VCinJerusalem

From Tel Aviv to Silicon Valley and Back: Returning to War

2012-11-18T00:31:29+02:00

This past week I spent a few days in Silicon Valley.

When I left Israel, there was a momentary ceasefire in the "low level" violence being directed at southern Israeli towns by various militia in Gaza. I purposely say militia instead of "terrorists" because as the world is now aware, we are in a state of war with those in Gaza who have been using psychological warfare on and off for many years. Terrorists and terrorism can sometimes elecit a sense of martyrdom for a cause, to perpetuate the idea of the underdog. War, on the other hand, is simply war. And at times armies, acting on behalf of a nation, commit war crimes, attack civilian populations with no just cause.

This is the situation we are in. Hamas has been at war with Israel for many years, we are only know fully acknowledging that reality.

During a ceasefire in the war, Israeli political and military leadership took a decision to act upon a war room priority of killing Jabaari, the Hamas military chief. Similar to the US decision to hunt down and kill Osama Bin Laden, who also was a political and military leader.

I personally think the world would have been a better place if we had brought Bin Laden forth to stand tribunal for his crimes, and sentence him to a life imprisonment pondering his fate. Yes, I am against the death penalty at all times, even for someone like Bin Laden. When there is a ticking bomb, however, we do not have that moral luxury -- and so at times we are justified in acting. Was that the case with Jabaari? Did our political and military leaders feel he was a ticking bomb, destined to commit further war crimes if we did not act in time? Perhaps. And so maybe there was a justified moral compromise. I do not know.

What I do know is that taking out of the equation one of the symptoms, without treating the core issues, is not a morally acceptable strategy.

If we have momentarily defused a bomb, wonderful -- but we must follow it up immediately with an intensive move to cure the disease, not only the symptoms. Gaza has been, since the ill-planned pullout, a stew of hatred breeding intense hatred. Is all of that Israel's "fault?" Of course not, Gaza shares a border with Egypt, under both Mubarek and his successor Musri that border has been closed -- and so are the sea, air, and other land borders controlled by Israel. Israel helped create a State of Gaza, with it's own political and military leadership. We are at war with that State -- but at some point we will want to live at peace.

And of course there is also the slowly developing State of West Bank, which we are fighting but is taking shape regardless. Will these two states merge? Maybe, but not our call. We need to make our peace with both of them, with an intensity matching or exceeding that of war.

When I was in Silicon Valley I visited with an Israeli friend whose company was recently acquired, and as a result he moved with his family to Silicon Valley to see through the integration of hs company into the acquiring entity. When I asked him how he was doing on a personal level, he said he only has one complaint about his new life in Silicon Valley..."that he has nothing to complain about." Only an Israeli would complain about there being nothing to complain about!!

And yet his statement represents the success of the bubble that Silicon Valley culture created, and within that bubble all is good. Can the Silicon Valley bubble be pierced? Popped? Sure, we have seen it happen. But that bubble is largely an economic one -- and those living at the "borders" of that bubble are somewhat indifferent, and when the bubble bursts are not so directly affected. Israel for many years has been behaving like a bubble, and those attempting to burst our bubble were operating with toothpicks going up against a super industrial strength bubble -- with a very thick skin. Poke us all you want, we don't feel it -- until the tooth picks get sharper, and pierce deeper (rockets in Tel Aviv). We cannot afford in Israel, or in neighboring States, for our bubbles to burst. We will not bounce back, as does Silicon Valley.

On my way back to Israel, an Israel that has woken up to the state of war it really is in, I think how we need to pursue peace at the same level of intensity that we fight our wars. We have finally started to stand and fight in a war that has been raging for some time. I pray that we can finish the war as quickly as can, and then start fighting for peace.

I bless us that we bring Israel to the point where Israelis can complain that there is nothing to complain about -- and then we will know we really did create our own version of Silicon Valley.

Saying No

2012-07-18T08:59:23+03:00

My natural tendency is get to yes, to close the deal, move forward, having all parties excited to forge ahead together knowing that we are in a win-win relationship.

Saying no is not easy for me. Some of my biggest mistakes, financial and otherwise, have resulted from not saying no. Of course, my saying “yes” has brought me a blessed life, with a beautiful wife (inside and out), seven incredible children, and many good friends.

The other day, after two months of roller coaster negotiations with a potential new partner, I finally had to say NO. It came to the point where I felt my comfort lines had been crossed, and even though I could still list the many reasons it made sense to say yes, I realized that in this case the answer was no.

In saying no I put myself through the wringer – why was I not able to navigate the relationship to a place where both sides would be comfortable? Recognizing my limitations is part of getting older, an ongoing maturation process (may it never stop, and may I continue to feel young).

So much of the business literature is about bringing the deal to fruition, closing the sale, getting to yes. Not enough attention is paid, I feel, to stopping unhealthy business deals from happening.

