The Journey Continues

Hello again! One year later, and once again, a group of 12 MBA students (both from Smith, as well as other top MBA programs) is primed to depart for eight weeks in Haifa, Israel as part of the Dingman Center’s Global Technology Entrepreneurship Fellowship program.

To myself and the inaugural team from summer 2010, the fact that the program has continued into a second year provides perhaps the greatest sense of satisfaction. It delivers tangible affirmation of the entrepreneurial path we blazed last summer. As the first participants in a brand new program, we knew the risks involved. Yet, without a doubt, last summer not only met, but exceeded our expectations. More importantly, we helped lay the foundation for this year's team to hit the ground running.

As I have mentioned previously on many occasions in this blog - Israel is an entrepreneur's dream. It is the quintessential Start-Up Nation. It is a land of high-tech innovation and a center of venture capital. Yet, it is also a land of many contradictions. For these and a myriad of other reasons, Israel is a fascinating laboratory for any business professional interested in studying innovation or entrepreneurship.

This post marks my final comments on the program. However, the story continues for this year's MBAs. If you are interested in reading about and following their exploits in Israel over the following two months, please head over to their page to find out more. Fellow MBA and 2011 participant Andrew Giessel has taken over blogging duties for this year's program. I wish him all the best, and hope you enjoy reading his posts this summer.

Elephant In The Room

We're currently in Southern Israel - having just visited Rehovot and now the Negev. As I've been on the bus for a while I've had time to reflect on the trip. Since arriving in Israel back in May, one topic that hasn't received a significant amount of attention (either from the speakers we've talked to, the companies we've visited, or on this blog itself) has been the issue of the business and economic conditions of both Israeli-Arabs and Palestinians. This is not to say that we haven't covered this issue generally, but this is an issue that (for a variety of reasons) hasn't always been the most comfortable or ready area of discussion.

"Some typical graffiti in the West Bank"
Photo by Stephen Kushner

To a large degree Israel's rapid economic progress of the past twenty years has been directed primarily towards Israel's Jewish communities. Oftentimes, Arabs (both Christian and Muslim) have been on the outside looking in (sometimes by choice and sometimes not) and even more so for the Palestinian populations of the West Bank and Gaza Strip (especially now that they are physically cut off from Israel by the Barrier Wall). This separation is clear when you drill down on the numbers. Income per capita among Arab-Israelis is one third that of the national average. For the Palestinian Territories, income per capita is one tenth that of Israel. It is not inconceivable to think that the future success of the peace process hinges on rapidly improving the economic conditions of these groups.

"A Palestinian woman in the city of Bethlehem"
Photo by Stephen Kushner

Regarding the Israeli-Arab population, Israel is looking to emulate the success of the government backed Yozma venture funds of the early 1990s. As such, they have launched the Al-Bawadir ("buds" in Arabic) fund in cooperation with Pitango Capital (see here). Al-Bawadir will invest approximately $50 million in Arab-Israeli ventures. The government provided $20 million, and Pitango general partners Nechemia Peres, Rami Kalish and Zeev Binman, along with various other private investors, provided the rest.  When we met with Chemi Peres last week (see here), this was an area he talked about as being the most critical component of Pitango's strategy going forward - and also an essential path to continued prosperity in Israel over the coming decades. Jerusalem Venture Partners and Viola Partners are also launching similar funds, which will begin investing in the next year.

In terms of the Palestinian population, Thomas Friedman of the New York Times recently discussed (here) the ongoing economic renaissance in the West Bank - which is paralleling the slow, but improving, economic improvements within the Israeli-Arab community - commenting that the changes ...

"initiated in the West Bank in the last few years under the leadership of Prime Minister Salam Fayyad, the former World Bank economist ... has unleashed a real Palestinian “revolution.” It is a revolution based on building Palestinian capacity and institutions not just resisting Israeli occupation, on the theory that if the Palestinians can build a real economy, a professional security force and an effective, transparent government bureaucracy it will eventually become impossible for Israel to deny the Palestinians a state in the West Bank and Arab neighborhoods of East Jerusalem."

