In its 61-year history as a modern nation state, Israel has become synonymous with conflict and controversy, creating friction with hostile neighbors and, at times, setting itself up as a target for international reproach. Israel has a history of having developed a number of great technologies that have come to market and done very well. There is a whole tradition … of innovation. That’s its biggest strength. Israel probably is not as widely known for all the things that it has developed. It could do a better job of [showcasing] all that it has brought to the world economy. It’s been very much an individual business and entrepreneurial effort, rather than a collective effort to say, “This is a national issue and we as a nation need to be doing something to address it.” I don’t think [the latter] has been the country’s approach, but it would be something that the country could do.
As a people, as a culture, and certainly as an engineering powerhouse. I love their will. I love their passion. I love that they can be surrounded (literally) by the worst of human competitors, and continue to smile. I’ve seen dozens, if not hundreds, of Israeli tech startups over the last ten years. They tend to follow one of two paths. The first is where they struggle to embrace the realities of the global markets (i.e. the U.S.) and go the way of Exanet. The second, the “victorious” case, is where they embrace those realities to varying degrees and exit – with a small technology valuation selling themselves to a bigger fish – typically in the $40-150M range. Path two is far better than path one, but rarely do you see these types of entities end up with home run kind of exits (not that I’m actually saying 40M bucks isn’t any good, but it’s all relative. I’d shoot you for $40M, no question).
The problem in either outcome tends to emanate from the same place: the belief that a company in IT/Tech over the last 20 years can be truly run from Israel. They can’t. I am an unabashed fan of all things Israel – but I’m a realist as well. You can make great things in Israel. You can sell to your army buddies in Israel. You can raise money in Israel. You can hire loyalists who will work like dogs and build stellar products in Israel. But you can’t grow a big IT/Tech company of relevance in Israel (with very few notable exceptions, of course).
There are some fantastic success stories that have come out of Israel, and there will be more. But history has taught us that life is not fair, and business even less so. For every Checkpoint home run there are handful of doubles (XIV), a dozen small wins (Files-X, Diligent, Kashya), a hundred waiting and hoping (Mellanox, Voltaire), and a thousand left for dead. The biggest home runs of all have come with the combination of Israeli skills and US based companies – including EMC, IBM, Microsoft, and others.