Much of modern life is reactive, from health care to business ethics. In relationships we also spend a lot more time on the failure than on the creation (just imagine if people like my wife, Rabbi Dr. Haviva Ner-David, who counsels couples contemplating life together, were just as busy and well-paid as divorce lawyers).

In choosing a business partner all the same pros and cons exist as when choosing a life partner – most important in both choices is can you imagine building a healthy, productive relationship together.

Too often money, external beauty, or convenience are swaying factors in taking on business partners and/or life partners. The decision I had to make last week had all of those factors – a potential business partner with deep pockets, committing significant sums, with business “beauty” (potential strategic value). And in saying yes, I would shield myself (for some time) from needing to possibly hear no from other investors – very convenient.

But when looking more deeply, I realized that while I could be friends with the person in question, and possibly do business together on specific spelled out deals, we did not have the ingredients for a healthy partnership.

Jobs or Family

2012-02-01T13:55:35+02:00

Jobs or Family

Recently I read through the biography of Steve Jobs, authored by the wonderful Walter Isaacson, CEO of the Aspen Institute (as you may know, I have the deep honor of being a Henry Crown Fellow of the Aspen Institute, and have had the unique pleasure of interacting with Walter over the past ten years, and greatly admire his ability to capture complex lives in written form). Walter takes the reader on a page-turning odyssey of the man Steve Jobs and the companies he created (Apple, Next, Pixar, and then Apple again). We are offered a rare glimpse into the life of one our generation’s most mythic figures.

As an owner back in 1986 of a first generation Mac , all the way to being the CEO of a company in 2012 developing a service running on the iOS platform, I did not need the biography to tell me that Steve Jobs had a gift for bringing technology to the masses. The question is, at what price? From the opening that Walter gives us into the life of Steve Jobs the man, not only the myth, I come away with a very bad taste in my mouth. While I knew that Jobs was a driven personality, it is only reading the book that I realize how much he sacrificed upon the alter of creating cool technology. As readers of the book or avid followers of Job “trivia” know, Steve Jobs the man fathered a child and then for almost ten years ignored that child, his daughter Lisa. Even after acknowledging her, and bringing her into his orbit, their relationship was not a happy one. While there are a few scenes in the book that tell us of Jobs ability to love family, you get the feeling that in the “family v. company” race there was never a doubt what would win.

My own father, who thank God is alive today and will remain so for many years to come, was one of the pioneers of the computer age, helping to create COBOL, building massive mainframe systems in the 60s and 70s, and helped create the forerunner of the internet in networks such as BITnet and Arpanet. But my father did not see the vision of a computer in every house that people like Steve Jobs (and of course Bill Gates) saw back in the 70s and 80s. My father felt that computers were tools, not toys. My father’s cohort were happy to leave computers in the hands of data processing centers, crunching difficult numbers in the pursuit of national defense, health systems, and in general making the world a better place, but from a “behind the scenes” paradigm. My father, before retiring to academia in 1970, created a start-up (yup, it’s in the blood) called Compumedic Controls, which harnessed powerful computing to help centralize medical records. Growing up my father was very present, although also very dedicated to his adopted persona of being a professor at a public university. And we (my sister and I) were very present in the professional life of my father (and mother, also an educator). He brought us to office many times, letting me play with the punch-card machines, teaching us basic programming skills. When my father had conferences, we often attended together with him and my mother. It was a lifestyle that treasured family, and integrated it into professional life. We did not feel a tension between the two paths, but rather an integrated approach to life.

No coincidence is it that Jobs adopted family name is all about the job, the workplace, the professional life – the side of oneself that is extremely ego driven. For Steve Jobs parents, their last name was a curiosity, for Steve it was destiny that the job would always come first, and would have primacy in his life. Isaacson does not tell us of a Steve Jobs lovingly showing off his kids at the office – what you hear about is a man cutting a family vacation short because of a defective antenna in the iPhone 4 (and not clear how cutting the vacation short helped that problem…). In fact, it was only reading the biography that I knew Jobs had kids at all! And this is one of the most high-profile tech leaders of the generation. I am not asking for people like Jobs to live out all of their life in the public eye – but on the other hand he was a role model, and along with great power comes great responsibility (as Peter Parker’s Uncle Ben so eloquently told him).

