Why I’m Doubling Down On Israel

No one has a crystal ball that tells the future. But once in awhile, we all see something that changes our perspective. And if we actually act on that new perspective it can have a dramatic impact on our lives.

The last time that happened to me was in 2010 when I was angel investing in New York. Someone offered to sell me shares in Facebook at a $16 billion valuation. It was a price which most of the blogosphere was ridiculing. I did a back of the envelope analysis of the company that indicated Facebook would be worth $100 billion in five years. Discounted back, that meant it was worth $50 billion at the time! Now I wasn’t the first person to believe in Facebook. Peter Thiel and Reid Hoffman beat me by five years. But I felt so energized by what I saw, that I was compelled to write my first “research report” in 10+ years (I left a career as an equity analyst at Goldman Sachs in January 0f 2000 to start the TLD .tv). I emailed the report to 150 friends as fodder for future conversations, and thought that would be that. But the report blew up in the press, and it lead to my return to Wall Street as the Street’s first private share analyst. I had a great second run as an analyst, during which I updated my Facebook forecast once, in 2011, projecting it would be worth over $234 billion in 2015 (it’s currently trading at $243B).

My second run as an equity analyst lead to the opportunity to launch The Social Internet Fund (TSIF) in July, 2012. TSIF is a stage agnostic venture fund investing in primary and secondary shares of rapidly growing internet companies. A few months after launching TSIF, I read a great book, “The Prime Ministers”, about an 18-year old from Britain who moves to Palestine in 1947, fights in the 1948 war, and eventually makes his way to the Israeli government in 1958, where he spends the next 25 years, working closely with five Prime Ministers. Reading the book, I was struck by how alone Israel was. Even the U.S. was not the friend I thought it was. Again, I felt compelled to do something, which lead me to AIPAC. As I got more involved with AIPAC, I was surprised to learn that there were active sub groups for lawyers and bankers and real estate execs, but there was no sub group for people in tech. So along with a few others, we formed the first Technology Group at AIPAC. The speaker at our first event in February of 2013 was Dan Senor, the co-author of “Start-up Nation: The Story of Israel’s Economic Miracle” .

The book, written in 2009, highlights the factors that enable Israel, a tiny nation of just 8.1 million people, to start so many successful companies. Israel is so successful at starting companies, that, as of today, Israel has the most companies listed on the NASDAQ (99, or 1 company per 80,000 people) of any foreign country in the world, other than China (153 companies listed on the NASDAQ, or 1 company per 8,000,000 million people).

Start Up Nation discards the arguments of religious exceptionalism or individual talent as major reasons for Israel’s high-tech success. Instead, the book highlights many other reasons for Israel’s high tech success, starting with the fact that at 61 years of age, Israel itself is a start up, iterating and pivoting to survive. The book also highlights Israeli chutzpah (defined in the book as “gall, brazen nerve, incredible guts…”). But the two major factors that, in the authors’ opinion, contribute the most to Israel’s economic growth are 1) mandatory military service and 2) immigration. The military service point really resonated with me.

The Israeli army is deliberately thinly staffed at the top to enable the decentralized decision making necessary in the military initiatives the army regularly undertakes. Thus, a talented Israeli in his early-to-mid 20′s can rise to Commander in the Israeli army, where they are in charge of 100 soldiers and 20 officers, often in intensely pressurized situations. That experience, which is unique to young Israelis, gives them the confidence needed to start a company, and the leadership skills critical to start up success.

After reading the incredible story of Start-Up Nation, I became more open to opportunities to invest in Israeli companies. As a result, in the following year, I made two investments in Israeli companies, Viewbix and IT Central Station. Both companies are doing well. When the tenant anchor in TSIF suggested that TSIF II focus on later stage companies, I partnered with Gil Penchina and we launched The Israel Syndicate on AngelList in April, 2015, as a way to stay involved in earlier stage companies.

The Israel Syndicate closed its first investment on June 9th, in Segmanta. The following week I finally made my way to Israel for, I’m embarrassed to say, the first time in 20 years. What a week! I went with high expectations. They were more than fulfilled. Here’s a brief list of the reasons why I believe Israel is still early in it’s emergence as a major ecosystem for tech innovation and wealth creation.

