Why haven’t you blogged for since mid September?

Can’t really say. For some reason, I couldn’t bring myself to write. It’s not that I didn’t have anything to say. I actually had a lot to say, but my typing hands were heavy.

Do you think you are now officially back to blogging?

I can’t promise anything. But I will try. I will also be blogging at the Gemini blog.

Can you highlight the top 3 events that happened in your life in the past 60 days, just to fill the gap.

Sure. Business: We made another investment (eKoloko, an official post to come tomorrow). Music: I saw Pearl Jam live again, and I also saw Shalom Hanoch live. Sports: Patriots are back at it, Hapoel Haifa are not. Overall, seems like everything is “normal”.

Do you feel the Venture Industry in Israel is active again?

Absolutely. Deals are happening, especially since a lot of funds have dry powder to invest. However, Israel is part of the global venture industry, which is going through some turmoil. Nothing dramatic will happen in Israel in 2009/10, but we may see some changes in the local investment scene in 2-3 years.

What makes you optimistic?

AdMob. Mint. Gomez. Good companies are being acquired, and it feels that if we invest and support good companies, we will be rewarded.

This year I decided to be a bit more specific, something beyond just general health and world peace. So, here are my 3 wishes for the new Jewish year:

• 5 great deals: When I talk about deals, I mean it in the most broad sense. Some combination of exits, strategic accounts, partnerships or massive distribution. 5 amazing business deals that will make a direct or indirect influence on Gemini’s success.
• 3 amazing rock concerts: I already have tickets for Leonard Cohen, Shalom Hanoch (1AM at the Barby) and Pearl Jam (again). Although we are back in Israel, I hope to attend at least 3 world class rock concerts with real emotional impact.
• 1 historical championship: Between the Patriots and Hapoel Haifa, how about another historic championship. Odds are low, but hey – I am asking for just one.

Add 5+3+1 and it equals Nine(9), the Hebrew letters of the new Jewish Year: תש”ע.

Shana Tova!

Aren’t we supposed to be in a downturn? Isn't the venture model seriously broken? Give us 52 more weeks like that and we will be just fine.

But still, this is not good news. A few years back I saw Paul Deninger speak at an Always On conference. Paul is a very smart guy, and extremely knowledgeable about the Venture Business. He said that one of the worst trends in the VC world is the growing gap between supply and demand. In other words, too many sellers, not enough buyers.

I saw Paul earlier this week at the E&Y Journey conference. We talked about the need for patience, and how the long term view of early stage companies is highly correlated to patience (both for the entrepreneurs and the VCs). Back to this crazy week of M&A, and we have 3 examples of short term gains, and no long term view:

• Omniture: Already public, could have acquired a few companies in the upcoming years.,
• Brightcove: Supposed to be profitable and very strong. Great potential for a 2010 IPO.
• Mint.com: Early traction, at least 2-3 years away from real early success.

So – here is a wish for the new year, a post called “Crazy IPO Week”.

As I am a VC, you would expect to hear now about some great portfolio companies, or at least about exciting product companies. That wasn’t the purpose of this trip. Together with 2 good friends, I went to visit Babcom Centers, Galila Line technologies, and Galil Software, three leading companies in the new emerging sector – the IT services industry based in the Galilee.

The rationale for this new trend is quite straightforward. There are a lot of Arab-speaking Israelis in the Galilee that are educated (Degrees from the Technion, TAU, etc.), extremely talented, yet can’t find the right position in high-tech or tech-services. Instead of losing these talents, new emerging companies in the Galilee hire them, train them, and leverage them to provide top notch services for the rest of the industry.

Here is a quote from Babcom Centers:

“Babcom is located near large Arab population centers in the Galilee, housing thousands of educated and skillful men and women interested in developing a career near their homes. The high availability of these high-quality human resources enables us to offer operational flexibility, quick response to our customers’ changing needs, as well as the ability to rapidly recruit educated employees, particularly women, meticulously selected in our uncompromising evaluation centers.”

And another quote from Galil Software:

“Galil Software is a software service company located in Nazareth. By recruiting from the highly skilled workforce available in the Galilee, Galil Software is uniquely positioned to offer high quality services at competitive prices. In addition, Galil Software’s proximity to major Israeli high tech centers ensures that customers have direct and continuous access to our R&D teams, significantly reducing the risk, cost, and management attention required to support off-shore outsourcing activities.”

We started the trip at 8AM, and were back home at about 8PM. Not a short trip, but much easier than a round trip to Bangalore. With a cost structure of 20%-40% lower than R&D in the center of Israel, the proximity (Combined with quality) of these emerging companies make them a really interesting alternative for outsourcing to Eastern Europe or India. Beyond that, providing real jobs to the Arab Israelis is a huge “small” step in making Israel a better place.

My Portfolio companies are not working with Babcom or Galil yet. Some are too small, some haven’t really checked these options yet. I was so impressed today, that I will talk about these ideas with all of my companies.

