I couldn't escape the irony of spending Wednesday morning on Microsoft's Silicon Valley campus, listening to show-and-tell presentations from 15 Israeli tech start-ups.
While Microsoft is trying to buy its way into becoming a more serious challenger to Google, here was a collection of very talented bootstrap operations trying to turn their respective "aha" moments into real businesses.
What with global stock markets going from bad to worse nearly every day, this was a tonic reminder that some incredibly creative development work continues apace regardless of the manic gyrations on Wall Street.
(Credit:
IsraelWebTour)
The sessions were organized by the California Israel Chamber of Commerce. Here's a link to its Web site, where you can find the full list of presenters. Even better, BlogTV (one of the companies that took the stage) recorded the proceedings, which you can replay.
For lack of a better reference term, you can classify the companies on display here under the Web 2.0 banner. (Someday, we've got to come up with a better description.) By now, you know the drill: a nimble start-up figures out a clever and unconventional way to view the world and rolls up its sleeves to get to work. I can't tell you how much of this stuff ultimately will wind up on the cutting room floor. Some of the companies already have funding. My hunch is that most of the rest won't have a hard time getting venture capitalists to provide backing.
What struck me, though is how--yet again--small start-ups are doing the more interesting development work.
This has been a recurring theme since the bubble burst. On paper, at least, there's no reason why a Microsoft, which hosted the event, couldn't have come up with a product like PageOnce, which developed a personal Internet assistant, or 8hands, which offers single point access to your social-network accounts (with real-time notifications).
But that's why Microsoft stands ready to spend billions on a Yahoo or an Aquantive or some much smaller fry. And it's not just Microsoft. Yahoo and Google have had little compunction about writing big checks. Is that the best way to secure a prosperous future? Ask Time Warner. I'm sure CEO Jeffrey Bewkes, still struggling to put a coda on his company's disastrous AOL acquisition, wishes he could turn back the clock.
Then again, when the M&A gurus plot their big plans on the white boards, who actually thinks they're going to get that badly burned?
MOUNTAIN VIEW--Israel is brimming with technology upstarts that want what Silicon Valley has--venture money, partnerships, and a bridge to the rest of the world.
On Wednesday, 15 Israeli companies showed off their technology to a group of investors and tech leaders here at Microsoft's offices. The conference, called IsraelWebTour 2008, was like a Demo for Israeli companies, but with potentially more upside for a start-up looking for influential ties.
"I love it. This gives us a lot of first-time introductions to major players like eBay, Microsoft, Google, and Ask.com," said Tai Schwartz, co-founder and CEO of Web analytics upstart Click Tale, who presented at the conference put on by the California Israel Chamber of Commerce. Schwartz, whose company is based near Tel Aviv, said he's staying on for an extra week of meetings in Silicon Valley after the confab.
Investors featured on a morning panel said that Israel is second only to Silicon Valley when it comes to Web entrepreneurs. But the Israeli technology community is so small (more like two degrees of separation instead of six) that it's easier to launch a company there than in the United States, said Yaron Galai, co-founder of Outbrain. To stay in Israel with plans for expansion isn't realistic, investors said. After hammering out the kinks of their technology, Israeli upstarts often venture to the United States for growth and new headquarters.
Eyal Hertzog, founder of video site Metacafe, said that his company suffered by not opening an office in Silicon Valley soon enough. It opened shop in Palo Alto last year after three years in operation, and could have benefitted from the tech expertise and exposure to the Silicon Valley zeitgeist. "People are living the culture here," he said.
The following are a handful of Israeli companies that similarly want to live the culture in the United States and that commanded particular buzz at the conference.
• Delver, social search. Delver has similar characteristics to the crop of people-search engines that have emerged recently. It aggregates data on people by their publicly available profiles on LinkedIn, Facebook, YouTube, and other social sites, using statistical models to sync up profiles. It then creates a "social graph" of who someone is and their connections. But unlike rivals, Delver combines that social graph with a Web database, and then lets users search for information based on their personal social relevance. A Delver user, for example, could search on "Vail, Colorado" to find out which of his or her friends had been there. "This is Web search--we're searching the general Web and cross linking it to your social graph," said CEO Liad Agmon. Agmon said that the company is looking for a Series B round of funding this year.
• 5min, "life videopedia." The idea behind
The company also developed a proprietary smart player for its video that lets viewers see related links and articles, as well as story boards of the video. Online outfits like Martha Stewart Living can license a white label version of the player. And 5min sells targeted sponsorships for its videos, e.g., pairing a Smirnoff an ad and bartending tips. The company, which is relocating its headquarters from Israel to New York, recently raised $5 million from Boston venture firm Spark.
