VCinJerusalem

Difficult And Complicated: Isn't That What VCs Are Supposed To Invest In?

As some of you know, recently I founded a new start-up as an entrepreneur, a co-founder, together with my friends Jeff Pulver and Tal Givoly. It’s been quite a few years since I sat firmly on the entrepreneur side of the table. It is refreshing, exciting, and exhausting. All at the same time.

And this past week we started in the ritual of funding our start-up. It is a really big idea, which will require a lot more money than any of us want to risk – and I have learnt over time that there is an industry set up to support people like us – and we should take advantage of it. I refer to the venture capital industry, which stands on the brink of frothiness after first the private market valuations (and fundraising rounds) of Groupon, Twitter, Facebook, et al., and now the public markets frenzy around LinkedIn.

Remember, the VC fund industry is largely teams of people who have convinced other people to commit money in basically a blind fashion. The Managers of the VC fund are supposed to find good deals, and at times also try to help the deals succeed.

Money that is committed to VC funds is high-high risk money. It is that small percentage of a portfolio that if lost will not greatly affect anything, if successful will provide that lift above “standard” returns. And if you are really lucky, VC fund ends up investing in a Google or Facebook, and then you make massive profits.

The key element here is risk – VC fund managers are being given money and paid to TAKE RISK. Of course they themselves need to manage that risk – but they are not being paid to make safe investments.

Part of the fundraising ritual is the founders of a given start-up will present the idea, have a short discussion, and then the VC will either follow-up with request for another meeting, or will say that they decided not to move forward. Almost never do VCs give a reason for not moving forward in the process, and the reasons are quite understandable – they might not have liked the entrepreneurs on personal level (this is a people business), might have disagreed with key aspects of technology and/or business model, etc.

But was our first “no” of our still nascent fundraising journey was a bit of a surprise, a VC told us he liked us, thought the vision was really interesting, but decided not to move forward because to succeed, he felt, would be difficult and complicated. Uh, yeah. 

If it wasn’t “difficult and complicated” to do what we are doing than it would be far less exciting and rewarding. If it were easy to do what we are doing – why invest? The barrier to entry would be too low.

Difficult and complicated is music to my ears – it is precisely the kind of uphill challenge every true entrepreneur thrives on. And I believe it is the role of a venture capitalist to back visions that are difficult and complicated to execute on. I fear that this particular VC manager has lost his mojo. I just hope the rest of the industry has not. 

 

Israel Needs to Act Like A Start-Up (that’s Obama’s real message to Netanyahu)

Before reading President Obama’s speech I saw this FB status update flash across my screen from  a fellow Israeli friend, someone I always assumed was “mainstream” Israeli:

“#obama can go F himself big time - this is the person who represents himself as a friend for israel? he's our worst enemy”

OK, so what prompted such a harsh reaction? I went to read the speech…and honestly cannot understand what got this friend so upset… (see here for full text of speech).  A Palestinian state based on 67 borders with land swaps – isn’t that what several Israeli Prime Minister s proposed? And recently past heads of the Mossad, IDF, and Shabak (Israeli FBI) called for the same negotiating parameters. I think my friend above was reacting to reactions…I don’t think he read the speech! This is a symptom of living life in 140 characters, the limits of a tweet. A lot gets missed.

My personal take on all of this is that Obama was really holding back. Bibi has told the world for two years that he wants to re-start the peace talks, that he supports a 2 state solution, and yet he has done nothing to further that goal, in fact has gone out of his way to continue settlement activity (beside a weird ten month lull in building, which was observed in the breach).  Bibi has refused to come to the Israeli people with a plan for us to support or reject. Bibi is not preparing the Israeli people at all for any eventual path to compromise which might lead to more peaceful relations with our neighbors.

Bibi and friends operate from a false sense of certainty that Israel will be the “winner” of the turbulence sweeping the Middle East and the world. As someone who cares deeply about the future of this experiment we call the State of Israel, I am extremely troubled by Bibi’s lack of humility.

The State of Israel has existed for 63 years, but there is no guarantee it will continue. By might we will not survive. Our only hope is to maintain our moral right to continue as a sovereign nation. And for years that moral right has been slipping away – not because the world does not want to see a viable State of Israel, but precisely because the world expects so much of a viable State of Israel.

