VC

While many ask (including myself) whether Israel can become a world leader in the internet business still lead by the US and soon Asian new powers, i think there is a bigger question that i have been thinking about lately. Beyond technology and consumer web services, can Israel create true powerful world class content and media companies?

I am referring to services where the success depends not on the technology but on the messages and the creation process itself. Historically Israel has been very weak in that space, out of Israel. There is an amazing activity of content creation here in Israel but that has poorly succeeded to export itself. It is too idiosyncratic and not enough universal. It is too specific to the israeli culture and system of references. Take music for example: i think you can count on 2 hands the number of artists that are massively successful beyond the Israeli borders, however you have a very intense activity of music creation in Israel: Shlomo Artzi, Matti Caspi, Yoni Rechter, Yehudit Ravitz, Ivri Lider, Ninette Tayeb...are very talented and famous artists in Israel. Never mentionned or referred to abroad.

This is changing, in the new generation of artists you can find talents born in Israel that are really taking off abroad, Like Yael Naim, Avishai cohen or my Friend Yaron Herman (Israeli jazz in one word). Curiously they are not very well known in Israel. You had historically Ofrah Hazah, the Yemenite singer that everybody knew, but this was a one off. In classical music you have Daniel Barenboim and Itzhak Perlman. Again a one off (and classical is not really creation, it is more interpretation). I think a trend is in place in Music.

Same goes on the movie/TV business. I was having a drink with a famous israeli producer 2 days ago discussing precisely this matter. Some movies made in Israel start to have strong success abroad and are even nominated in the best festivals: Beaufort, Waltz with Bashir... For the first time a TV series is adapted by HBO (BeTipul/ In Treatment). Some Israeli actors slowly are also moving to hollywood and Some documentaries are on the way to become world successes (like DieinJerusalem Nominated at the Emmy Awards). A TV game format, the Katzefet was created here and now can be found on US TV screens. The trend is happening, but most Israeli movies are staying in Israel. There is maybe a one-off in the past years: Haim Sabban, but his success is more attributed to his stunning sense of business than to the content he used from Japanese licenses.

So why is that only starting to happen now? Can it go further? I think the reason is simple. Content creation and culture in particular have never been priorities in Israel. It does not mean people are not interested in culture or content, but that as industries they were secondary. Security and Technology (and water of course) have always come first. For obvious reasons, mainly political and military. And this is why the VC business has had little opportunities to fund content projects and more tech oriented businesses. There was no real ecosystem in Israel for world class content creation. Now the new generation are less obsessed with war and terrorism (they still are but way less) and they are enjoying via the internet exposure to great content and are inspired by they peers abroad. Education infrastructures are now here open to the world like Betsalel institute or Rimon school of Jazz and many more.

I think there is another reason: Israel has been for many years a country-non-grata, and i believe that in the public opinion it was not a "good thing" to welcome something coming from Israel. I remember having seen stunning Israeli movies 7 years ago in Paris, but it had very little success outside the jewish community. And this remains a big mystery to me, because when you look outside Israel many jews have been successful at creating strong quality content: starting by the hollywood movie industry, but also on the artistic (book, theatres,...) and the video game industry also.

So can we go a step further and anticipate the rise of this Little country as a major force in the content industry? Israel is for me the perfect environnement for the creation of great content: because of the intensive melting pot, result of years of immigrations, there is no better place in the world to create things that can merge different cultures and points of views. There is a tremendous level of creativity and entrepreneurship and there are the funds and ressources. Israel today has a better image worldwide and i think we are witnessing a remarkable shift in the manner content is being produced.

On the web, little things have been done so far but a few promising projects are on the way. Aniboom, the youtube of animation created by Uri Shinar (founder of Keshet, the biggest Israeli TV broadcaster) is out there, trying to solve the value chain of content creation for specific formats. Oberon is one of the most successful games creators and distributor on the web. Kaltura is working on video creation too, and WeBook on the book content creation. I know of many more projects that are on the way from different startups.

Can the next Second-Life be created in Israel? Can the next World of Warcraft (of which one of the top execs was an Israeli now back in israel) be created in Israel? Can the next TechCrunch/The Onion be created in Israel? i DO believe it is already happening because all the conditions are here. Many investors do not believe in that part of the business, but i strongly do. Other too: a new fund managed by JP Morgan will be dedicated only to that.

