Tuesday, November 24, 2009

The Israeli Entrepreneur's Dilemma: Product or Business

Israel, more precisely the central region around Tel Aviv, is a test tube for entrepreneurs. Something in the mix of size, innovation and cooperation in small groups makes Tel Aviv a good place for start-ups. While the venture capital funding world is taking a nap (see previous article here) hundreds of engineers, marketers and WEB2.0 want-to-be-entrepreneurs are buzzing with new ideas. WEB2.0 (web two point oh) is the new buzz word here, you still hear "enterprise applications" and "big iron" once in a while. The buzz about Internet applications, widgets for blogs and social networking sites and all kind of services tied to Internet businesses is fun to hear. Eventually from all the buzz some work takes place. Programs are written, web sites are designed, buzz on Twitter and FaceBook is generated... eventually people try and tell their friends about it and things get out to the world []. Israeli entrepreneurs have experimented with new technologies and new products for a long time now. I would say at least twenty years maybe even thirty. But there are still new technologies and products to try. If Israeli entrepreneurs continue with technology they are in a safe space. But "what can they do next?" or more aptly: "what more can they do?" Business! Until now Israeli start-ups were sold at early stages of their product cycle. The word "EXIT" was the buzz word for the 1980s and 1990s in Tel Aviv. The Israeli technology start-up business was started by American and they are the ones to buy Israeli companies. When an Israeli company sold, company founders made a few million dollar each, the good workers got jobs with the American company that bought them, and for the most part products survived (some didn't but that's life.) But there was always the suspicion that Israeli entrepreneurs sold out too quickly. That the big money came when the company was already established. Workers also complained of dedicating the best years of their lives early in the company and did not get the senior level jobs, these were reserved to the American company in control. The problem Israeli managers had was little or no business experience. Technologists were able to make good products but they did not know finance, stock markets, government regulation, and mostly the traditional business world. Now comes the dilemma: should Israeli entrepreneurs learn business and aim at keeping their start-ups longer? OR should they keep on selling to the larger companies in order to focus on developing new technologies?

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Wednesday, November 11, 2009

Simple Economic Models: Cars, Water or Real Life

When the economy changes drastically government officials and economists try to tell stories about it. They give us a model like a lesson in high school science class, sometimes they even give draw a diagram. A car is a good model for the economy, it has been used by senators and governors, we have a car but no fuel so we can't go anywhere. This model works great in the US, running out of fuel is a real emotional issue for Americans. There is a model of water, when it stops flowing we need to "prime the pump" (famous quote from depression era economists.) Water model is good, there are pipes and pumps, reservoirs and leaks, all kind of elements in a water system. Do we need simplified models to understand what is going on in the worlds economy? Do we need models for local economies? Why don't we deal with the economy as it is? When a bank collapses we should talk about the risk the bank investment managers took. When the US sub-prime Real Estate fiasco was going on, even Warren Buffet wrote about it in his eloquent yearly report to stock holders.

Models are good for certain things. But making an analogy for the world economy using a car and fuel is an over simplification. So is the use of water in a pump for the flow of money in any economy even a small one. Why don't we have accurate explanations from economists and government leaders on the economic situation? Why do we need to wait for a book to be written a year from now telling us how demand for durable goods (cars, refrigerators, diamond rings) goes down forcing less manufacturing of these goods to stop manufacturing, which means factories have less money for worker's salaries. Or demand for old technology like big cars running on gas goes down but there are still not enough new designs and not enough electric engine production capability to make hybrid and electric cars which would be more in demand if we had them. Or that in the last fifteen years American car companies has not produced a single low cost model so Hyundai a Korean car company or Sang Yang a Chinese company are becoming an attractive alternative? Demand, competition, trade advantages, import tariffs, these are not such hard concepts to grasp.

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Saturday, November 7, 2009

Start-Up Nation: Book on Israel's Entrepreneurship

How does Israel innovate? How does Israel produce more start-ups that make it to the NASDAQ than whole of Europe? How does Israel use the technology (i.e. electronics) start-up model in agriculture, bio-tech and now clean-tech? These are questions people have been asking for as long as there has been Israel. Israelis first built guns, cannons and avionics when no one would sell them arms to defend themselves (in the 1940s.) Than came a period of building the state itself and Israel built housing, factories, roads and public buildings (in the 1950s and 60s.) If you look carefully from the air you see the famous green line, an outline of the state in green where Israelis planted trees and literally changed the landscape (and the environment - that took more than 50 years.) Now Israelis build and design Integrated Circuits for Intel and cell phones for Motorola. But more than that, Israelis build companies. Not just products and inventions. Organizations to create and compete in the world technology, bio-medical and other fields. This phenomenon is discussed in Start-Up Nation. From an Israeli perspective it seems like an old story, start-ups go back 30 plus years. Here we have lived the gradual change and every week see a new product or announcement or a company acquisition. But in reality it is a big deal. Building a company is hard enough, building a whole economy and culture to drive company building is phenomenal.