• 8hands, a unified social feed. Ofer Luft, CEO and co-founder of 8hands, calls his technology a cure for social-networking fatigue. (But what about a cure for downloads?) The technology is a downloadable desktop application that aggregates a user's accounts on Flickr, Facebook, Wordpress, YouTube, Twitter, and others, and pools them into one interface on the PC or mobile phone. Instead of receiving e-mail notifications (the colloquial term is bacon) when friends update their profile, 8hands pushes that event to the forefront of its application. "A Jewish company should be the one to try to rid the world of bacon," Luft joked. The application also integrates a person's phone book, enabling people to dial directly from inside 8hands when on the iPhone or another mobile phone.
• Click Tale, virtual usability lab. For Web publishers that would like to examine minute details on how people respond to their Web site, Click Tale is the answer. Launched in August, the Tel Aviv-based company lets subscribers track the movements of site visitors between pages--down to the last cursor scroll and mouse click. It records individual sessions on a Web site (but still protects a visitor's privacy), and even shows "heat maps" of where on the page an aggregate number of people were drawn to during their sessions. Click Tale CEO Schwartz said that publishers embed a JavaScript code on their pages to collect the details for fees of between $19 and $99 a month. A free version lets publishers see up to 100 page recordings per week. "It's as if you're standing behind the shoulder of the user to see what they're doing," he said.
Yoav Leitersdorf, managing partner at European venture firm YL Ventures, said he's looking closely at the collection of companies from Israel. His firm specializes in spotting younger companies, investing less than $3 million in a start-up, and then taking them to the point of a buyout or merger with a larger company, such as Google or Microsoft.
"Israel's got smart entrepreneurs who know what they're doing," Leitersdorf said. "It's such a small market, everything in Israel has to go abroad. Clearly, the U.S. market is the biggest and most lucrative."
HALF MOON BAY, Calif.--Homesick entrepreneurs longing to return to China or Europe may find the motherland is offering more than a warm embrace: funding by eager investors.
China's stock market has climbed fivefold over the past two years, and efforts are under way to create an emerging market that would cater to younger companies.
"The China market has turned over five times, so it's very, very hot. But there've only been a handful of local companies that have done an IPO," said Kuantai Yeh, managing director of Intel Capital and a panelist Friday at the AlwaysOn Venture Summit West here.
While China's stock market caters to larger companies, Yeh noted that the Chinese government has efforts under way to create a Nasdaq-like market for emerging companies.
The government is also driving efforts to bake innovation into companies, a shift that has been evolving for the past five years, said members on a panel discussing investments in China.
"If you rank innovation, and the U.S. is 100, then China is 50," Yeh said. "If you see a model and can copy it very easily and duplicate it for over 1 billion people with very little R&D, why not do it? But the government is pushing China to develop its own 3G, its own computer standards, autos...and space program."
He added the government is beginning to recognize it can't continue to rely heavily on other countries' innovation to move the country forward and is encouraging businesses to spend more on research and development.
A path between the U.S. and Israel has also been well-trodden by entrepreneurs, noted Danny Cohen, a partner with the Gemini Israel Fund and a speaker on the State of European Venture Capital panel. He said he is increasingly seeing people get their training in the U.S. and then going back to Israel.
"Israel, outside of the U.S., is the most entrepreneurial country," Cohen said. "With valuations much lower than the U.S., about half, I tell people you can get a copy of a Silicon Valley company, but at an attractive price."
In Europe, an abundance of capital is available to companies, said Tod Bensen, founder of Cazenove Private Equity. "Some could even argue some companies are going public that shouldn't," Bensen said. "In Europe, it's a very healthy place to generate an exit (for an investor)."
Whether your pilgrimage tour makes it to Bethlehem or ends up as Mediterranean fish bait may all depend on a credit-card-size keypad designed to prevent hijacked airliners from entering Israeli airspace.
Starting next year, Israel will require all airlines flying into its airports to use a new Security Code System device designed to prevent a 9/11-style attack by identifying commandeered planes before they enter the country's airspace, Reuters reported last week.
Elbit Systems, the company that developed the device, declined to go into technological and procedural detail. But judging by the keypad, it's possible that the pilot would be required to enter a numerical code. There is also something that looks like a microphone suggesting voice recognition, according to a Reuters reporter allowed in for a peek at Israel's Transport Ministry.
Whatever the test, pilots who flunk it or send a secret Mayday will be ordered to turn back. If they ignore the warning, they and everyone on board become fair game, which means-worst-case scenario-you and aunt Edna get splashed.