I believe the world is flat. In addition to Israel and Silicon Valley, I’ve invested in companies in New York (where I live), Los Angeles (my home town), Toronto, Raleigh-Durham, Toms River (New Jersey) and London. But there is only one Silicon Valley, which continues to dominate in terms of wealth created from tech start ups. There are many reasons for this, but one major reason I’ve always marveled at is how open and accessible the Valley is. I first saw this point written about in a post by the esteemed Vivek Wadhwa who opined in a TechCrunch article in 2011 that:

“In Silicon Valley, sharing information is the norm — unlike most places in the worldin the Valley, techies are far less secretive and are generally helpful to one another…Silicon Valley is one giant network…”

I have always felt that way about Silicon Valley, and I had never felt that way about another city until my week in Tel Aviv. Not only was virtually everyone I reached out to open to meeting, every meeting included the offer of multiple additional introductions. It felt like I was with family. The joke in Israel is “everyone is just one degree of separation away from everyone else”. In Israel Sand Hill Rd and Market Street are combined, it’s called Rosthschild Blvd. Walking on Rothschild with an entrepreneur was one long hug fest. They do a lot of that in Tel Aviv.

I spent a great few hours speaking at a meeting of AlmaLinks, a “global network fostering the next generation of Jewish business leaders”.

A fun evening with the Tel Aviv Alma Links crew

Another great example of the openness and collaboration in Tel Aviv isSOSA (as in South of Salame, a riff on SF’s SOMA, which was a riff on NY’s SOHO).

At the entrance to SOSA with Arale Cohen of 2BAngels. Note all the members on the Board behind us

SOSA is a shared workspace. In addition to the normal start ups, more than 40 members of the tech community are members, ranging from VCs, to large multi nationals to incubators/accelerators, lawyers, bankers, and others. It’s a meeting place, and a home for those without a home (be they wayward VCs or multi national corporations). The shared workspace 1871 in Chicago is the closest parallel I’ve seen elsewhere in the world.

Israel has long been a major outpost for Silicon Valley’s largest companies, where they have grown organically and through multiple acquisitions. Intel’s largest R&D center outside of the Valley has long been in Israel, where they now employ over 9,200 people. It’s now impossible to go to a major building in Israel without seeing multiple floors taken by the likes of Google (acquired Waze for over $1 billion in 2013), Facebook (acquired Onavo in 2013, price undisclosed), and Apple (acquired PrimeSense for $350 million in 2013).

Acquisitions are a key part of successful tech ecosystems, as they create wealth that can be poured in to new start ups, and leave a trail of experienced tech executives who can invest in and mentor the next wave of start ups. Yossi Vardi began mentoring and investing in start ups after he sold ICQ to AOL for over $400 million in 1998. With Yossi now focused on his DLD Conferences, the baton has been passed to a rapidly growing list of experienced, talented, and supportive entrepreneurs like Noam Bardin (Waze CEO), Gigi Levy (CEO of online gaming site 888 acquired by Ladbrokes for £240 million 2011) and others who have had successful exits and become active angel investors and mentors.

Israel also enjoys a rapidly growing ecosystem of talented VCs that could hold their own against the best in the Valley. I had the pleasure of meeting with Arnon Dinur of 83 North, Modi Rosen at Magma Ventures, Tal Barnouch at Disruptive, in Tel Aviv, among others. Jerusalem is seeing increasing activity, lead by veteran firm JVP, which is being joined by newer seed stage firms like Jumpspeed Ventures. Israel also has it’s own highly supportive commercial bank, Bank Leumi, which has long provided the needed support in Israel, and recently launched it’s Leumi Tech initiative to provide the broad services needed by Israeli tech companies when they come to the U.S..

A long time knock against Israeli start-ups is that they sell too early. But this is changing, as more Israeli start ups become Unicorns and have aspirations for more. CyberArk went public last September, and is now trading at a $2 billion valuation. Wix went public in November, 2013, and is now worth more than $900 million, defying the silly belief that Israel can’t build great B2C companies. When I met with Tomer Bar Zeev of ironSource ($1.1 billion valuation), he clearly stated his aspirations to achieve far more than what ironSource has accomplished to date. While other Israeli unicorns, likeHouzz ($2.3 billion) and Taboola have moved to the U.S. to achieve their aspirations, their wins are surely Israel’s wins as well.

Can Taboola be the next Facebook?

In fact, Israeli companies that move to the U.S. are increasingly feeling at home as robust communities of Israelis can be found in New York (242 Israeli start ups are featured on Israel Mapped in New York) and San Francisco (check out Silo, where users get help from their professional network, which started with the Israeli community in Silicon Valley).

Academics is another strong point of the Israeli ecosystem. My visit to theTechnion Insitute of Technology in Haifa was a highlight of my week.Technion is already recognized as home to one of the world’s leading academic environments for successful technology innovation ecosystems. The initiatives Technion has underway in partnership with Cornell in New York , and with Li Ka Shing in China, will only accelerate Technions remarkable ascent. Israel has three other universities ranked in the top 300in the world (Tel Aviv University, Hebrew University, and Ben Gurion University), not to mention the IDC and its innovative entrepreneur programs.