One example that Friedman points to highlight the economic revival is the Palestine Exchange Board in Nablus, which was established in 1996 with 19 companies. It now has 41 with 8 more joining by the end of 2010. More to the point, this year the Al-Quds Index, which tracks this market has outperformed most other markets in the Arab world, as well as many markets in Europe and the United States. Hopefully - as I optimistically agree - this recent success - driven in no small part by the reforms of Salam Fayyad - offers positive signs for the rest of the Palestinian economy as a whole.

Over an over this summer, we've heard about the amazing "Start-Up Nation" that is Israel. Further, we've discussed and debated the characteristics that have enabled Israel to achieve its success. This prosperity and success though has been limited in its effect. The political and military conflicts are inextricably linked to economic conditions. For peace to ever succeed, it is in Israel's best interest if they look for ways to export their model to both their own Arab population, as well as to the Palestinian areas. Ultimately, the true success of the start-up nation may actually come in the next twenty years.

Obviously this issue raises many heated opinions on all sides - which I can't even hope (or have the ability) to address on this blog. That aside, I think from an economic standpoint there is a major question both sides need to address. For Israel, they must ask whether they have the desire and willingness to commit resources to improve the economic standing of the Arab populations (both in Israel and the occupied territories), even as they face resistance and hatred. For the Arabs and Palestinians, the question is, can they find positive purpose in a program of concerted economic growth and the building of a functioning economy and government, free of graft and corruption, rather than an existence centered on the negative (i.e. the destruction of Israel).

In both cases, I think the answer is yes. Perhaps I am naive or optimistic. Maybe, but I don't think so. There are at least groups like The Center for Jewish-Arab Economic Development, initiatives like Pitango Capital and Al-Badawir, and success stories like the Al-Quds Index. In the long run, I honestly believe that if Israel's economic success can be replicated (even partially), this will go a long way towards solving a lot of the regions problems.

Back to Jerusalem, pt2

On Saturday we woke up at a more reasonable time (leaving Ramat Rachel at 9:30am) for a visit to the Israel Museum. Located on a hill in the Givat Ram neighborhood of Jerusalem, near the Knesset, the Israel Museum is most famous for two amazing exhibits. The first is an enormous and fully detailed (22,000sqft) model of Jerusalem at the time of the Second Temple. The second is the Shrine of the Book which contains the Dead Sea Scrolls discovered in (now) southern Israel in 1947–56 in 11 caves around Wadi Qumran. 

"Our guide, Israel, talks with us about ancient Jerusalem"
Photo by Kristin Thompson

Our tour guide, Israel, took us on a full tour of the model. Over about 30 minutes we walked to each side - and were provided a thorough history of the city - as it was two thousand years ago. Incredibly - despite the centuries and the modern construction - the actual city retains a very consistent visual appearance to the model. The colors and layout have not changed drastically over the centuries. After our tour of the model we visited the Shrine of the Book. Interestingly, the outside of the shrine is constructed to visually represent the War of the Sons of Light Against the Sons of Darkness. The white dome symbolizes the Sons of Light, while the black wall symbolizes the Sons of Darkness. The interior of the shrine is like a cave, representing the environment in which the scrolls were discovered sixty years ago.

"The Sons of Light and the Sons of Darkness"
Photo by Kristin Thompson

That afternoon, a few of the team decided to visit the Old City of Jerusalem again, instead of heading back to the hotel. Those who went did quite a bit of shopping (mostly nargilas) before stopping at a bar for drinks and snacks. I (and a few others) opted to return to the hotel for relaxation either inside at the bar or out at the pool. According to a few people, the water slide was pretty amazing, though I didn't get a chance to try it myself. That evening the team went out on the town in Jerusalem - first to watch the World Cup match between Paraguay and Spain and then later to a nearby dance club. It was a very late night.

