Chutzpah nation: on Israel and tech entrepreneurship

The general subject of Israel normally provokes considerable disagreement in politically-aware circles, but it's hard to disagree with the country’s track record of innovation and entrepreneurship. Given that innovation is widely accepted as the best engine for creating jobs and growth and much of that innovation will come from start-ups rather than incumbents, I wondered what other countries could learn from Israel.

Start-up Nation is written by two Americans, Dan Senor and Saul Singer, one of whom now lives in Israel and the other is a frequent visitor and investor in Israeli companies (none of which are covered in the book by the way). Avoiding any discussion about the fundamental right of the state of Israel to exist or regional politics, the book looks specifically at what it is about the place and its people that has created the highest concentration of innovation and entrepreneurship in the world.

Some statistics:

• Israel has the densest concentration of start ups in the world – more than one per 2,000 Israelis More Israeli companies are listed on NASDAQ - than from any other country and the whole of Europe combined
• Per capital venture capital is 2.5 times higher than in the US and 30 times higher than in Europe
• Highest % of GDP spent on R&D in the world
• Israel experienced only one quarter of negative growth in the recent recession.

Yes, Israel has all the ingredients Michael Porter identified in the late 1990s as a requirement for successful clusters: universities, large companies, talent and money co-located and well networked. But so now do most other developed countries. Yes, Israel stands out from its neighbours in being a democracy where talent doesn’t tend to be stifled by nepotism. Yes, its small domestic market and regional isolation have forced Israeli companies to develop a global customer base from the outset. Yes, tech entrepreneurship has the same cachet with Israeli mums as lawyers and accountants do with Jewish mums elsewhere. But none of these factors is unique to Israel either.

Senor and Singer suggest the key difference is the role the Israeli military has in shaping the characters of its young people. Military service is compulsory in Israel. The best and brightest school leavers are recruited into elite units where they receive three years of advanced technical training as well as yearly follow-up stints as reservists well into their 40s. There is fierce competition to get into these units as career benefits will undoubtedly ensue. Other countries have conscription of course, but in the Israeli Defence Force and especially the elite units, junior ranks are encouraged to challenge their superiors and improvise. The phrase “an insatiable need to tinker, invent and challenge” seems to sum up their disregard for the rules. Not just in training, but in live situations. Senor and Singer argue that it is this on the job training and heavy responsibility from an early age that creates individual self-confidence, as well as tight and lasting bonds between team members, many of whom go on to set up innovative companies together.

Start Up Britain and Tech City are evidence of our own government’s belief in entrepreneurship as driver for economic growth, so what can we and other countries learn from Israel? Senor and Senior do not suggest conscription, but that military experience should be valued far more by employers and society at large. Also that we should find ways to challenge our young people with real responsibility, so they develop the confidence to question and invent. Another thing that struck me about the book was the sense that Isreal’s politicians, although not business people, are risk-takers, thereby creating a tolerance of risk and failure throughout society.

Finally, and possibly the most transferable lesson for other governments, Israel’s economic miracle may be due as much to immigration as anything else. Israel is possibly the only country that seeks to increase immigration and not just to people of narrowly defined origins, educational or economic status. It is now home to more than 70 different nationalities and cultures. It is well known that migrants often have more drive than better-established sections of society.

General Assembly session on entrepreneurship in London

Last week Sarah and I attended a fascinating session hosted by General Assembly, London, an evening designed to help start-ups get thinking about business planning and, well, get on with it. It goes without saying that we were among the oldest there; most of the attendees were in their twenties and considering perhaps their first entrepreneurial adventure. We were interested in that, course, but were also interested from a kind of "meta" position: Sarah is professionally and personally obsessed with start-up culture and keen to see how it can be be "taught"; I, on the other hand, am very keen to see how others run workshops, that being one of my stocks in trade.

In fact it was a great evening, covering a huge amount of ground in three hours; course facilitator Rob Fitzpatrick was fantastic: engaging, hugely energetic and ready, willing and able to step into discussion and give instant and adroit feedback. I'm also already "on side" with anyone who kicks off a session on business practice by citing Taleb's The Black Swan, as regular readers would imagine.

Towards the end of the evening, Rob showed us this little video by CD Baby founder Derek Sivers which nicely sums up the importance finding a balance between persistence and flexibility from someone who's truly been there and done that.

Running with the Bulls in Barcelona, Part 2

Part 1 of this post described the keynote and panel sessions from the White Bull conference. This post focuses on the companies, or “bulls” who presented. All are finalists from a series of competitions and classified by stage: Yearlings, Young Bulls and Longhorns. It's a long list, so take a deep breath...

