Two Start-Ups, Different Fortunes (Money and Passion)

“The Globes” (Israel's Business Newspaper) ran a story about “Boxee”, a start-up purchase (see: Globes story ). In this case, Boxee has not returned any profit to it's investors or employees. It seems a little wasteful to work for six year (the company was founded in 2007) and in the end have value of the invested capital as the sale price. Yet in the world of high-technology start-ups, this is not the worst outcome. Actually, this is probably one of the good stories to be told. Since most start-ups do not produce more than one generation of product and close without selling their intellectual property or operations. Contrast this with the large, $1.1 Billion purchase of Waze to Google just a few weeks ago (see: Ha'aretz story or Time Story). Here, the $67 Million investment, returned 16 times to it's investors. These are the fortunes of Israeli start-ups. While the amount of ingenuity and industry ends up as unique and innovative products, their fortunes differ widely. Israeli entrepreneurs are well aware of the risk involved in starting a company and taking millions of dollars from investors, especially in the venture capital market.

In the case of Boxee, like many innovative Israeli products, the market of video streamers, quickly grew with many suppliers. The company offered a nice product, but not unique enough in the world of highly competitive electronic gadgets. This essentially did not give the company a business advantage to become a profitable business. This follows a long string of Israeli companies which succeeded in producing a product, yet could not turn their technical achievement into a business success. Yet this story holds anther aspect obvious to Israeli technology followers. If Boxee remains a product for Samsung, and their current employees continue to work, the start-up essentially assured a good number of people some employment security. Israel is filled with small to medium size foreign operations, remnants of former start-ups (purchased by large foreign companies.)

So what's next? That question rears it's head with the current employees and outsiders. Regardless of what happens to the company in it's present form, employees find their way “next”. Some will stay and will become Samsung employees, some will seek traditional employment at another stable company, and some will take this experience and will start another new venture. Israel is filled with individuals and even teams of “serial entrepreneurs”. People who essentially risk a stable career with multiple start-up stints. Their hope is to “hit it big” as did the Waze founders. There, the estimated take ran in the $3 to $60 million for the top ten employees. In addition, start-up teams with a fortunate exit can look forward to a high position and maybe even highly profitable position at the purchasing company. In the case of Waze, a senior technical or marketing position at Google is the bonus to the lower level employees, which did not receive million of dollars at the purchase time.

If you are an outsider to this world of high-technology start-ups, there are a few interesting facts. Investment in Israeli start-ups is a strong local field. Israeli technology start-ups have potential to return high profit. Investment in start-ups is not limited to traditional venture capital firms, it can come from individuals and traditional corporate sources. Not all start-ups end up either failing or fabulous fortunes. Many end up not completely losing their investment capital. If you are an individual looking to come to Israel, high-technology start-ups are a good place to look for work. These companies look for very specific skilled individuals. Yet, they employ more than just technical professionals, there are marketing, market specific experts, and many other skilled workers (i.e finance, medical, aviation, and industrial experts). If you are a senior executive in an international company, come to Israel and buy one of these start-ups. They cover a wide range of specialties. Many are surprised to hear of Israel's expertise in electro-mechanical engineering makes for strength in the aviation and industrial fields. Even more interesting is the large number of medical instrumentation companies, today outnumbering the traditional electronic and software start-ups. If you are an investor, even one working with traditional public companies, take notice to Israeli start-ups, their investors, and their collaborators. If you were tracking the stock market, this information could have been useful in your investment strategy.