As with any tech ecosystem, Israel has its challenges. Like San Francisco, skyrocketing housing prices has become a major issue in Tel Aviv, whilesalaries remain low. This disparity is driving up the the rate of start ups in Israel, which can make Israel a challenging environment to attract capital. Even though the amount invested in Israel is climbing, the number of companies receiving VC has remained relatively flat over the last two years.

High marks should go to the Israeli government which has long helped foster it’s tech ecosystem. As I was planning my trip, The Government of Israel Economic Mission in New York made several introductions including to Arale Cohen of seed stage investor 2B Angels. My meeting with Arale, the first investor in Yotpo, a rising star among Israeli tech companies, was a highlight. Within Israel’s Ministry of Economy is the Office of the Chief Scientists (OCS). Among the various projects the OCS supports is a loan program which can provide up to $400,000 in funding for start ups doing cutting edge research (broadly defined). The OCS also licenses incubatorsand then offers up to 5-to-1 leverage for investments the incubators make in start ups. Among the 24 incubators currently licensed is one run by Nielsen. You don’t need to be licensed to operate an accelerator, and there are plenty of great programs. AOL’s Nautilis, Coke’s The Bridge, IBM’s AlphaZone and Citi’s Innovation Lab are just a few of the corporate accelerators blossoming in Israel.

Finally, I’m all in on Israel because I want to do things I believe in. I want to be a“missionary” CEO rather than a “ mercenary” CEO, as defined by various VCs from Randy Komisar to John Doerr. I’m not very religious, but I find myself caring deeply about Israel’s survival, and the biggest impact I can have on Israel’s survival, is to help Israel thrive. That’s why I’m on a mission to help the Israel tech ecosystem evolve to become the best innovation ecosystem it can be. It’s not about being the next Silicon Valley. It’s about being the best innovation ecosystem Israel can be. I’m clearly not the first person to be so optimistic on the Israeli tech ecosystem. But much like when I invested in Facebook at $16 billion, I think it’s still VERY early days for Start-Up Nation. So I’m all in.

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Lou Kerner and Gary Winnick Present The Zeitgeist Salon Featuring idealab’s Bill Gross

To see the invitation please click here

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Are We In A Tech Bubble?

A presentation I put together, and continue to update, looking at data to answer the question “Are We In A Tech Bubble”?

 

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Newest metric for retailers: Their social media following?

For Full Article on CNBC click here

The touting of engagement over mere followers is probably a wise call. As Social Internet Fund founder and early social media investor Lou Kerner pointed out to CNBC: “Followers is an irrelevant metric. They can be bought. What matters is engagement, which is what drives value, and can’t be bought.”

 

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Is Uber, Snapchat or Taboola the next Facebook?

Click here for the video on CNBC

 

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Why streaming apps are a huge business opportunity

Click here for the video and full article

The widespread streaming of the much-hyped boxing match between Floyd Mayweather and Manny Pacquiao marks “a seminal moment in the history of Internet video,” said analyst and investor Lou Kerner, founder of the Social Internet Fund.

 

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TEDX Talk – The Rise and Fall of Corporate AHere’s the link to my TEDx on ccelerators

Click here to see my TEDx Talk on Corproate Accelerators

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Snapchat Takes On Facebook Beyond 13-to-25 Age Group

BY TIM LLOYD, FOR INVESTOR’S BUSINESS DAILY

To read the full article click here

….Snapchat isn’t a social network and can’t really be compared with Facebook, says Forrester Research analyst Julie Ask. “I wouldn’t compare the two,” she said. “I don’t think Snapchat is a social network — more of a messaging platform with rich media. One records my life and shares it with friends. The other allows me to have virtual conversations that include photos and videos.”

But Lou Kerner, founder and managing partner of The Social Internet Fund, a New York City-based venture capital firm, takes a different view.

“At the end of the day, there’s so many hours in the day,” he said. “And if you’re spending them on Snapchat, you’re not spending them on Facebook.”

Cowen estimates Snapchat users spend an average of 17 minutes a day on the platform, vs. 42 minutes for Facebook users.

Also, 71% of people Cowen surveyed in the 18- to 29-year-old demographic said they use Snapchat. Meanwhile, a November survey by eMarketer found that only 23% of people ages 18 to 29 use Facebook.

Kerner told IBD that more older users will adopt Snapchat as it develops into a utility, as has Facebook.

The issue, he said, isn’t “are older people going to do Snapchat,” but “are younger people still going to be doing Snapchat in five years.”