I know it is not cool to speak ill of the dead, and so I prefer to take step back, and analyze the clash between Job[s] and family from a more removed and also personal point of view. As a serial entrepreneur, I am often faced with needing to choose between another hour (or three ) of work, or spending time with kids, raising them, together with my life partner, Rabbi Dr. Haviva Ner-David, and also wider family circle, community, and the world. As the father of seven children, ranging in age from ten months to 18 years, those demands on my time are a daily challenge. But it is a challenge I relish. I don’t think one can “do it all” if the job demands operating at a Jobsian level of intensity -- almost necessarily means family will lose out – and that is a terrible example to set for the world. For me, it actually taints the products that Jobs created, knowing they are the result of a philosophy that so prized work and professional pursuits above family and community. No wonder that Steve Jobs never engaged in social change and/or philanthropy. In fact it was Bill Gates who brought forth a much healthier and ethical approach, understanding that technology and business success should be used for tikkun olam, repairing the world. Even someone like Warren Buffet, who does not feel he personally can contribute with his own skillset to fixing the world, had loudly announced that the bulk of his wealth will go to repairing the world, and has urged others to do so.

Recently there has been a rash of a new type of program for entrepreneurs and start-ups called accelerators. There are several well-known programs in the US, including Techstars and YCombinator. In Israel we have some new ones as well, including the Elevator (where I am a mentor). These are wonderful jump-starts for an entrepreneur, and I know I would have benefited greatly 17 years ago had I started out my entrepreneurial career going through such a program – heck, I am sure I would benefit today. These programs, however, were set up with one “type” of entrepreneur in mind – one who comes with no strings attached, no responsibilities outside of their start-up. It is expected that they go “all in,” devoting all their energy to making the start-up work. Most of these accelerator programs are for a three-four month period, cramming together an MBA like education, the networking that normally would take years of conferences, and intense brainstorming on a 24/7 pace.

On the side one is expected to whip together at least a working prototype if not a launch able product. Oh, and the expectation of the accelerator is that you can drop everything and physically be where the accelerator is located. In the US this could mean getting on a plane and locating yourself thousands of miles from where you live (there are Techstars in Boulder, Seattle, Boston, and New York – so there are some geographic options…). No provision is made for family inclusion, or support. The cash invested in base on a per-founder “living expenses” model, or as one program calls it, “beer money.” What is someone with kids to do? Just pick up and leave the family for 3-4 months? I haven’t see any discussion in the blogosphere around this point. For me it is glaring.

I recently heard about a new program for Israeli start-ups to introduce them to the hard charging environment of Silicon Valley. The program literally picks up the leadership of start-ups and houses them in together Palo Alto for three months (in a group home in Palo Alto, sounds a lot like a frat house). In order to participate in the program the CEO must be present in Palo Alto for the full three months (I can understand why – I just see it from the viewpoint of an entrepreneur with a life beyond the start-up). The program is wonderful, just what is needed for newbie and experienced entrepreneurs. But why 3 months straight? Why not think in advance of the father or mother of young children, the CEO with a sick parent, or some other type of life responsibility. Do we really want to exclude all of these people from the best programs? And more importantly, the lack of exposure of these issues leaves a hole in the training of CEOs in the making, and perpetuates the Jobsian example of complete dedication to “the job.”

I reject the idea that it is either Job or Family. I believe you can “have it all”—but with different rules and expectations. It will not be perfect, and there will be moments where one or the other wins out. But three months of taking a break from life is beyond the pale, it exceeds the red lines. For some it may be workable – but for many not, placing a strain on family that cannot be morally justified by the potential success of a start-up (remember, 9 out of ten start-ups fail, even if accelerators have better stats, there remains a good chance the start-up will not succeed).
Where is the happy balance? I do not know how put my finger on the exact point along the spectrum. I just now that the life example of Steve Jobs is not the path to healthy family or soul. May he and his memory be blessed for the joy he did bring to the world, through Apple, Pixar, and then Apple again, and may we learn how to take the good and leave behind the not-so-good from the life lessons of Steve Jobs.

Broken Business Models in "Non-Profit" Start-ups; Case Study: Jdub

2011-07-14T11:27:22+03:00

Last week I had a packed Wednesday, starting off the day leading a Wexner Heritage Leadership group focused on the New Economy of Israel. OK, so the new economy is not so new, been around for almost 20 years, but what can I tell you, Americans are slow to pick up on these things. Anyway, talked to them for hours about entrepreneurship in Israel, start-ups, wealth creation, and more. To kick off the day I asked my friend Jon Medved to join us, who is featured prominently in Saul Singer's book, Start-Up Nation.

And then I walked down the street to meet with the PresenTense 2011 Global Summer Institute fellows, to talk about business models in the non-profit world, where most of the fellows are planning to make their mark in the near term.

I told them that from my perspective, there is a false distinction drawn between "for-profit" start-ups and "non-profit" start-ups. The only real difference is that in a for-profit the goal of the founders/investors is take money out of the business in some fashion at some point in time (either by dividends, IPO, trade sale). In a non-profit, the founders/investors are happy to let it ride, i.e. not to take any money out, except for salaries for paid staff members. Otherwise, all start-ups should be run in the same manner. Now, that doesn't mean that there aren't trade-offs all the time between generating usage/traction/influence and financial stability/sustainability. Twitter for many years did not think at all about generating revenues, let alone profits. Same for Facebook. And so many others. In the Venture Capital world right now people go ga-ga over Groupon which is generating massive losses, because they are showing "growth." Sustainable? Probably not, but the founders/early investors of Groupon have already cashed out in a big way. And current investors believe that with enough growth a profitable business model will be developed.