Just open your eyes and your hears.

Technorati Tags: israel media content

I recently wrote a note about the unacceptable behavious of israeli taxi drivers. I recently had a new "great experience" following what i decided to send a complaint to the tax authority. This can be done by email at tlunot1@mot.gov.il

You can see here (click to enlarge) that they answer within a week and that according to what they say they are going to inquire directly with the driver. I don't know whether this will have an impact, but i am sure about is that is some driver has some recurring bad behaviour, people will complain, enough to influence a little his behaviour in the worst case or to can his license in extreme cases.

I launched a conversation last night with friends on the matter. EVERYBODY felt concerned about it.

I will do that whenever i feel this is necessary. In order to complain you need to send all the details (or scan then) appearing on the receipt.

i guess you could say that about music in general, but i think it applies in particular to jazz where rythm is probably the key component.

Here is a great example by the great George Duke. Note the usage of Silences and how the grooves get out of it. By magic.

Very quickly i got frustrated with Typepad comment system because it misses so many features i like: for example the ability to track a conversation via email or RSS, or the possibilty to easily manage a white list/black list of commenters. In the past year surged many new alternatives for blog comment systems the main 3 players are SezWho Disqus and IntenseDebate. I only tried IntenseDebate on this blog because this is the only one that enables zero code manipulation set up which is a major driver for adoption in my view. however i do recognize that Disqus is well done once integrated.

I was not happy with it at the beginning and played back and forth with it to see, until their last version which was stable and reliable. I have been tested the new IntenseDebate for 2 months and it is working well. There are bugs from time to time but the team behind the service is super reactive when i shoot them an email. They have a nice comment widget that i have added on the left.

For a reader their are several advantages to this type of solution:

- one time login: multi blog usage so you can post from other blogs using the same system without having to post your details again
- easy track of conversation with RSS or email
- reputation system: to see whether other commenters are "long timers"
- comment rating
- comment ranking by date or rating (for long comment lists, so not relevant for most blogs)
- Good thread system to reply to a specific comment
- zero spam: i have not a single spam in 3 months

For editor it is a no brainer:

- zero code install, 3 clicks install
- super dashboard monitoring
- great widget tools
- perfect template integration with no bells and whistles


My only complaints to IntenseDebate?

- Comment link at the bottom of the post takes too long to display vs the rest of the blog
- no integration with FriendFeed which they should work on ASAP
- integration of html code for rich commenting

Technorati Tags: comments blogs intensedebate

Orli has noted that there is a vesion for Israel of the App Store for the iPhone. This is intriguing cause Apple does not plan to sell the iPhone in Israel for now...In the meantime Israelis buy iPhone, with or without the good will of Apple

Anyone in Israel already has a 3G?

Note: someone posts rightly in the comment that the AppStore is also worth for iPod Touch 2.0 which is sold in Israel. Good point. What is missing to get the real iPhone? Come on Steve???

Click to Enlarge

The globes share a study by IVC informing that more than 1 billion dollars was raised by high tech startups in first half of 2008. This number is impressive, specially when you consider the global economical fear (not totally justified btw). The interesting number is that only 11% of those investments go to web startups.

I am not sure you can compare 1% of dollar invested in communication/Life Science and internet since the cost of inception and seed funding is probably the lowest in the internet compared to any other high tech vertical. I would be more interested in knowing the number of startups funded in the web compared to other sectors: my gut feeling and sense of observation of the israeli tech scene would say that the ranking would be totally different and that internet would probably rank 1 or 2.

Seed investments are slowing down compared to 2007 (5% vs 12% last year) this is an indicator that the market has less faith in the economical potential of the web. I think this is a fair assumption to say that no one knows what is going to happen. However there is no indication of slow down at this day on the web: users are growing, ad dollars and ecommerce too. It is not going to change tomorrow in my opinion. One thing that changed is that the IPO market is dead for internet companies and investors are partly worried about it. They should not. An objective and cold view should lead investors to keep up with the level risks as other paths to liquidity are there, specially on the Merge and acquisition side (which is going to accelerate in the next 12 months in my opinion)

At Lgilab we are still committed to invest in young startups at very early stage (i insist on early). And we will announce soon a new operation.