 

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Facebook’s new Super Bowl ad play

Internet Retailer

To see the full post click here

In addition to letting large advertisers amplify their Super Bowl campaigns, the feed will also let smaller marketers, including e-retailers, use attention-grabbing ads to be a part of consumers’ Super Bowl discussion, says Lou Kerner, a social media analyst and investor at The Social Internet Fund.

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The Disruptive Technologies Speaker Series: Tuesday January 27th, 2pm-3pm EST

To listen to the call click here 

Lou Kerner Presents

“The Disruptive Technologies”

Conference Call Series

Topic

Mobile App Installs

The Fight For Dollars & Discovery

Speakers

Jud Bowman

CEO, Appia

Itai Tsiddon

Co-Founder & Director of Business Development, Lightricks

 Steve Wadsworth

President and CEO, Tapjoy

When:        Tuesday, January 27th, 2015, from 2:00PM-3:00PM EST

Where:     Conference Call – Please email lou@socialitnernetfund.com for dial in information

Please join us for a conference call featuring three thought leaders on the current state and future direction of the rapidly growing ecosystem of mobile app installs. Click here to get the slides for the call (on the 24th).

According to comScore, mobile surpassed desktop in 2014 as terms of total users. Flurry research indicates we now spend more time consuming media on mobile (177 minutes a day) than television (168 minutes a day). eMarketer estimates that 23% of all media time is now on mobile, and Nielsen reports that 89% of time spent consuming media on mobile is spent in app. Those are staggering numbers, and they’re all growing rapidly, which is why the app install market has exploded over the last few years. Fiksu estiamtes that Facebook alone has driven more than 350 million app installs in the last two years, which has been a major driver of its

These questions and others will be addressed by our panel of crowdfunding experts.

Speaker Bios

Jud Bowman – Founder & CEO of Appia . Jud is the founder and CEO of Appia, which has grown into one of the largest mobile user acquisition networks for Android & iOS, driving over 85M+ app installs to date. In 2012, the Wall Street Journal ranked Appia #22 on its list of the Top 50 VC companies. Appia has raised $30 million in venture capital from investors including Venrock, Trident Capital, Eric Schmidt’s TomorrowVentures, Relay Ventures, and The Social Internet Fund. Prior to Appia, Jud co-founded Motricity in 1999 and grew the company to more than $100 million in annual revenues and 500 employees. As Motricity’s CTO, Jud was the chief architect of one of the mobile content delivery platform that delivered more than $3 billion of content to mobile phones. In June 2010, Motricity completed an IPO co-led by Goldman Sachs and achieved a peak market cap of $1.25 billion. Jud has been named one of the world’s “Top 100 Young Innovators” by MIT’s Technology Review and one of “Tech’s Best Young Entrepreneurs” by BusinessWeek. Jud is currently on leave from Stanford, where he was named a President’s Scholar, and is a graduate of the North Carolina School of Science and Mathematics. In October 2011, Governor Bev Perdue appointed Jud to the North Carolina Board of Science & Technology.

 

Itai Tsiddon – Director of Business Developemnt of Lightricks. Itai co-founded Israeli/NYC based Lightricks with 4 PhD friends in 2013, to bring academic grade image processing technology & products to the mobile first world. Itai is based in New York and leads Lightricks business development. Lightricks, a bootstrapped company, scaled to 20 employees in under two years. Its first product, Facetune, is a powerful portrait editing application, and is one of the world’s best selling paid apps, with millions of apps sold and reaching the #1 top paid app rank in over 100 countries. Lightricks has served as Facebook’s case study for mobile user acquisition. Its products have been featured by Apple, Google & Microsoft, including as Apple and Google’s Best of 2013 and 2014. Itai previously clerked in the Supreme Court of Israel and practiced M&A at Davis Polk in New York.

 

Steve Wadsworrth – President and CEO of Tapjoy. Steve has been an influential executive and leader in the Internet and digital media industry since 1995. Steve has served on Tapjoy’s Board since 2011, and prior to that, he was President of Disney Interactive Media Group where he was a pioneer for the company’s digital media and technology business including more than 11 years as Disney’s chief Internet and digital media (DIMG) executive. During his tenure, Steve led DIMG’s global creation and delivery of entertainment and lifestyle content across digital media platforms, including mobile devices, video game consoles and social media platforms. Steve is a frequent spokesperson on Internet and digital media issues and guest speaker at Internet industry forums. In 2010, Steve was selected as one of UCLA Anderson’s 100 inspirational Alumni, and he was named to The Hollywood Reporter’s Digital Power 50 list in 2008, 2009, and 2010. Steve also served on the board of the Internet Advertising Bureau (IAB) for a decade where he served in roles of chairman and chairman emeritus. Steve holds a Bachelor of Science in engineering from the University of Virginia and an MBA from the UCLA Graduate School of Management

 

 

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