Yearlings are at the seed or angel stage:

Hitlantis.com (Finland)

Is replacing the “letterbox” text-based search experience for content discovery with visual browsing. Their first target market is music and they’ve applied their visual interface (different sized and coloured spheres) to a large community-managed database of unsigned artists.

Betcafe.com (Greece)

Is a global football community with a social, virtual currency-based betting game. Online gambling is worth $30bn, there are 1bn football fans globally and clubs like FC Barcelona, Real Madrid and Man U have millions of Facebook fans, so the reasoning goes that this translates into a huge business opportunity.

Peecho.com (The Netherlands)

Adding a Peecho print button to your website is as simple as adding a Facebook Like. Once it’s there, users can order and pay to receive professionally printed images from your site or book versions of PDFs. To save on postage and delivery time, the print order is sent to the print facility closest to the intended recipient.

Ondango (Germany)

Social commerce is growing at a staggering 50% CAGR. With Ondango you can have a shop on your Facebook Page where your fans can buy your products and spread the word to their friends about your brand.

NicePeopleatWork (Spain)

Don’t be misled by the name. This is actually an online platform for distributing High Definition video content to web, mobile devices, set top boxes and connected TVs. Their USP is around content protection.

Dexmatech.com (Spain)

This is a SaaS platform that helps building managers and owners to monitor and analyse their energy consumption patterns and reduce their energy bills by up to 30%.

Justinmind (Spain)

An easy to use prototyping tool to test concepts, validate features and run usability tests on apps and websites. They have 600 customers worldwide including HP, Oracle and Wells Fargo.

Qustodian (Spain/UK)

Offers a mobile marketing and advertising service that puts the user in control of what they receive, when and how. Members create and manage a digital profile of their preferences so they receive the financial and commercial benefits of the use of this data. This approach not only benefits the user, but also the advertiser, as the advertiser knows that the user has agreed and wants to receive communications from them. This is a really interesting space to us here at Unthinkable. I will return to it later.

Kiosked (Finland)

Kiosked icons are essentially hotspots placed in online content and linked to product information, ability to buy, save to a wish list or share with friends, the location of the nearest shop and so on. Using the scalable ad sales solution, advertisers can link their offers to relevant content while publishers and bloggers can earn commission from the sales their content generates. This has got to be a huge improvement on annoying banners.

Skybus (Spain)

Skybus provides the technology for local governments and corporations to run on-demand and cost effective public transport systems. It’s particularly suited for low population density areas. Passengers book via a web-based system which designs routes dynamically according to demand.

Offset Options (Spain)

Assess the carbon footprint of your product/service, select from a screened list of offset suppliers and projects, integrate and then share with customers, partners and fans via social media. U2, apparently, are using it to demonstrate their eco credentials on their next tour.

Transfluent.com (Finland)

Transfluent translators can translate blogs, twitter, Wordpress, YouTube and Facebook into 30 different languages to provide a multi-lingual web presence for global clients. By using professional human translators they can guarantee the highest quality. After the first login, the whole process is automated, near real time and scalable.

Young Bulls are seeking or have received series A, usually $2-10m:

Qubulus.com (Sweden)

Location based services are predicted to be worth $2.5bn by 2015, yet current technologies for identifying location don’t work well indoors where we spend 80-90% of our time and where we generate 80% of mobile traffic. The Qubulus Positioning System (QPS) uses existing signals inside buildings (eg wifi and bluetooth) to pinpoint locations to less than 1m. The technology can be applied to analysing shopping centre, airport or conference visitor flows for example. Very cool.

Screenreach.com (UK)

The Screach platform enables iPhone and Android users to interact in real-time with any digital screen – in the street, in the home, at the match. The technology can help digital signage companies sell measurable advertising, Wembley Stadium can interact with sports fans and broadcasters engage with audiences during programmes.

Phonedeck.com  (Germany)

This is an app for managing your mobile phone remotely. When at your PC, it will let you make mobile calls with one click, get reminders, read/write SMS, keep track of contacts, analyse your communication and locate your phone. I can see this simplifying my life so I’ve signed up for the Beta version.

ASYX (The Netherlands)

Helps suppliers get paid faster by connecting buyers, sellers and banks. The ASYX platform supports both the physical as well as financial supply chain resulting in working capital improvements for the entire supply chain.