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Tuesday, November 3, 2009

Israel's Hebrew Legacy: English a Barrier ?

Israeli schools are great at teaching English to an acceptable business level. But only a few Israelis end up with world class English writing and editing skills. Hebrew, a language that was resurrected in Israel in the 1880's by Eliezer Ben-Yehuda and others is thriving. Being the main language in Israel for three generations, its been the mission of Israelis to be a language of everything. But this phenomenal success comes at a cost. Israel's economy and business simply needs more English writers, speakers and editors (for that matter many other languages.) The problem seem most acute in the technology and tourism sectors. English is not just a bridging language between Israeli technologists and the world, it is used extensively to document and plan. Essentially working in English is helpful in preparing a company to market internationally. Writing in English all along the product development and marketing process enable Israeli technologists get to international market quicker.

A bit of history of the modern Hebrew language. Hebrew is essentially a modern language with ancient roots. As a language of religious study, it has been used by Jews for two thousand years. But religious study did not mean daily use. Therefore Hebrew was neglected for over 1,000 maybe even 2,000 years (that debate is related to the use of Hebrew in pre-inquisition Spain where Judaism had a golden age from 711 to 1492 CE.) When the Zionists first arrived in Israel (then Palestine ruled by the Ottoman Empire) the use of Hebrew in daily life took on a renewed interest. Clearly there was a need for the language although at times Yiddish was assumed to be the best alternative. Eliezer Ben-Yehuda was not the only European Jew who had in mind reviving the language. But he is remembered today as the one to invent new words and clearly passionate enough to make Hebrew a modern usable language. Literature and poetry in Hebrew started coming from Europe at about the same time. But these were based on the knowledge of religious Hebrew used in Torah and Mishna studies in the Yeshivas.

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Monday, November 2, 2009

Happy Tel Aviv: Rain, a Packed Bus and Coffee with Internet

Winter is really here with four days of rain. Sometimes it comes down hard and Tel Avivians hide in cafes and offices. At night streets are deserted, left for the teenagers and "acharei tzava" (twenty something after their military duty.) Tel Aviv does not take well to the rain, the sewers were not made for this much water, streets flood and puddles stay for hours. Sometimes we forget how 100 years ago central Israel from Tel Aviv south to Rehovot, east to Kfar Saba and north to Natanya was one dusty sand patch. In the deserts and semi-desert climates rain does not seep into the ground. It seals the sand with top layer of wet sand then flows to make small floods down hills into low points. In south Tel Aviv, where sewers are old and narrow streets fill with water covering car tires and sidewalks. So Tel Avivians, take out their boots. Women who wear open shoes all year around get these few days to make a change. To some it's an opportunity to make a fashion statement. Boots that were made to European snow pop out everywhere. What an amazing transformation in an instant.

Last Thursday the 55 bus from Tel Ha'shomer skipped twice. It usually runs every 20 minutes in the evenings. It did not come from 7:30 PM to 9:00 PM. Riders all along the route gave up and took taxis or waited when there was no alternative or did not want to spend the extra money. Once on the bus a minor demonstration started. First people scream at the driver. So he tells them that it's not his fault, actually they should be nice to him. It's the previous two drivers that should be taking the heat. That does not help, it makes things worst. Than a few start talking loud and threaten to "write a petition and have everyone sign it". To me they all seem to be the Russians, they are used to bureaucracy and official government departments which debate people's opinions in local government meetings. A debate started on which government department the petition should be sent and what to say to get them to do something. The department of transportation was the most agreed upon candidate while the bus company seem to be losing out. To Tel Avivians the bus company is just a winner of a government bid to move people economically. But most riders were just glad to get going to where they needed to be. On Thursday evenings, the end of the working week, soldiers from the base in Tel Ha'shomer, one of the bigger recruitment base, go home for the weekend. These are the army's bureaucrats, they will be receiving the complaint petitions from bus riders in ten year when they work for a government department. They are tired and don't care about a bus route missing two appointed rounds, they just want to get home.

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