Bibi continues to harp on the demand that everyone, including the Palestinian people through some of their formal institutions (PLO, PA, Hamas government in Gaza) recognize the State of Israel as the state of the Jewish people. In fact, it was President Obama yesterday who reiterated this, and the American government’s commitment to:  “Israel as a Jewish state and the homeland for the Jewish people.” Personally, I don't need my enemies to recognize the justness of my existence. More important that my friends support me. 

But what kind of “Jewish state” does Bibi envision? One of stagnation and occupation?

For 44 years we have kept Judea and Samaria (and its residents) in limbo. In East Jerusalem we half-heartedly annexed land, but never brought the infrastructure up to the level of West Jerusalem. We do everything we can as a government to disenfranchise Palestinian residents of East Jerusalem. As I have often said, if we truly want to keep East Jerusalem under Israeli sovereignty, we need to invest. We need to campaign for the residents of East Jerusalem to participate in municipal politics (as a rule, for 44 years East Jerusalem Palestinians have not exercised their rights to vote or participate in the administration of the city).

I referred above to State of Israel as an experiment. And an experiment it is, it could be a model for many of our neighboring states on how a State formed and based on a religo-nation can conduct itself – how we can take the best of our religious tradition, synthesize those values and ideals with the modern recognition of the values of liberal democracy and show off a taste of Messiah. Not the Armageddon of some, but the realization of the Jewish age-old pursuit of “tikkun olam,” of fixing the world.

But experiments can also fail.

Bibi and many others take great pride in Israel’s start-up culture. My friend Saul Singers book “Start-Up Nation” has become a best seller because there is an underlying statement that in a start-up anything is possible. Israel is a state of dreamers, and as a State it dreams as well. But as one who has lived his life amongst start-ups for some time, I call upon us to remember that most start-ups fail.

I do not want this start-up to fail. It is the big, outdated companies that are slow to move, do not react to changes in the marketplace, fail to innovate. Israel as a modern nation is still in its start-up phase, and should be moving at a start-up pace.

We need to re-invigorate a sense of entrepreneurship in our political realm. And then we will begin to merit the status of “Start-Up Nation.”

 

 

 

 

Should We Be Talking More? The Larry 2 Email Rule

 

This past week I spent 7 hours in a “sulha.” A sulha is an middle eastern conflict resolution tradition, an attempt to bring together parties with severe differences, probe the issues, and leave in a different place than when the sulha started.

What caused the need for this sulha? Email. Huh? Yes, you were expecting some family honor issue, or a deep ideological divide. Nope. The sulha revolved around a series of emails in a start-up I am part of (I am the Chairman of the Board) which spiraled out of control, and almost caused the company itself to run off track. What happened? A simple misunderstanding, a word used in a context that was out of place.

Email is a valuable medium. Email is based on thousands of years of written communication. The written word in general has a core place in our Western tradition. In fact, I am part of a people who are literally called the “people of the book,” and the written words take center stage in our life. But on the other hand, it is people who read the book, aloud, and discuss the written word on a regular basis. The written word on its own is dry, unforgiving, lifeless.

In our modern culture we are in tension between constant communication that is anything but real soulful communication. Over 100 years, in ever speeding evolution, we have moved from the Pony Express, to telegraph, to fax, to email, to SMS, to instant message, and then disparate variations (Facebook messages, wall posting, Twitter tweets, 4square check-ins, and more). But what about talking? Somehow we keep inventing new ways to avoid actually talking to one another.

I broke my entrepreneurial teeth 15 years ago helping to disrupt the telecommunications industry (in co-founding Delta Three [NASDAQ: DDDC]). The first business conference I ever spoke at was “Talking on the Net,” the pre-cursor to the successful VON series of conferences sponsored by my good friend (and now business partner) Jeff Pulver. Then we were sure that we were part of a wave of technology advancement that would allow people to talk more. We believed that “free” speech (or at least very low cost) would make the world a better place. I still believe that, and have seen how in using technology to avoid speaking we sometimes “communicate” at each other, rather than with each other.

Oh, we don’t think we are avoiding speaking. We think we are communicating. But when we rely too much on written words, we lose the meaning. In the Jewish tradition the written word never stands alone, and even though is said to be the word of God, it is the oral interpretive tradition that takes precedence in Jewish law. It is the conversation of the study hall that talks through the issue raised in the written tradition.

