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?
Dilemmas usually mean a split in behavior and this is what we see. There are still many purely technical start-ups. There are also more attempts at not selling a company early [Dov Moran at Modu]. There are also more attempts to delay the "EXIT" and receive more value from start-up success. Developing a longer range plan is different from traditional start-ups using venture capital financing. In the traditional venture capital model, investors would like a company sold or go public. Selling a company is usually easier and takes less time. As technology and investment cycles change, so does a company's value, it is hard to predict what will happen in the future. This is the issue young companies face. Israeli entrepreneurs have not seen enough situations where the market goes down than up. Another issue just surfacing now is working with non-American investors, partners and markets. An infusion of Russian, British and French business managers is changing the way Israelis relate to markets and resources all around the world. A shift to new markets saved the Israeli construction industry the last two decades. Building in Israel goes through sharp cycles which can cause havoc for builders, architects and financial companies. Building projects in Africa in the 1980s, Asia and eastern Europe in the 1990s and 2000s essentially saved the Israeli construction sector. In global scale this may not mean much but for Israel it meant economic stability. The growth in diversification in the construction sector gives hope to the technology sector. Israeli technology companies are welcomed in eastern Europe and Asia because of reputation and flexibility. In places like India and central Asia, Israeli companies seem to be less threatening than their European and American counterparts. To date there have not been large investments into Israel from Asian companies, but I believe it is just a matter of time. Business with Russia and other eastern European countries is also growing. Investment from Russia can be expected to take a different route. Israel has a million Russian immigrants. Some still keep business contacts with Russian companies. Other eastern European countries (Poland, Hungary, Romania) hold promise although their weak economic conditions there may not mean investment in the near future.
This article was an introduction to an aspect of the Israeli entrepreneurial world. There are many issues and interesting information on this dynamic world. If you are interested, please comment and ask for more specific articles. THANKS for READING ;))
Comments
The article's topic and content are very interesting, however the formatting is very difficult to handle. I would recommend short line-spaced paragraphs.
I was referring to the paragraph length. Your paragraphs are exceptionally long. For me, at least, it is difficult to read extremely long paragraphs.
I would rather have several smaller paragraphs, each dealing with an aspect of the topic rather than a big paragraph discussing the whole thing.
These are just my two cents -- Perhaps other people feel differently.