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A Perfect Birthday for a Middle Eastern Bull

By Camel, Bus and Plane

Written by Brian Hicks
Posted June 20, 2007

TEL AVIV, ISRAEL: As the clock struck midnight on June 10, I had just arrived in Amman, Jordan. My local hosts, vibrant young entrepreneurs and rising stars in government investment companies, insisted that I have a drink. Sunday brought mixed gifts of inside information, international travel, and little sleep.

I had woken up June 9 in Wadi Rum, just across the border from my previous Israeli desert digs, in the same desert that Bedouins and other nomadic folk have traversed for millennia without regard for national boundaries.

desert

photo by Sam Hopkins

But this was the 40th anniversary of the Six Day War, when Israel conquered Jerusalem and the West Bank from Jordan. From 1967, it took until 1994 for an official peace agreement to get done.

For me to get across the border from Jordan to Israel, it took about 15 minutes.

After a crash course in Jordanian economics from my local contacts-insight into Jordan's millions of Palestinian and Iraqi refugees and their effect on the business climate which I will share in forthcoming articles-I had to hurry back to Tel Aviv for the research that was the main purpose of my visit to the region.

The Israel Venture Association 2007 conference, hosted by the IVA and Red Herring magazine, packed an astonishing amount of expertise into a day and a half. I was invited to the IVA conference to get the advance story on Israel's next technology waves.

More than 100 Israeli startups have ended up on major global stock exchanges in recent years, leading tech stock analysts to dub Israel the "Silicon Wadi." Wadi is an Arabic word borrowed into Hebrew, and it means a river valley that flows in the wet season but is bone dry in the summer.

Were these writers just looking for a quick turn of phrase, or did they mean some meteorological metaphor? After all, through mergers and acquisitions, some 35% of Israel's IPOs have dissolved into other companies. Those have dried up, but other startups are flowing like the Great Deluge, with plenty of money in the stream rushing alongside.

In Tel Aviv I heard from Dov Moran, founder of M-Systems, a flash memory company acquired by SanDisk last year for a cool 1.55 million dollars. You would think Moran would be a pretty happy guy with a deal like that, but as part of a panel on building large Israeli companies, he sulked.

Moran regretted not being able to build M-Systems into the major international brand it could be, instead of selling out to SanDisk. Moran's company developed the Disk-on-Key, a revolutionary USB device that allows computer users to swap information whenever they have their keychain handy. Right now, I have the SanDisk model in my pocket, right next to my house and car keys.

Two gigabytes worth of whatever I want to put on it, for just around 30 bucks. This would have been unthinkable just a few years ago, but the mini drive is becoming as essential and revolutionary as the copying machine, the modem, or the BlackBerry in their days.

But like so many Israeli-grown advances, no one knows Disk-on-Key is Israeli.

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Instant messaging, online payment software, portable memory, and even the machines you use to pay for dinner or store items with credit-all thanks to Israeli engineers.

Some at the conference chalk it up to the military basis of Israeli know-how. Many in this country received their initial training during compulsory national service, manning satellite and radar operations when most Americans are doing keg stands (by the way, if you don't know what a keg stand is, you're better off).

However, while Israelis are start-up savvy, they lack marketing skill. On Tuesday I watched Alex Vieux, the French publisher of Red Herring, tear a thirty-something executive to shreds. The man, whose company has promising technology for monitoring driving behavior for insurance and company fleet monitoring, barely spoke about target markets or branding.

"Have you ever read a basic marketing book?" Mr. Vieux asked impatiently. "Well, no," the suit answered with a defensive grin, looking to the audience for sympathy.

This seems to be a weak suit across Israeli tech enterprise, and I say that this weakness must become a strength if we ever get to the point where Joe Public can rattle off names like Comverse, Retalix, and Uniper when asked to name Israeli companies that are essential to daily life.

As I conduct my international research, I see markets mingle and products emerge onto the global scene. In this age of increasingly borderless commerce, company names will be like national flags. We see this with automobiles and watches, where Japanese and Swiss gladly point to national benchmark brands, but many other emerging economies have yet to create the instant connection in consumers' minds.

In the IVA 2007 yearbook, the roster of recently acquired Israeli companies is double that of stock market listings over the same period. Israel is behind the scenes when it should have a starring role, leaving the headlines to war and other negative news while the country is developing technology that may well save the world.

Shai Agassi, the vibrant young Israeli who until April was the president of technology at software giant SAP, addressed the IVA gathering on Sunday night. As I struggled to keep my eyes open, fatigued by plane, train, and automobile rides to finally get me to Tel Aviv, I darted to life when Agassi mentioned his intention to transform Israel into an international experiment in electric transportation.

He envisions a market where individual transportation is more like the mobile phone market, where units are heavily subsidized and the consumer's primary cost is monthly service charges. This, Agassi says, would stimulate the market for plug-in transportation in a way individual consumer movement could never achieve.

CleanTech is Agassi's bet for the next class of Israeli tech startup successes. But I have to wonder, if and when this and other green technology comes to market, will it have an Israeli face?

For Israel to finally emerge on to the international scene and cease to be one of the world's "undiscovered bull markets" (despite its unmistakably strong presence in New York trading), the answer will have to be "yes."

Stay tuned to learn exactly when and where to buy in to this major shift in the way Israel does business.

Regards,

sig

Sam Hopkins

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