A lesson I shared in the sulha process last week was one I learned from a CFO I worked with many years ago at a company called Omnisky. His name is Larry, and he had a “2 email rule.” Put simply, if an issue did not get resolved with 2 emails being exchanged, the parties needed to at least speak to each other by phone, if not meet in person. Not sure what Larry would say about tweets, but I am sure he would not be in favor of conversations based on tweets running back and forth. Sure, for very short staccato type messages Twitter/SMS is fine. “Where are you?,” “I am here,” and so on. But even then…we lose some much in not hearing the other person.

At Omnisky, which acquired a company I started called NomadIQ, we were pioneering mobile email (a distant competitor at the time was a start-up called RIM with a device called Blackberry, we didn’t think they would make it, we were writing software for the Palm OS platform….). We did not imagine then the rapid back and forth communication that would soon emerge with Blackberry, Iphone, and now Android. Push email was still cumbersome then – you had to pull down your email (like walking out to the curb to check if the mail came yet).

Have advances in technology helped? Sure, I enjoy being able to be out with my family for the day but still be “on-line” for important email messages, releasing me from needing to sit in an office or next to my laptop. But a blackberry (or an iphone) or even a laptop is no solution for a phone call, or for an in-person meeting when possible.

Recently, in a meeting with a senior person at a large mobile operator, I was told that they “value voice at zero.” It’s all about data. Well, at some levels I agree that voice is a data application. But she (and her team) is forgetting that voice is THE application. All other applications are but a distant cousin of voice. And we do expect service providers to helps us talk to one another, not only at one another. Posting a thought on Facebook is cute, but it doesn’t rise to level of intellectual conversation, even with healthy comments.

Too often meaning is lost when we rely only on the written word, especially today when the written word comes so cheap (when you wrote in stone you gave it a lot of thought before etching out those words…).

I know we cannot turn back the clock, and people will not suddenly put down their mobile email device of choice, SMS and Twitter will continue to be influential medium. But perhaps we can all remember the Larry rule, and if it looks like a conversation is going off course, pick up the phone. Talk it through. Try it, it works.  

 

Being Who You Are

For the past five years I have served as the Managing Partner of Jerusalem Capital I, LP, a venture fund I willed into existence, helped and supported by partners, investors, and of course my family. Now I am in the process of winding that down – and rediscovering who I am and what I want to do with my time.

During the past five years Haviva and I welcomed two additional children into our lives (Mishael, who joined the family over three years ago, and most recently Shefa, born two months ago), continue to raise our other five children, moved from Jerusalem to Hanaton where we are helping establish a new community, and much more.

In parallel, in my role as seed stage investor, was part of the formation of six companies, two of whom are alive and making progress. The other 4 – victims of the statistics of start-up life. Yes, along the way there was 2008-2009, which was a good excuse for many failures, but those 4 might have failed regardless.

So where does that leave me? Well, I can genuinely say I still am very interested in technology, entrepreneurship, and the constant innovation that makes up the start-up ecosystem in Israel and around the world. I know that as a board member, I can add value. But I also know that at 42 years old – I still have the strength and endurance to do it again directly – to start something new. Even if I do manage to return capital with a profit from the fund, which remains a driving motivation for me, I would not raise another fund. For me, the VC business is a lot of talking about, not enough doing. And I am doer.

The most important message we try to import to our children is “be who you are.” Some might be familiar with the hasidic tale of Reb Zusha, who fears not being judged against the achievements of others, but rather being questioned in the world to come as to whether he was the best Reb Zusha.

I also try and remain open to new possibilities, and that together with realizing what I want to do led me to deciding to go back to my roots – yes, I am co-founding a start-up, where my role is CEO. We (my co-founders and I) are setting out this week to begin our formal fundraising, after giving the “idea” much thought. I am sure we will continue to shape and reshape our plans in light of feedback we receive from the venture community and our potential business partners.

I am excited to going back to being who I am  -- a “start-up” guy. Coming together with people who have chosen to work with each other, exploring new ideas, challenging each other, and creating something from nothing.

There are no guarantees of success in this business, but definitely will be a fun ride, and I will be who I am.

I will keep you posted on my progress, but in light of so many changes, I am renaming and moving my blog, but will continue to cross-post for some time.  Will notify of new blog very soon.