"Sherwin Pomerantz talks with the group about Israeli business"
Photo by Kristin Thompson

Sunday was focused on company visits and meetings. In the morning we had a meeting with Sherwin Pomerantz at Shelby's house. A 24-year resident of Israel, Sherwin (and three others) founded the Atid-EDI consulting firm. Atid-EDI is a team of economic, research, trade development and planning professionals who understand the nuances and business climates in Israel, North America and the region. Since 1991, Sherwin's firm has functioned as consultants to Israel's Ministry of Industry, Trade & Labor's Investment Promotion Center. He has also represented the trade interests, in the Middle East, of a number of U.S. states, including Delaware, Georgia, Illinois, New Mexico, Oklahoma, and Pennsylvania. As you can imagine, Sherwin had the knowledge to provide for a very interesting meeting!

"The group visits PresenTense to hear from Jewish entrepreneurs"
Photo by Kristin Thompson

After this meeting we traveled to Jerusalem's German Colony to visit PresenTense, a group that aims to foster entrepreneurship and leadership amongst the international Jewish community. While there, we heard business pitches from a group of summer fellows. We made sure to ask them lots of tough questions. The highlight of our visit to PresenTense though was that we got to hear a talk by Saul Singer, author of Start Up Nation (detailed in this previous post). Altogether, it was a pretty cool set of meetings!

"Saul Singer gives a talk on his book Start Up Nation"
Photo by Kristin Thompson

That afternoon, we finished our weekend in Jerusalem by celebrating America's Independence Day, July 4th. Once again, we traveled back to Shelby's house - this time for a BBQ. Hot dogs and hamburgers (sans cheese unfortunately) were plentiful, and everyone was content. Though we weren't able to acquire fireworks, it definitely was a great way to feel like we were back in the US of A. That evening the team hopped in the van for the long trek back to our house in Haifa - one final week of classes left to go.

Start-Up Nation

This past Sunday we had the opportunity to meet with Saul Singer, co-author of the book "Start-up Nation: The Story of Israel's Economic Miracle." Saul gave a thirty minute talk to the Smith team, as well as interns from PresenTense, about both his book and also thoughts on what factors have driven the phenomenal success of the Israeli economy over the past twenty years. Here's a clip posted below of Saul talking about his book.

It's funny how quickly Start-up Nation has become the de facto story of Israel. No matter where we've been this summer or who we've talked to - without fail - everyone has spent the first few minutes of each meeting discussing this book. Have we read it? What did we think? It was definitely cool to finally hear this story from the author himself.

Video Three

Our esteemed trip videographer, Stephen Kushner, has released his third video of the trip. Halfway through the program, this video is the third in a series (of five) depicting the Global Technology Entrepreneurship Fellowship for rising second-year MBA students from the Robert H. Smith School of Business at the University of Maryland College Park. 

The Part 3 video (posted above) includes: commentary, company visits and interviews, as well as cultural experiences and camaraderie, from weeks 4-6. Once again, Steve's done a superb job distilling the spirit of our trip into 3 minutes of video. Thank you Steve!

Jerusalem Visit

After a day back in Haifa for our weekly class at the Technion, on Friday morning the Smith team was back on the road for a full weekend of touring and sightseeing. In the morning we were met by our guide, Israel, who gave us a preview of the days activities as we sped down the highway to our first stop of the day, Caesarea.

"Our guide Israel weaves a story about ancient Caesarea"
Photo by Kristin Thompson

Planted firmly against the coast, halfway between Haifa and Tel Aviv, Caesarea is an ancient port city that dates to the time of Herod the Great – about 22 BCE. The ancient city itself is no longer inhabited - as the last occupants, French crusaders under Louis IX - were forced to flee when the city was put to fire by Baybar invaders in 1251 CE. Literally lost to the sands, the city was rediscovered and its secrets uncovered in the 1940s due to the financial generosity of Baron Edmond Benjamin James de Rothschild.