You can relax on at least one count. "You can't bluff this system," the Transportation Ministry's security chief told Reuters. "It provides a higher level of confidence that the aircraft is being controlled by the right people, which are a huge asset in terms of avoiding unnecessary security alerts."
He added the system knows the difference between a "classic hostage-taking hijacking and a 9/11-style hijacking."
So there's still a chance you'll deplane in one piece.
Fraud Sciences, which has developed systems that cut down on credit card fraud, has received $11 million in a new round of funding, according to VentureBeat. The lead investor was Redpoint Ventures.
The company has devised what it calls the SpotLight transaction verification system, which essentially confirms that the customer trying to use a credit card number on a computer is the owner of the credit card. The system cuts down on fraudulent transactions, but also lets merchants accept transactions that seem to be a bit suspicious, but in fact are genuine (i.e. a husband on an international business trip uses a card in Asia, while his wife is making a transaction with the same joint account in San Francisco. It looks suspicious but it is legit. I know. This just happened, and it took a panicky phone call from me to get the card reactivated.)
The system relies on behavioral analytics and real-time fraud intelligence tools.
"If we approve a transaction that is ultimately found to be fraudulent, we will cover the full amount we approved. Period," the company's Web site says. The company lists a boatload of customers on its site. The guarantee goes to merchants who buy the services, but consumers benefit as well.
Although based in Palo Alto, Calif., the company comes out of Israel. The CTO held senior positions in the Israeli Defense Forces, which is sort of a finishing school for the security industry.
"Mother of Satan"--that's what bomb makers call peroxide-based explosives like triacetone triperoxide (TATP), which are easy to make and hard to detect. But a new pen-shaped detector doodad offers hope for those doing time in airport security lines.
(Credit:
Acro)
The Peroxide Explosives Tester, or PET, by Acro is supposed to help security personnel quickly and accurately identify peroxide-based explosives, from diacetone diperoxide and hexam-methalene-triperoxidediamine to the notorious TATP, a component allegedly used by Mr. Goofy in the shoe bomb he tried to detonate on a trans-Atlantic flight in 2001.
Acro announced this month that it had licensed the explosives testing kit technology from Life Science Research Israel, a subsidiary of the Israel Institute for Biological Research.
Peroxide is what bombers from London and Madrid to Casablanca and the streets of Israel all have in common nowadays, and unfortunately we're not talking about their roots. It's also what caused the hoopla over liquid explosives in London in 2006 and subsequent banning of all carry-on bottled goods.
The chemical generally comes as an innocuous-appearing solid that looks like sugar, a class of explosive that's almost impossible to detect with dogs or conventional high-tech methods. To make matters worse, it's easy to whip up at home with ingredients available at any supermarket.
Testing with the new device sounds easy enough: Insert the sample into PET and inject the secret sauce; if it turns green-blue, dive for cover. The company says it's also disposable and nonpolluting, but there's no word on how it's expected to be applied to mass screenings.
There's already a constituency opposed to readmitting fluids to your carry-on--the people who charge $2 for a pint of water in the departure lounge.
Not everyone hates cellulite. Venture capitalists and medical device entrepreneurs like it.
Cellutions has raised $7 million from Versant Ventures, SV Life Sciences, Accuitive Medical Ventures and Carlyle Venture Partners to help it fund human testing for a medical device that smoothes out that lumpy cellulite skin texture that some people get, according to VentureWire.
The machine produced by Cellutions costs $69,000. Doctors buy it, and patients generally have to pay for this kind of aesthetic treatment out of pocket. Paying for treatment yourself, of course, means that if a doctor says "I have a Cellu-tion for you" you can punch him out. You don't have to worry about the insurance company getting testy about that.
Medical devices, in general, are one of the fastest growing segments in venture capital.
Cellutions has not fully fleshed out how its technology, which it licenses from an institution, works. But another company, Israel's Syneron Medical, already has a skin smoothing device on the market and explained it to us last year. A high-powered light source combined with radio frequency energy melt the fat and sort of move it around. This eliminates the unsightly bumps, says founder Shimon Eckhouse. You can also use it to smooth out your skin after getting liposuction. There's lots of extra skin after that. Have you eaten lunch yet?
It doesn't eliminate the fat, Eckhouse added. The company has to figure out a way to get the fat out of your bloodstream before it does that. The energy source for Syneron's VelaSmooth system, which the company has demoed on daytime TV, comes from a system Eckhouse developed for stripping paint off of fighter jets.
Cellutions' system likely doesn't suck out fat either. The company admitted that the treatment, which will cost around $2,500 a pop, only lasts about a year before you have to go back in for another treatment. But while you're there you can get your back hair trimmed again.
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