But lets look at non-profits. How should they pay the bills in a sustainable manner? Well, like their peers on the for-profit side, at first need to find investors (which could and should include the founders themselves). Very quickly comes the question: what is more important, short term financial stability or growth? Usually growth wins out, but there is no secondary market for shares of "non-profit.com" -- which means there is no liquidity event, nor will there ever be -- but on the other hand, there does need to be financial sustainability. Well, after many years Facebook turned on the revenue generation, and now they bring in (profitably) billions of dollars a year. Twitter slowly making their way there, and so on.

The time has come for non-profits to realize they need a business model, more than "let me try to raise a lot of money to pay my staff." The same metrics that VC use to decide whether to keep pouring money into start-ups that aim to one day provide liquidity for their investors should apply to "social ventures," whose goal is making the world a better place. (I am one of the few that believe we can make the world a better place and provide liquidity with the same venture, but that's a different conversation). Relying on passive donors for the bulk of the budget is a recipe for financial meltdown at some point. And it does not reflect any "buy-in" from those actually benefiting from the venture itself.

As a case study let's look at Jdub, which I have known since their very first baby steps. As some of you know, Jdub announced yesterday they are shutting down, and founder/CEO Aaron Bisman sent out the following letter:

Dear Friends, Fans, and Supporters,

I have to share some unfortunate news. After almost 9 years in operation, JDub's Board of Directors has decided to wind down the organization.

The decision to close was entirely financial, as the challenges facing our business model are too great to overcome. We were never a normal record label, nor were we ever just a record company. We always knew that in order to discover, curate, and promote unique, proud Jewish voices and role models in the mainstream we would need to rely, at least in part, on philanthropic support. In addition to buying our albums, sharing the music with your friends, and attending our concerts and events, so many of you supported us as donors, talent scouts, and stream teamers. Thank you, thank you, thank you.

JDub would never have grown into the organization that it was without you.

JDub earned half of its annual budget from mission-related revenue, including album sales, concert tickets, and consulting fees, and the other half from foundations and individual donors. The collapse of the music business in the decade that JDub has existed, combined with recessionary effects and aging out of the cohort of Jewish "start ups," made securing the necessary operating support an insurmountable challenge.

We have shared some incredible memories - bringing 3,500 people together for The Unity Sessions at Celebrate Brooklyn; watching Balkan Beat Box play to sold out crowds of Gypsy bikers in Portland; jumping into a spontaneous hora at The Independent in San Francisco while a half naked Golem played frenetically onstage; putting many of you onstage at the Bowery Ballroom for an American Shmidol karaoke battle; being told "I've never felt Jewish until tonight."

We'd love to hear your memories and reflections as well. Please post them on Facebook, or tweet them to @jdubrecords.

Just as JDub modeled what a new Jewish organization could look like and achieve, we will also model how one appropriately winds down. We plan to share as much information as possible, and seek appropriate homes for our successful programs and assets. We hope that our albums will continue to be available on iTunes, Amazon, and record store shelves long into the future.

We are extremely grateful to all of our fans, funders and supporters, the creative and inspiring artists with whom we've had the pleasure to work, their devoted fans, and our innovative and energetic team. We close with heavy hearts, but incredible pride in our collective accomplishments and impact.

We hope you will join us for the last official JDub event this Sunday night on the Roof of the 14th St Y in NYC, where Deleon will play songs from their new album, Casata, which you'll get, along with free beer, when you attend.

Thank you again for supporting us in all our endeavors. It has been a true honor.

Sincerely,

Aaron Bisman

Co-Founder & CEO, JDub

OK, so what is wrong with the above letter?

1. Well, for one, not enough transperancy. It's not clear if the half of his budget that came from "mission related revenue" was profitable. If it was, why shut down? Why not cut back and live off revenues? If you are going to tell us you are shutting for financial reasons, tell us more -- you are a public entity (a non-profit).

2. Aaron talks about the success they enjoyed, but he doesn't show us on a graph if they plateaued at some point, or if the growth continued. If they reached their maximum somewhere over the past decade, that is the point at which they need to say: "this is how big we will be, how do we make this work." If they did keep growing, why couldn't they find additional investors (donors)??