"Modern concerts in Caesarea's ancient amphitheater"
Photo by Kristin Thompson

Our first stop in Caesarea was the Roman aqueduct that provided fresh water to the city for over a thousand years. From there we proceeded to the old city itself, where we visited the Roman theater, hippodrome, and palace (which was possibly the former residence of Pontius Pilate). As we walked back to the van, we passed through the city walls and across the moat, which were both constructed by the Crusaders. All in all, Caesarea was awesome!
 

"Driving through East Jerusalem"
Photo by Kristin Thompson

From Caesarea we drove directly on to Jerusalem. Since it was Friday, a lot of tourist sites were closing at sunset for Shabbat, so we were in quite a rush to get into town. We drove into the Old City and parked right next to the City of David – where the Biblical King built his palace and capital in 1000 BCE. The key attraction at this famous archaeological site is Hezekiah's Tunnel. This tunnel, which runs for a little under half a mile is filled with about three feet of water at all times. We walked (in my case barefoot) through the tunnel before emerging on the other side in East Jerusalem. Following our underground trek (which seemed to go on and on), we proceeded to the promenade overlooking the city.

"Looking out at Old Jerusalem from the Haas Promenade" 
Photo by Kelley Harris

We went next to our hotel for a brief rest before Shabbat dinner. Max and Sue Singer (parents of Saul Singer, the author of Start-up Nation) were kind enough to invite the entire Smith team into their home to participate in this weekly Jewish tradition. Dinner began with the serving of homemade challahs. Afterwords, this ritual was followed by Kiddush, the blessing of the wine. Max and Sue then led us through a number of other songs and readings before we finally began the meal in earnest. Altogether, everyone had a great time!
 

"Shabbat dinner with Max and Sue Singer"
 Photo by Stephen Kushner

In the preceding days, I had been coming down with a bit of a cold. A bug of some sort had been making its rounds around the team - and unfortunately my time arrived sometime late Friday night. I woke Saturday morning feeling pretty horrible - so somewhat reluctantly I opted to skip the tour that morning. I did get a pretty good report from the team later that evening though, when we all convened for dinner.
 

"Old Jerusalem near the Jaffa Gate" 
Photo by Kristin Thompson

On Saturday the group met our guide, Israel, at 9am in the hotel lobby. From there the group went to the Old City, this time for a more thorough tour of its many historical sites. The team walked the Via Dolorosa, visited the Church of the Holy Sepulchre, and shopped (and ate) in the Muristan Souq. From there they climbed the ramparts and walked the city walls, emerging just next to the Western Wall. The last stop of the afternoon was a short drive to the Mount of Olives – a site significant to both Jewish and Christian traditions.

"Fresh food at the always busy, Muristan Souq"
Photo by Kristin Thompson

I was feeling a bit better that evening so I opted to join everyone for dinner at Asher Epstein’s place. Altogether, the group was feeling pretty fired up about everything we’d seen and done so far this weekend. Additionally, this evening was especially important to everyone, as it was the England vs. USA World Cup match. Americans (myself included) have a funny habit of completely ignoring the sport of soccer (nee football) for 4 years and then suddenly remembering when the Cup comes around again. It may be the world’s sport, but it certainly isn’t America's sport. Anyway, the game started at 9:30pm, so many in the group decided to head to the The Lion’s Den pub to watch.
 

"Everyone celebrates as the USA battles back against England in the World Cup" 
Photo by Kristin Thompson

Ninety minutes later the game was over and we (the USA) had forced England to a 1-1 tie. I’ve read that this was a fantastic result – as everyone had expected England to prevail. That being said, I have a hard time getting excited about a tie game. I mean, really? A tie? I think this fact alone is what makes it so hard for Americans to get behind this game. Someone has to win. Without a winner, what’s the point?  