Note: Read also Fred Wilson's note on the dichotomy of the web economy and traditional stock market

(in hebrew at the beginning then french subtitled)
A funny and sad video on the matter: Via Jeremie

The mysterious Pill - the full answer
Originally uploaded by misterooSo i was asking you to guess what that pill served on my plate at the end of a good diner was? Well here is the answer

This is one of the most intriguing patent i have seen in a long time

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I am back from a a few daysin Italy in Parma/Varano Race track where i was invited for 2 days by Alfa Romeo to test the new MITO with other European Bloggers. The rest of the time i rented a car (an alfa romeo) and drove in the north of Italy in the beautiful region of Lago di Garda.

I never drove this brand before, but i really enjoyed it and the team did a great work organizing this event. Below a short animoto video of our experience there [now the full version below]




Technorati Tags: alfaromeo mito cars italy varano race

Alongside the challenges of actually getting a company up and running, the issue of equity often becomes a key concern in the life of entrepreneurs. After all, the startup is their baby and they are hoping to be rewarded for their hard work in the end. But many new entrepreneurs may not have a full handle on how a company should be valued and how equity should be distributed. So in the next couple of posts we will examine these questions.

Recently I’ve had a number of entrepreneurs pitch their company to me followed by the question, “Do you think I can ask for a pre-money valuation of $X million?” The short answer to that is, “Yes, you can ask but that won’t be much of a factor in the actual valuation.”

When you deal with traditional industries or later-stage technological companies, you can call on a set of established measurements – such as discounted cash flows and company assets – in order to establish a valuation. These help provide investors with a valuation that is relatively objective and takes into account the current state of a company and its future prospects.

Unfortunately, early stage tech companies usually have no revenues and few real assets, so the normal tools don’t really apply. This means that the valuation for early stage companies is strongly subjective. It is influenced partially by the quality of the team and the hype surrounding the space, but much more by the immediate financial needs of the company and the investor.

What does this mean for the entrepreneur? In short, it means that the valuation of the company is based mostly on what the investors are willing to give you, which in turn is based on how much you are looking to raise.

VCs (early stage ones at least) have a set investment model which is generally based on holding a 20-25% equity stake in a company. In the case where two VCs are investing, each one will want to hold 20-25%. This dictates the valuation we are willing to consider.

Let’s put it into numbers. You are looking to raise $1 million. Your friendly VC wants to hold 25% of the company post money (in other words, after the investment). So, if we divide $1 million by 25% we get $4 million dollars post money (i.e. the $1M put in is now worth 25% of the company). If we subtract the money investment from the post-money valuation we get $3 million.

This means that your company is worth more or less $3M.

Let’s take a second example, where two VCs are involved. You want to raise $5 million from two VCs. Each will want 25%. Therefore your post-money valuation is $10 million ($5M/50%) and your pre-money valuation will be around $5M.

These figures are not set in stone. But they are the basis for negotiations. Obviously, if you have a number of investors fighting over your company, you will be able to demand a higher valuation. But this will give you a ballpark figure about what you can expect your valuation to be.

Also, it should be noted that this rule does not necessarily apply to angel investors. Angels have their own goals with regards to the revenue they will see from your company and will offer you a valuation accordingly. One well-known angel investor I know has a standard model of taking 20% of the company in return for $100K seed money. Some are less generous, others more so.

To reiterate, your valuation is directly affected by the amount you want to raise. Next time, we will tackle the issue of how much do you need to raise.

Can you guess what this is? Skip the obvious answer
Originally uploaded by misteroo

I was in a restaurant in Italy, when after desert i was served a kind of pill. A very weird pill. Can you guess what this is?

answer soon: all i can say for now is that this is a great patent

update: answer here

Seen in Italy. Obviously very useful for finding numbers

Here is the reason i am taking a few days off: i am invited by Alfa Romeo to test a new upcoming car called Mito. This is why i posted the teasing the other day. I am not sure why they picked me (along with a few other guys). Probably because i write TechCrunch France which is one of the biggest blogs in Europe and maybe because they are and will use strongly the web and its ressources to push this car smartly to its potential users as you may see from their website.

I any case, this is going to be fun. I will report a few details as i can connect to the internet

Technorati Tags: alfaromeo mito italy

Ouriel Ohayon

i was proud to walk in Paris metro the other day and this ad for the La defense jazz festival with my good friend Yaron Herman, an israeli pianist living in france (the opposite of me), showcased just above Herbie... Ouriel Ohayon