In 2006, When we started the (LGiLab) we were looking for a great GM. Our thought – someone who has a great understanding of the industry, with good contacts and strong knowledge. We looked hard, and finally found Ouriel Ohayon, who was then the editor of Techcrunch France and doing Biz Dev at ICQ.

Back to 2009, I can easily say we made the right decision. Ouriel did a great job as he became the master of knowledge on everything that was consumer internet and mobile. He helped us find great opportunities, and analyze all of the many projects that came through the lab. He was personally responsible in finding us both Outbrain and Eyeview.

Now, after 3 years of working together, Ouriel is going back to his roots: Being an entrepreneur. He will be leaving the Lab in order to find the best possible project for him. It may be Appsfire, it may be Topify, and it may be a whole new project (that I haven’t seen yet). All I can say, he has A LOT of great ideas. Check out his blog to read more about his specific plans.

In fact, with the help of Ouriel, we just closed an Internet seed deal (on our own). We are officially announcing this deal later today (Check later today on this blog). I am sure there will be many more like those in the next 24 months.

Ouriel – good luck on your new journey. I am sure you will build great things.

I will not cover all the topics that were discussed. Yaron created a beautiful presentation, and many of the issues are presented there (Check it out here). But I do want to touch upon one VERY IMPORTANT issue.

Trust.

The actual question that was presented: “What is the percentage of companies you meet just to learn about your portfolio competitors? Do you share the numbers you see in competitors’ info with your portfolio companies?”

I can write a very long post on how we never do this, and why doing this is wrong, and how VCs that do this should be fired immediately, etc. etc. Instead I will write a very simple sentence.

Never.

Never meet companies “just for learning” and never meet “to gather information”. Every information we share (with anyone) is done in full understanding and endorsement by the company. That’s it.

Still, if any company feels uncomfortable – they can easily use Confidela and send their material through the Watchdox system – and in that case no one can do anything with it. In the next few weeks we will fully integrate Confidela to Gemini's website, and sending secured documents to our firm will be very easy.

I am a big fan of VC blogging. I think that it’s a great way to show the personal side of the Venture Capitalist, and also to easily communicate our thoughts on the industry, our work, and our processes. Saying that, maintaining a personal blog requires a lot of effort. Fred Wilson, probably the most known VC blogger on the plant, posts at least twice a day. That’s amazing. I manage to post times a week (on a good week), and I sometimes go for more than a month with nothing to say.

The Gemini blog provides a great opportunity for our team members to share great content, and do that in a sporadic way. Some will write twice a week, and others will post something every 2-3 months. However, we guarantee fresh content every other day, and hopefully a site that will become a great resource for the Israeli high-tech scene.

Regarding my personal blog, Israel Venture Capital 2.0, it’s not going anywhere. I will continue to post here (a lot), and will also add some to the Gemini blog.

So, what’s the action item now? Add Gemini Blog to your RSS reader, and in any case check it out now.

Analytics is a key part of any web business, and in today’s world – any business, web or non-web. Everything needs to be measured, and it’s important to measure the right things. A lot of times, it’s the trivial stuff (# of users, growth, conversion) but other times it’s much more sophisticated (repeat users, traffic sources, segmentation, churn, etc.).

Having good metrics is important as they provide good information, and GREAT stories. Sitting with the BI manager taught me a lot about the business of that portfolio company. What is really happening? What customers are profitable? Where can we make more money? What are the current bottlenecks? With such insights, you can addicted to analytical information, as much as you can be addicted to the performance of a public stock. As such, I ask my companies to share data on a monthly basis. That’s the minimum resolution where you can see real changes, that are beyond just noise. I never want to get access to Google Analytics. As a board member, getting daily information can kill you.

A lot has been written on the importance of analytics. Check 360innovate as one example. Or just search Google for “importance of analytics”.

Now, here is a personal thought on analytics. I sometimes wish I could have analytics on my life. Some sort of a measurement tool on everything. Just for me. How many flights did I ever take? How much km did I run to date (total)? How many people did I meet? I can’t get this information. Is it interesting? Not sure. But maybe my grand kids will have all that in a database one day.

The reality is that Israel had very few breakthrough companies in the web space. ICQ was one (Although they made their money in a B2B model), and maybe Conduit is one (Although it’s not realy B2C). I tried investing in the space, but did not succeed (eSnips, and a couple in the lab).

Still – I think we have to continue creating direct-to-consumer plays, and build companies that will expand fast. I was told of a US venture that in the past year grew from $5M to $40M in 12 months. That is something that has not happened here yet, but should.

What are the key success factors? What needs to happen so Israeli consumer web companies will succeed. We need more talent that will return from the US to Israel (happening) and we probably need to look at the non-US markets. And we need to keep inventing and investing.

I am currently finalizing an investment in a direct-to-consumer opportunity. Risky, but with huge potential. More on that in the upcoming months.

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