Anyway, one other cool outcome from the game: our esteemed photographer, Kristin had the previous photo featured in the Washington Post. Congrats, Kristin! All in all, Jerusalem was a blast! We got to see some fantastic historical sites, eat wonderful food, and watch the USA beat up on our cousins across the pond. It would be hard to ask for much more – well maybe the USA could have won rather than tied - but I digress.

The Prime Minister

As promised, here is Israeli Prime Minister Benjamin Netanyahu addressing the 2010 High Tech Industry Association Conference last week in Jerusalem. The second part of Netanyahu's speech is posted in full at our team's YouTube site.

First Three Weeks

As we approach the end of the our first three weeks in Israel, I think it's probably as good a time as any to provide a recap of where we've been so far. I'll try and do this a few times this summer in order to fill in any new readers on anything they may have missed. Anyway, the past weeks have certainly gone by quickly. We've seen and done quite a bit. In fact, it's actually hard to believe how much we've been able to fit in to such a short amount of time.

Pre-Departure: in the weeks leading up to the trip I blogged here and here about the reasons why I believe Israel is important and what are the unique characteristics that have lead to Israel's economic and technological achievements of the past few decades. Start-up Nation - the unofficial handbook of our trip - was mentioned on a few occasions. On April 29, the team celebrated the beginning of the program, while also recognizing the contributions of the program's many generous donors, at an evening reception in Washington, D.C., hosted by Miles Gilburne and Nina Zolt.

Week 1: After months of planning and hours of travel, the Smith team finally arrived in Tel Aviv, Israel, passed through customs, and then made the hour long drive up the coast to Haifa - our home for the summer. The first few days were set aside for us to get acclimated to our new surroundings. The fact that we'd arrived during the holiday of Shavuot certainly helped keep things quiet that first night. By Thursday we'd had a chance to settle in and proceeded to the Technion for our first class and to meet our Israeli teammates.  The projects were finalized and the patent creators presented on each of their technologies. On the weekend we toured the city of Haifa - the German Colony and the Baha'i Gardens - and then traveled north for visits to Rosh Hanikra and Acre.

Week 2: The second week began slowly - with Monday through Wednesday working at our office at the Technion. I blogged about the Israeli business culture here. On Wednesday we had a presentation from the Technion Entrepreneurship Club. Then on Thursday, we had our second class with presentations from the Technion incubator and our project leader Asher Epstein, among others. At the end of the week we departed Haifa for a weekend visit to Tel Aviv. Friday morning we had a brief meeting with Israel's Warren Buffet, Yossi Vardi. Later that afternoon, we went on a guided tour of the city - from Jaffa and Neve Tzedek to the Hacarmel Market. Saturday we were free to explore on our own - or head to the beach - as a few folks did. It was awesome! Before heading back to Haifa, on Sunday we had meetings at two venture capital firms, Tamir Fishman and AquAgro Fund, where we met with Moshe Levin and Hillel Milo respectfully. Altogether it was a busy but exciting week!

Week 3: At the beginning of the week a political and military incident drew the eyes of the world to the coast off of Israel and the Gaza Strip. Early on in the week, our resident video blogger, Stephen Kushner, posted the first (of five) major trip videos on the site. Wednesday found us once again at the Technion Entrepreneurship Club for a presentation by one of our program's benefactors, Rick Zitelman. Rick gave a talk on business ethics (here) from a Jewish perspective, as well as comments on investing in general (here). On Thursday we had our first major presentation of the trip. In class we gave 30 minute presentations on our technologies and five potential markets to a panel of local Israeli venture capitalists. [More on this event to appear later this week]. On Thursday, my photo from our house in Haifa was featured on The Atlantic. This weekend the team has been enjoying free time at the beach, while getting ready for next week, when we'll be heading to Jerusalem for the High Tech Industry Association Conference.

Venture Capitalists, pt1

I'm definitely quite a bit late in getting a post out about this, but every time I thought I'd have a free moment to start putting down my thoughts, I'd get distracted by something else. Anyway, better late than never! 