JobandTalent.com (Spain)

JobandTalent is a social platform that connects job seekers to job opportunities through their friends, while helping recruiters find and connect with candidates. JobandTalent is already helping 2,000 employers save on recruitment costs. CEO Felipe Navio Garcia charmed the audience with his amusing presentation.

Zyncro.com (Spain)

Zynchro is a corporate social network providing internal communication, file management and customer and supplier extranets all in one platform. It can integrate with any application and corporate system and is a development platform for 3^rd party integration.

Usabilla.com (The Netherlands)

Is the fast, fun and easy way to collect visual feedback on webpages, mock-ups, sketches or any other image. CEO, Paul Veugen, describes it as the Google analytics for customer insights on your website.

Publitas (The Netherlands)

Tablet devices are changing consumer attitudes to paper brochures and Publitas is taking good advantage by offering e-publishing software specifically for product catalogues. Input a PDF and video and the output is a beautiful e-catalogue with social media features, e-commerce enabled and search engine optimised. The company has over 300 paying customers including Asos.com, is debt free and achieved revenues of $1.6m in 2011. Tony Kypreos helped Guillermo Sanchez with his presentation prior to the event and the coaching really paid off. Publitas was one of my stand out companies.

Tribe of Noise (The Netherlands)

Describes itself as the Getty Images for music. Tribe of Noise bypasses the music publishing industry to connect over 12,000 musicians with businesses that want to license music. Music licensing is an €2bn a year industry and ripe for disruption.

Encap (Norway)

Norwegian consumers routinely do their banking on their mobile phones using native mobile apps and without the need for dongles and other paraphernalia. The rest of us still have to make do with clunky browser-based solutions and dongles which are inconvenient and, ironically, less secure. Encap’s mobile authentication product turns your phone into a personal security device for secure mobile banking and enterprise applications. Barclays, take note please!

BitCarrier (Spain)

BitCarrier’s technology scans the Bluetooth and wifi signals emitted by mobile devices between specific points to provide real-time traffic information such as travel speeds and traffic volumes. This information can then be used to intelligently manage road traffic and even visitor flows in busy museums and shopping centres. They achieved €1m revenue this year and won the IBM Smartcamp regional competition in June.

Avistatime.com (Sweden)

Old friend Magnus Maurex offers a mobile solution for human logistics and service management. Applications include large cleaning jobs, security provision or care for the elderly where the work of 100s of people needs to be carefully scheduled and their performance managed. Workers check in and out using NFC and mobile technology. The company is debt free and profitable.

Shutl.co.uk (UK)

My favourite presentation of all was by Tom Allason, CEO of Shutl. It definitely wasn’t the sexiest product (basically a B2B platform to enable delivery at buyer’s convenience of items bought online), but Tom not only understands the art of telling a great story, he could describe the customer experience. Apparently, failed deliveries cost as much as £1bn per year and 90% shoppers cite delivery as their top annoyance. Shutl helps customers like Argos compete with Amazon and other pure plays by aggregating local couriers to guarantee delivery within 90 mins (or at a time the shopper chooses) for the same price as most next day delivery services, £5.75

Touchtype (UK)

Also very slick was the presentation from Touchtype. Having raised $4m to date and with 30 employees, they’ve come a long way since I first heard them present after receiving a £15,000 grant from the TSB. They use artificial intelligence and social media to predict the next word as you type, making mobile text entry easier, faster and more personal in 30 languages. So far their paid Android app has had over 3 million downloads and an average 4.6 rating. They are on target to achieve £1m in revenue in 2011.

Iovox.com (UK)

Definitely the best looking slides of the conference and CEO Ryan Gallagher coped admirably when they developed a life of their own mid way through his presentation. His company provide phone numbers and then analyse the traffic for customers like BT, Yellow Pages and property portals. It’s a lot like Google Analytics for telephony.

Longhorns are post Series A:

Sponsorpay.com (Germany)

Lets users earn virtual currency or premium services in exchange for engaging with advertising on their favourite games, virtual worlds and online services. Also known as performance advertising. SponsorPay already reaches over 120m consumers.

Appearnetworks.com (Sweden)

Appear IQ, is a mobile enterprise application platform for field service organisations. Appear IQ optimises mobile workflows by deploying context-aware applications to aircraft maintenance crews for example.

Baracoda.com (France)

Provides the best radio aggregation platform and applications to help operators develop, monetise and retain strong audiences.

