knowledge". Founded in late 2006, Yedda is a website built to share knowledge with others by asking and answering questions. What I believe is most interesting about the Yedda story is that they were not the first mover in this space. In fact at the time of launch, Yahoo Answers, Wondir, and Google Answers were already offering similar services. Yedda differentiated themselves based on a number of unique offerings as well as through selling their service as a Q&A platform for other independent sites. Traffic grew rapidly over the first year and by November 2007 they had been acquired by AOL - which has subsequently integrated Yedda into their existing website(s).
Our final meeting of the day was at Pitango Capital. Founded in 1996, Pitango was Israel's first major venture capital firm. Over the past 14 years they have invested over $1.3 billion in 120+ portfolio companies. Pitango has been involved in many of the most successful Israeli ventures over this time period. Our host was Chemi Peres, co-founder of the firm and son of Shimon Peres, former Prime Minister and current President of Israel. Chemi is one of the most well connected and experienced venture capitalists in Israel.
"The team listens closely as Chemi Peres talks business"
Photo by Kristin Thompson
Photo by Kristin Thompson
For about an hour and a half, Chemi provided us a comprehensive overview of the current Israeli economic condition. He definitely had some insights (very pragmatic/realistic) that surprisingly (i.e. Israeli people are notoriously blunt) we hadn't heard yet during our time in Israel. Following this, Chemi then drilled down on the story behind one of Pitango's original venture investments - VocalTech Communications. In many ways, VocalTech exemplifies both a "great" venture capital investment as well as "flawed" investment. It was great in that it delivered a high return on capital. Concomitantly, the venture did not originally go as far as it could have in capturing the value of the space. Other players (e.g. Skype) came late, yet gained more - mostly because they took greater risks. VCs - though they seem risk seeking - are actually as risk averse (if not more so) then most investors. Lesson learned.