3. The statistics fall far short of showing me whether this really was a successful venture. That 3500 people came to a concert is not a massive accomplishment. Discovering Matisyahu was -- and not clear why that and other achievements didn't generate enough revenue to support a modest music operation. Aaron in a postscript to his farewell letter sums up 9 years of work as follows:

A final JDub snapshot:

- 150,000 event participants in 472 cities

- 35 album releases

- 3 Gold Records

- 3,500 attendees at The Unity Sessions, the largest Israeli/Palestinian concert in the history of the United States

- 52 songs placed in major films, TV shows, or ads

- 800+ mainstream press stories including The New York Times, The New Yorker, The Wall Street Journal, MTV, CNN, NPR, David Letterman, Conan O'Brien, Rolling Stone, SPIN, Billboard, and Pitchfork

- 26 foundation and Federation funders

- 630 individual donors

- 2.7 million unique visitors to Jewcy.com since JDub's adoption

It is very difficult to analyze the above without understanding development of the venture along a timeline, together with a business plan.

4. Donors are simply investors called by a different name, and need to be treated as such. They need to be shown how their investment is generating results -- and results means more than paying the overhead (or half the overhead) of an organization. Again, results could mean many things, ranging from user traction to revenue growth to public awareness, but it needs to measured and proven.

Bottom line: if a venture is delivering bang for a buck (or a shekel), it will be sustainable. It's up to us entrepreneurs to figure out how.

Difficult And Complicated: Isn't That What VCs Are Supposed To Invest In?

2011-05-22T21:55:49+03:00

As some of you know, recently I founded a new start-up as an entrepreneur, a co-founder, together with my friends Jeff Pulver and Tal Givoly. It’s been quite a few years since I sat firmly on the entrepreneur side of the table. It is refreshing, exciting, and exhausting. All at the same time.

And this past week we started in the ritual of funding our start-up. It is a really big idea, which will require a lot more money than any of us want to risk – and I have learnt over time that there is an industry set up to support people like us – and we should take advantage of it. I refer to the venture capital industry, which stands on the brink of frothiness after first the private market valuations (and fundraising rounds) of Groupon, Twitter, Facebook, et al., and now the public markets frenzy around LinkedIn.

Remember, the VC fund industry is largely teams of people who have convinced other people to commit money in basically a blind fashion. The Managers of the VC fund are supposed to find good deals, and at times also try to help the deals succeed.

Money that is committed to VC funds is high-high risk money. It is that small percentage of a portfolio that if lost will not greatly affect anything, if successful will provide that lift above “standard” returns. And if you are really lucky, VC fund ends up investing in a Google or Facebook, and then you make massive profits.

The key element here is risk – VC fund managers are being given money and paid to TAKE RISK. Of course they themselves need to manage that risk – but they are not being paid to make safe investments.

Part of the fundraising ritual is the founders of a given start-up will present the idea, have a short discussion, and then the VC will either follow-up with request for another meeting, or will say that they decided not to move forward. Almost never do VCs give a reason for not moving forward in the process, and the reasons are quite understandable – they might not have liked the entrepreneurs on personal level (this is a people business), might have disagreed with key aspects of technology and/or business model, etc.

But was our first “no” of our still nascent fundraising journey was a bit of a surprise, a VC told us he liked us, thought the vision was really interesting, but decided not to move forward because to succeed, he felt, would be difficult and complicated. Uh, yeah.

If it wasn’t “difficult and complicated” to do what we are doing than it would be far less exciting and rewarding. If it were easy to do what we are doing – why invest? The barrier to entry would be too low.

Difficult and complicated is music to my ears – it is precisely the kind of uphill challenge every true entrepreneur thrives on. And I believe it is the role of a venture capitalist to back visions that are difficult and complicated to execute on. I fear that this particular VC manager has lost his mojo. I just hope the rest of the industry has not.

Israel Needs to Act Like A Start-Up (that’s Obama’s real message to Netanyahu)

2011-05-22T18:52:21+03:00

Before reading President Obama’s speech I saw this FB status update flash across my screen from a fellow Israeli friend, someone I always assumed was “mainstream” Israeli:

“#obama can go F himself big time - this is the person who represents himself as a friend for israel? he's our worst enemy”

OK, so what prompted such a harsh reaction? I went to read the speech…and honestly cannot understand what got this friend so upset… (see here for full text of speech). A Palestinian state based on 67 borders with land swaps – isn’t that what several Israeli Prime Minister s proposed? And recently past heads of the Mossad, IDF, and Shabak (Israeli FBI) called for the same negotiating parameters. I think my friend above was reacting to reactions…I don’t think he read the speech! This is a symptom of living life in 140 characters, the limits of a tweet. A lot gets missed.

My personal take on all of this is that Obama was really holding back. Bibi has told the world for two years that he wants to re-start the peace talks, that he supports a 2 state solution, and yet he has done nothing to further that goal, in fact has gone out of his way to continue settlement activity (beside a weird ten month lull in building, which was observed in the breach). Bibi has refused to come to the Israeli people with a plan for us to support or reject. Bibi is not preparing the Israeli people at all for any eventual path to compromise which might lead to more peaceful relations with our neighbors.