Taulia (Germany)

Have just closed a B round and their customers include Coke, Pfizer and PG&E. Taulia helps suppliers to global corporations get paid early in return for a small discount which, in turn, enables corporations to save millions of dollars annually and invest their excess liquidity for better returns risk-free.

Several things stood out for me after hearing all those pitches:

Firstly, that the European entrepreneurial ecosystem is alive and kicking. There are lots of great teams developing and commercialising some really clever technologies. Judging by the increasing presence of non European investors and corporations at these events, this is widely recognised. But several of these companies are working in similar areas so might consider merging in order to scale more quickly. Yann Mauchamp from Mutual Benefits considers this the best route to creating more European global leaders.

Secondly, while great technology and great management are vital, they aren't enough to stand out at a conference like this, let alone in today’s crowded market place. A clear proposition, brand personality and good marketing is key, even if your product is b2b. Shutl have that nailed.

A recurring theme was about improving online advertising and ecommerce. At Unthinkable, we talk about how relevance creates the potential for the most annyoing advert to be perceived as useful information. Simon calls this the “The Amazoning of Everything”. The idea that every aspect of our lives, from shopping to healthcare, choices about education and jobs to our wider interest-sphere can be hugely enhanced through the kind of algorithmic recommendations Amazon uses to flog us books, DVDS and, most recently for me, this wifi body scale!

I also like the businesses focussed on getting customers paying their invoices faster. As the owner of a small business, I feel this pain. Improving cash flow in SMEs would reduce the need for bank lending.

My final thought is a question: where were the women? We had no female entrepreneurs or investors at all. Let's change that in 2012.

Bullish in Berlin

This week, in my third post on the White Bull Tech Entrepreneur Series, I'm reporting from Berlin. The Library of Soho House is probably the most luxurious setting  we've had so far for one of these events: a splendid Bauhaus building dating from 1928, originally a department store and then occupied by the post-war Communist regime. Great surroundings for a discussion on entrepreneurship and the next batch of German Internet millionaires.

The evening started with a short presentation from Ciarán O'Leary, Principal at Earlybird Venture Capital and, according to his own description, the only Irish national with a Bavarian accent. Ciarán talked briefly about the investment landscape in Europe. His numbers were for all sectors but give plenty of reasons for optimism in Europe and Germany in particular.

• There was €13bn worth of venture-based liquidity events in Europe in the last 24 months, of which €4.4bn took place in Germany and €3.9bn in UK. 
• Europe is producing better returns than US – a higher proportion of European exits are over $100m and at higher exit multiples (although exits are lower on average).
• While European entry valuations are significantly lower and less capital is invested prior to exit, average exit valuations are only slightly lower than in the US ($304m to $388m).
• At the same time, the European entrepreneurial talent pool has grown in both quantity and quality - in 2009, 7.4% of the European population were deemed to be "latent entrepreneurs" and the proportion of repeat entrepreneurs in Earlybird’s portfolio increased from 7% in 98/99 to 50% by 2007. Earlybird sees repeat entrepreneurs as key to reducing operational risk.

The scene set, we then discussed the strengths and weaknesses of entrepreneurialism in Germany. It was no surprise to hear that Germany produces great engineers, that the people are very hard working and like to build stuff, so are good at execution. A structural advantage Germany has over the UK is that if you want to earn a big salary you have to be an entrepreneur as only a very small number of the top jobs pay million dollar salaries. In the UK, these sort of salaries are relatively common in the banking industry which, as a result, sucks up a lot of our top talent.

Markus Fuhrman, Venture Partner at Team Europe was less confident. Lots of local Internet businesses have been copycat sites, albeit adapted for the German market. With low barriers to entry on the Web, it’s very difficult to build global businesses. Germany's last huge start up was SAP. The panel agreed, however, that Bigpoint, SoundCloud and Tomorrow Focus had the potential to do very well.

When I asked how Germany and the UK could work together, Michael Moritz owner of Catcap Corporate Finance was pretty negative about the UK – it isn't entrepreneurial or innovative, has lost its manufacturing and is now over-dependent on financial services. Although, he conceded, UK is still important for German companies for liquidity and IPOs.

The other panelists were a bit kinder: Brits are good at sales so they would look to recruit heads of international and other seasoned executives here. The UK also has good access to global corporates and it is easier to enter the US via UK. A good case in point is SoundCloud who set up a subsidiary in UK in order to be near the record labels and have investment from UK VC firm, Doughty Hanson.

Without doubt, Berlin will be giving London's Tech City a run for its money, but I think that if you're a media play rather than pure technology, London is still the place to be.