The Other Silicon Valley

There’s two of them. In addition to the Silicon Valley in, well, Silicon Valley, a mammoth entrepreneurial machine is also grinding away in Israel.



Or so I witnessed recently at a summit on early-stage investing in Tel Aviv. Organized by Los Altos-based Silicom Ventures, the conference’s speakers included Israelis such as Meir Brand, who runs Google Israel, and a hefty contingent of Valley denizens.



Palo Alto locals were present, of course. Eric Benhamou, CEO of Cowper Street’s Benhamou Global Ventures, and Amos Barzilay, a venture consultant at Lytton Avenue’s Walden International, gave talks on management and finding funding, respectively.
For Barzilay’s talk, so many Israeli entrepreneurs crammed into the beige conference room that it became standing-room only.



Admittedly, everyone from social scientists to civic boosters has been anointing new “Silicon” spaces since the 1980s.



But Israel – a country so small that driving the coastal plain takes as long as a trip between San Francisco and Gilroy – really does have a thriving culture of entrepreneurship.



Israeli high-tech firms netted about $1.75 billion in capital investments in 2007 – down from a 2000 high of just over $3 billion, according to the Israel Venture Capital Research Center. This year, the first quarter’s $617 million in raised capital is a seven-year high, according to the research company.



As in the Valley, money and talent cluster together. Herzliya Pituach, a city 15 minutes north of Tel Aviv, is packed with tech firms such as Microsoft and funders like Israel’s homegrown Carmel Ventures.



Menlo Park-based Daniel Cohen of Gemini Israel Funds was even moved to write an entertaining blog post comparing Sand Hill Road with Herzliya Pitauch’s Hamenofim Street.
His verdict: Sand Hill lacks bars, atmosphere and enough food options. (I guess The Sundeck doesn’t cut it.) But the silence is nice, sometimes, he conceded.



At the conference in Tel Aviv earlier this week, politicos were optimistic about the growth of Israel’s entrepreneurial culture – and collaboration with the U.S.



Outgoing U.S. ambassador to Israel Richard Jones partially credited the spirit of the Israeli people for the sector’s growth. Before 1993, there’d been one venture capital firm in Israel, he explained. Now, the average size of Israeli VCs is $250 million.



"If the creativity of the Israeli people can continue to be unleashed … the sky is literally not the limit," he asserted.



Peace is also important for growth, he said – a perhaps ironic statement given the roots of Israeli’s high-tech world: the military.



As former defense minister Moshe Arens explained at the conference, it was in defending itself that Israel’s cultivation of intellectual capital took root.



It makes sense. For young, brilliant minds, even a sizable check from a firm like Draper Fisher Jurvetson to scale and monetize a Web 2.0 firm is a pale motivator in comparison to a blank check from the Israeli military to … do whatever nationalistic, futuristic projects they do in those secret bunkers.



Adrienne Sanders wrote a great exploration of those military roots – and the Israeli influence on the Valley -- last October for the San Francisco Business Times. (PDF here).



Now if only all the Israelis coming to the Valley could bring some good hummus with them. And shakshuka. And falafel. Ok, I better stop here. Stay tuned for an upcoming post about Israeli ties to Palo Alto.

(Note: despite high spirits in the Holy Land, I can only imagine the mood is a bit glummer outside the espresso-fueled optimism of self-promoting conferences. The venture capital scene stateside is in the doldrums just now, The New York Times reported Saturday. No venture-backed firms went public in the second quarter this year, a bleak stat not seen since 1978.

Oh, and luxury-caffeine peddlers Starbuck’s are closing 600 stores. Maybe everybody started taking the Latte Factor money-saving method pretty seriously.)

Chart graphic from the New York Times Web site. Flag photo courtesy Creative Commons user Johnk85. Silicom Ventures conference graphic from Silicom Ventures’ Web site.