Bibi and friends operate from a false sense of certainty that Israel will be the “winner” of the turbulence sweeping the Middle East and the world. As someone who cares deeply about the future of this experiment we call the State of Israel, I am extremely troubled by Bibi’s lack of humility.

The State of Israel has existed for 63 years, but there is no guarantee it will continue. By might we will not survive. Our only hope is to maintain our moral right to continue as a sovereign nation. And for years that moral right has been slipping away – not because the world does not want to see a viable State of Israel, but precisely because the world expects so much of a viable State of Israel.

Bibi continues to harp on the demand that everyone, including the Palestinian people through some of their formal institutions (PLO, PA, Hamas government in Gaza) recognize the State of Israel as the state of the Jewish people. In fact, it was President Obama yesterday who reiterated this, and the American government’s commitment to: “Israel as a Jewish state and the homeland for the Jewish people.” Personally, I don't need my enemies to recognize the justness of my existence. More important that my friends support me.

But what kind of “Jewish state” does Bibi envision? One of stagnation and occupation?

For 44 years we have kept Judea and Samaria (and its residents) in limbo. In East Jerusalem we half-heartedly annexed land, but never brought the infrastructure up to the level of West Jerusalem. We do everything we can as a government to disenfranchise Palestinian residents of East Jerusalem. As I have often said, if we truly want to keep East Jerusalem under Israeli sovereignty, we need to invest. We need to campaign for the residents of East Jerusalem to participate in municipal politics (as a rule, for 44 years East Jerusalem Palestinians have not exercised their rights to vote or participate in the administration of the city).

I referred above to State of Israel as an experiment. And an experiment it is, it could be a model for many of our neighboring states on how a State formed and based on a religo-nation can conduct itself – how we can take the best of our religious tradition, synthesize those values and ideals with the modern recognition of the values of liberal democracy and show off a taste of Messiah. Not the Armageddon of some, but the realization of the Jewish age-old pursuit of “tikkun olam,” of fixing the world.

But experiments can also fail.

Bibi and many others take great pride in Israel’s start-up culture. My friend Saul Singers book “Start-Up Nation” has become a best seller because there is an underlying statement that in a start-up anything is possible. Israel is a state of dreamers, and as a State it dreams as well. But as one who has lived his life amongst start-ups for some time, I call upon us to remember that most start-ups fail.

I do not want this start-up to fail. It is the big, outdated companies that are slow to move, do not react to changes in the marketplace, fail to innovate. Israel as a modern nation is still in its start-up phase, and should be moving at a start-up pace.

We need to re-invigorate a sense of entrepreneurship in our political realm. And then we will begin to merit the status of “Start-Up Nation.”

Should We Be Talking More? The Larry 2 Email Rule

2011-05-18T00:56:18+03:00

This past week I spent 7 hours in a “sulha.” A sulha is an middle eastern conflict resolution tradition, an attempt to bring together parties with severe differences, probe the issues, and leave in a different place than when the sulha started.

What caused the need for this sulha? Email. Huh? Yes, you were expecting some family honor issue, or a deep ideological divide. Nope. The sulha revolved around a series of emails in a start-up I am part of (I am the Chairman of the Board) which spiraled out of control, and almost caused the company itself to run off track. What happened? A simple misunderstanding, a word used in a context that was out of place.

Email is a valuable medium. Email is based on thousands of years of written communication. The written word in general has a core place in our Western tradition. In fact, I am part of a people who are literally called the “people of the book,” and the written words take center stage in our life. But on the other hand, it is people who read the book, aloud, and discuss the written word on a regular basis. The written word on its own is dry, unforgiving, lifeless.

In our modern culture we are in tension between constant communication that is anything but real soulful communication. Over 100 years, in ever speeding evolution, we have moved from the Pony Express, to telegraph, to fax, to email, to SMS, to instant message, and then disparate variations (Facebook messages, wall posting, Twitter tweets, 4square check-ins, and more). But what about talking? Somehow we keep inventing new ways to avoid actually talking to one another.

I broke my entrepreneurial teeth 15 years ago helping to disrupt the telecommunications industry (in co-founding Delta Three [NASDAQ: DDDC]). The first business conference I ever spoke at was “Talking on the Net,” the pre-cursor to the successful VON series of conferences sponsored by my good friend (and now business partner) Jeff Pulver. Then we were sure that we were part of a wave of technology advancement that would allow people to talk more. We believed that “free” speech (or at least very low cost) would make the world a better place. I still believe that, and have seen how in using technology to avoid speaking we sometimes “communicate” at each other, rather than with each other.

Oh, we don’t think we are avoiding speaking. We think we are communicating. But when we rely too much on written words, we lose the meaning. In the Jewish tradition the written word never stands alone, and even though is said to be the word of God, it is the oral interpretive tradition that takes precedence in Jewish law. It is the conversation of the study hall that talks through the issue raised in the written tradition.