This past Sunday, May 30th, the team visited two venture capital firms in the Tel Aviv area before returning back to Haifa in the late afternoon. Our meetings at both locations lasted a little over an hour, and in both instances we were given an opportunity to ask questions. Given the differences in each visit, I've decided to break up my coverage of each into two separate posts.

The first meeting was at DFJ Tamir Fishman, the local affiliate of Menlo Park, CA based Draper, Fisher, Jurvetson (DFJ). DFJ and its worldwide partner organizations (including DFJ Tamir Fishman) manage a portfolio of companies and assets worth approximately $6 billion. DFJ Tamir Fishman itself is actually the venture capital subsidiary of the larger Tamir Fishman Group, which is a full-service financial management firm.

At DFJ Tamir Fishman, our host and point of contact was Moshe Levin. Currently a managing general partner, Moshe is a 25 year veteran of the Israeli venture capital industry, having previously served as a partner at  Pitango, Israel's largest VC firm. It was pretty clear from the get go that Moshe would be able to offer us a wealth of information and experience - and we were not disappointed.

Moshe's presentation was in some respects a recap of Start-up Nation. That being said, his presentation did dig into some prime examples of Israeli created technologies that many of us had not been aware prior to our meeting. I realize I've already gone into some of this in previous posts, but it still bares repeating.

It is quite extraordinary how many technologies - upon which our current global economy is based - that were created in Israel. To be honest, these contributions are drastically out of proportion relative to the size of this country, its population, or its economy. Listed below are a just a few of these technologies as well as the Israeli (or Israeli subsidiary) that was responsible for each creation.

• Pentium PC - Intel
• Centrino - Intel
• IP Networking - RadWare, Allot
• Flash Memory - M-Systems
• Stents - Medinol
• Generic Drugs - Teva
• Voice Mail - Comverse
• Instant Messaging - ICQ (Acquired by AOL)
• Cable Modems - Libit (Acquired by TI), Terayon
• Cordless Phones - DSPC (Acquired by Intel)
• Cellular - TI
• 3G Cellular - Modem Art
• VoIP - Vocaltec, AudioCodes
• AntiVirus - Symantec
• Firewalls - CheckPoint

Seriously, it is astonishing the range of technological innovations that have emerged from Israel over the past twenty years! From the internet, to personal and portable computers, to telecommunications, and medical devices, each of the above technologies was critical to the development and evolution of these markets and industries. Given their impacts, it would be hard to imagine a world in which these technologies had not been invented.

Why Israel? Ctd

Dan Senor, co-author of the recent (and highly recommended) book, "Start-Up Nation: The Story of Israel's Economic Miracle" really captures the essence of what makes Israel worth paying attention to in this November 2009 article in Newsweek. 

How does Israel—with fewer people than the state of New Jersey, no natural resources, and hostile nations all around—produce more tech companies listed on the NASDAQ than all of Europe, Japan, South Korea, India, and China combined? How does Israel attract, per person, 30 times as much venture capital as Europe and more than twice the flow to American companies? How does it produce, for its size, the most cutting-edge technology start-ups in the world?

David Brooks in the New York Times gives some more reasons to study the Israeli model.

Because of the strength of [its] economy, Israel has weathered the global recession reasonably well. The government did not have to bail out banks or set off an explosion in short-term spending. Instead, it used the crisis to solidify the economy’s long-term future by investing in research and development and infrastructure, raising some consumption taxes, promising to cut other taxes in the medium to long term. Analysts at Barclays write that Israel is “the strongest recovery story” in Europe, the Middle East and Africa.

Interestingly, when Michael Porter (a name near and dear to most MBA students) penned his definitive tome "The Competitive Advantage of Nations" in 1990, in its many pages he saw fit to only mention Israel once! His single comment being that, "Israel's principal clusters [of innovation] are related to agriculture and defense." It seems clear that if Mr. Porter were writing today he'd likely want to revise and elaborate on this assessment.