A lesson I shared in the sulha process last week was one I learned from a CFO I worked with many years ago at a company called Omnisky. His name is Larry, and he had a “2 email rule.” Put simply, if an issue did not get resolved with 2 emails being exchanged, the parties needed to at least speak to each other by phone, if not meet in person. Not sure what Larry would say about tweets, but I am sure he would not be in favor of conversations based on tweets running back and forth. Sure, for very short staccato type messages Twitter/SMS is fine. “Where are you?,” “I am here,” and so on. But even then…we lose some much in not hearing the other person.

At Omnisky, which acquired a company I started called NomadIQ, we were pioneering mobile email (a distant competitor at the time was a start-up called RIM with a device called Blackberry, we didn’t think they would make it, we were writing software for the Palm OS platform….). We did not imagine then the rapid back and forth communication that would soon emerge with Blackberry, Iphone, and now Android. Push email was still cumbersome then – you had to pull down your email (like walking out to the curb to check if the mail came yet).

Have advances in technology helped? Sure, I enjoy being able to be out with my family for the day but still be “on-line” for important email messages, releasing me from needing to sit in an office or next to my laptop. But a blackberry (or an iphone) or even a laptop is no solution for a phone call, or for an in-person meeting when possible.

Recently, in a meeting with a senior person at a large mobile operator, I was told that they “value voice at zero.” It’s all about data. Well, at some levels I agree that voice is a data application. But she (and her team) is forgetting that voice is THE application. All other applications are but a distant cousin of voice. And we do expect service providers to helps us talk to one another, not only at one another. Posting a thought on Facebook is cute, but it doesn’t rise to level of intellectual conversation, even with healthy comments.

Too often meaning is lost when we rely only on the written word, especially today when the written word comes so cheap (when you wrote in stone you gave it a lot of thought before etching out those words…).

I know we cannot turn back the clock, and people will not suddenly put down their mobile email device of choice, SMS and Twitter will continue to be influential medium. But perhaps we can all remember the Larry rule, and if it looks like a conversation is going off course, pick up the phone. Talk it through. Try it, it works.

Being Who You Are

2011-05-16T14:14:52+03:00

For the past five years I have served as the Managing Partner of Jerusalem Capital I, LP, a venture fund I willed into existence, helped and supported by partners, investors, and of course my family. Now I am in the process of winding that down – and rediscovering who I am and what I want to do with my time.

During the past five years Haviva and I welcomed two additional children into our lives (Mishael, who joined the family over three years ago, and most recently Shefa, born two months ago), continue to raise our other five children, moved from Jerusalem to Hanaton where we are helping establish a new community, and much more.

In parallel, in my role as seed stage investor, was part of the formation of six companies, two of whom are alive and making progress. The other 4 – victims of the statistics of start-up life. Yes, along the way there was 2008-2009, which was a good excuse for many failures, but those 4 might have failed regardless.

So where does that leave me? Well, I can genuinely say I still am very interested in technology, entrepreneurship, and the constant innovation that makes up the start-up ecosystem in Israel and around the world. I know that as a board member, I can add value. But I also know that at 42 years old – I still have the strength and endurance to do it again directly – to start something new. Even if I do manage to return capital with a profit from the fund, which remains a driving motivation for me, I would not raise another fund. For me, the VC business is a lot of talking about, not enough doing. And I am doer.

The most important message we try to import to our children is “be who you are.” Some might be familiar with the hasidic tale of Reb Zusha, who fears not being judged against the achievements of others, but rather being questioned in the world to come as to whether he was the best Reb Zusha.

I also try and remain open to new possibilities, and that together with realizing what I want to do led me to deciding to go back to my roots – yes, I am co-founding a start-up, where my role is CEO. We (my co-founders and I) are setting out this week to begin our formal fundraising, after giving the “idea” much thought. I am sure we will continue to shape and reshape our plans in light of feedback we receive from the venture community and our potential business partners.

I am excited to going back to being who I am -- a “start-up” guy. Coming together with people who have chosen to work with each other, exploring new ideas, challenging each other, and creating something from nothing.

There are no guarantees of success in this business, but definitely will be a fun ride, and I will be who I am.

I will keep you posted on my progress, but in light of so many changes, I am renaming and moving my blog, but will continue to cross-post for some time. Will notify of new blog very soon.

Ambient Still Going Strong, 16 years Later. Never Say Never.

2011-04-17T12:05:41+03:00

In 1995 I co-founded a company called Ambient. The original idea was to commercialize technology being developed by a group of Israeli-Russian scientists who had immigrated to Israel in the early 90s.

We raised some start-up capital, and then had an opportunity to do a very early stage IPO, what some term public venture capital. We raised a few million dollars, and poof we were a public company (still trading today, ABTG.OB). Soon after the IPO I realized I did not want to continue to manage the company (I was the CEO), and turned over the reigns to my then CTO Dr. Yehuda Cern. Yehuda, together with some of the original investors in the company, continued to push it forward. My last major contribution to the company, just before I resigned, was to help Yehuda pivot the technology from it's first purpose, contactless smart cards, to very different market, which is the data over power line industry, otherwise known as Smart Grid.

Flash foward 16 years--the company is not only still around but is thriving. In 2010 Ambient corporation generated over $20 million in revenue and a gross profit of $8 million. Still losing money, due to continued investment in R&D. But not bad...

Ambient proves the adage Never Say Never. Had I been pressed to predict in 1995 whether Ambient would survive the first tech bubble bursting, financial meltdown, and more, I probably would have said no way. But thanks to perseverance of Dr. Cern and others on the team -- Ambient is a thriving company today. I have been diluted down to nothing, so my stake is completely sentimental, and I doubt if beyond a footnote in some annual report anyone at Ambient knows of my historical connection. Still feels good to see something that you willed into existence still moving forward.

May we all be privelaged to see the fruits of our labor flourish in our times. And if Ambient would like to invite it's founder and first CEO out to dinner (or more), happy to accept...

The Color of Money

2011-03-28T00:32:37+02:00

What could inspire me to blog after such a long "rest?" (a deserved rest, I might add, what with new daughter, 6 other children to parent, marathon to run, companies to start, etc.)

Well, the color of money. No, not the funky colors of Israeli monopoly money, but the good old greenbacks of US of A, a land where anything is possible, including raising $41 million dollars for a start-up that had NOT EVEN LAUNCHED A PRODUCT. And they are proud, check the press release here. And proud they should be -- showing off the heights of lunacy in America today.

Yes, I am talking about the recent news item that the legendary VC firm Sequoia Capital led a $41 million round for the company known as Color. What does Color do? I am not quite sure, but thanks to my new friend Tal Givoly I was alerted to this review. Check it out for a laugh, in a sentence I will take this in a more serious direction...

In searching through the web for clues as to how this insanity happened, I stumbled across an interview Color founder Bill Nguyen gave to Business Insider. You should read it in its' entirety (here), but let me just dwell on a few choice lines. Before I do, let me expose something about my relationship to Bill -- we don't know each other, but have bounced around similar circles. When I co-founded Delta Three, he founded OneBox, both playing in VoIP space. When I was focused on mobile email/apps in founding NomadIQ, Omnisky, 2bAnywhere, he was doing Seven. And so on. Bill has made a LOT more money than I have at this start-up game, but like me still loves it. So he is somewhat of a kindred spirit. OK, now back to our regularly scheduled programming.

In the interview, Bill is asked many questions. But what astonished me was not all the nothing he had to say (after all, there is no traction, no growth, no rave reviews, just a lot of money sunk in). What astonished me are the following:

"There's not much we can do about the money we raised, I'm not giving any of it back."

Wow.

And then when asked for the "business model" behind Color, he said:

BN: Advertising through the app. We're going to build a intelligent system that allows businesses to participate with their customers. So when you walk into a restaurant and you use Color, and they're also customers through a self-service Web interface -- or actually a self-service iPad interface -- every time you walk into the restaurant, your [first] name will show up with your picture. The maitre d' or receptionist will know who you are, they'll be able to welcome you, they'll know the last time you were here, they'll be able to see pictures if you took them here. They'll be able to provide you better service than they've ever before, that's going to drive up their revenue by increasing repeat business because we always want to go back where we feel welcome.

BI: They would pay you for that capability?

BN: Exactly

Double wow. He actually said his business model is....someone seeing your picture on an iPad when you walk into a retaurant. And someone paying for that. Heck, I would pay for that not to happen.

I am not going to enter the debate as to whether we are in a bubble or not...for another time, maybe after it bursts (oops, gave myself away there). But regardless this story is fascinating.

On the one hand, I love the fact that serial entrepreneurs can command massive investment on the basis of....whatever Color is, or will be. On the other hand, the VC community has forgotten that they are supposed to be professional investors. How much is Bill himself investing? That's what I want to know. After all, he has a shekel or two. If the answer is zero, than something is very wrong with this situation. Here we have a very wealthy tech guy, being given more money that 40 standard start-ups combined to develop...a photo sharing app that claims it is something else?

This sounds to me like some serious laziness on the part of Seqouia, and their tag along co-investor Bain Capital. At least they should give Bill a slap on the wrist for the line about not giving the money back -- or perhaps this is Bill's twisted way to improve the Palo Alto economy, by robbing from the rich and giving to the...rich?

Anyway, if anyone out there is listening, please help me understand the Color of Money.