Michael Kagan has quite an interesting life story, which he shared at an “Innovation on the Bar1” event earlier this month. Born in Soviet Russia, Michael first learned about his Jewish origins when he was denied admission to a university in Leningrad in 1974, on the grounds of him being Jewish. His parents found a way to leave Russia (an extremely difficult thing to do at the time), and moved to Israel so that he could enroll in higher education.

He studied Electrical Engineering in the Technion, and after completing his military service, he joined Intel as the 40th employee in Israel (Intel today employs approx. 12,000 people across multiple sites in Israel). At Intel Michael Kagan has led the design of the Pentium MMX, which was introduced in 1996 and became probably the most widely used processor at the time (until the Celeron was introduced in the early 2000’s).

Kagan left Intel in 1999 with the vision of building a leading Israeli semiconductor company. Mellanox Technologies, with Kagan as a co-founder, went public in 2007. The company designed networking connectors for the data center with incredibly high speed and low latency, and booked $1.3B in revenue in 2019. NVIDIA acquired Mellanox for roughly $7B in 2020, in one of the largest acquisitions in Israeli tech history. This was also when Kagan was appointed to the CTO role at NVIDIA.

Kagan offered some advice to younger techies. The first was that he experienced many failures in his careers, but that didn’t discourage him. He learned from his failures and kept going. He attributes his success to having experienced many failures. The second advice was to lean into your strengths. Kagan shared that earlier in his career at Intel he took on an executive role, and found out that he didn’t perform them very well. Instead of focusing on improving these skills, which according to him would have resulted in him being a mediocre-plus manager, he decided to pursue a technical leadership path. As you can tell, that worked out far beyond what is considered mediocre.

Michael Kagan also shared some of his views on the future of computers, mainly focusing on AI and the Metaverse. He made the point that we’re already living in the Metaverse to some extent, and explained that this is what allowing him to perform his role as CTO of NVIDIA from his home in Israel. He has meetings with China in the morning, with Israel and Europe in the middle of the day, and with the US at night. So he can essentially be in three very distant geographies every day. It’s just that the experience is very poor since it is based on the “old internet”, and interacting with other humans that way still feels very far from meeting them in person. That will get better though. I think I remember Ben Thompson making a similar point on Stratechery.

Link to podcast (Hebrew)

Frank’s Israeli Investor

Charlie was young enough to be my daughter and, in fact, offered to take my oldest daughter out for a whirlwind tour of Manhattan, including shopping and manicures. When my daughter returned, she told me that Charlie was something special (although she hated the color Charlie picked for the manicure). I trust my daughter’s view of people (and for what it’s worth, Charlie told me later that she hated the color my daughter chose).

This quote is from a Medium post by Michael Eisenberg. Not to be confused with Michael Kagan from the previous section, Eisenberg is a partner at Alpeh, perhaps Israel’s leading VC firm.

Said Charlie, who was able to impress his daughter so much, has also impressed Forbes magazine to the extent that they included her in their “30 under 30” list. She also impressed JP Morgan Chase so much that they bought her company for $175M last year. That Charlie is Charlie Javice, founder of Frank, who is now being sued for fraud.

Aleph made a seed investment in Frank in 2017, and the initial product was built out of a WeWork in Tel Aviv. JP Morgan are claiming that Javice inflated Frank’s user base by over 10x. In order to do so, Javice allegedly reached out to Frank’s Director of Engineering and asked him to create a synthetic list of customer data. When he questioned whether that was legal, “Javice tried to assure the engineer by claiming that this was perfectly acceptable in an investment situation and she did not believe that anyone would end up in an “orange jumpsuit” over this project.” He still refused. I couldn’t figure out who this engineer was and whether he was based in Tel Aviv.

Michael Eisenberg wrote the post in order to celebrate Frank’s acquisition by JPM. It obviously didn’t age very well. One of the partners at Aleph said that Eisenberg’s strength is in assessing the personality of a founder, and understanding what “makes them tick”. Looks like he might have gotten this one wrong.

Michael referred to Charlie Javice as “A Value-Driven Visionary”, and wrote about how well he knew her:

I was introduced to 19-year-old Charlie Javice some 10 years ago ... I was inspired by her vision of helping college students build a better life ... I was blown away by the social startups Charlie had started in college at the University of Pennsylvania, and by her missionary zeal to solve this problem. It was also right up my alley of “values create value.”

To be clear, I don’t mean to dunk on Aleph for this. Just like I don’t mean to dunk on Forbes for including Charlie Javice on their list, or on the Peter Thiel Foundation for offering her a fellowship when she was 19 years old. I just thought it was an interesting angle to highlight, and quite an incredible post to read in hindsight. Of course, Michael Eisenberg and Aleph have also had their impressive share of success and positive impact, which I’ll probably mention in future posts.

Link to post

Personal Anecdote of the Week: (Self?) Driving In Tel Aviv

This might start out sounding like a grumpy old man, but I promise there is a potentially interesting tech angle at the end if you can just bear with my rant.

Driving in Tel Aviv sucks. Roads are narrow, there are bikes and scooters going in the wrong direction, the never-ending construction results in many streets being blocked. People think it’s ok to block the way because it’s only for a few minutes, and no one will let you in if you need to change the lane. The highway is mostly jammed, even in the middle of the day, and often on a weekend. The lanes are inconsistent.

It’s just so stressful. In the US you can just listen to a podcast during a long drive, whereas in Tel Aviv I feel like you need to focus on survival. I had to drive through traffic last week to visit my parents’ town, and I was exhausted. Luckily I don’t have to drive most days, and can just get around with a (non-elecrtical) bicycle.

That drive made me think about the Tel Aviv Robotaxi Service that I mentioned was promised by Mobileye to be launched by 2022 (and never happened).

Ben Thompson has recently made the point that it is relatively easier to launch an autonomous driving service in suburban areas such as Arizona or Palo Alto. The roads are wide and people generally follow the rules. That is not the case in Tel Aviv, which might lead to some tricky questions.

Do you train the model to break the law and change lanes on a solid white line in some cases? Otherwise the “self-driving car” is just going to sit there behind a truck that decided to block the street. Do you teach it to beep and aggressively cut through traffic? Otherwise it is just going to miss the exit.

I don’t know how these challenges are going to be addressed, but I realize that many cities worldwide will probably get their robotaxi service long before someone figures out how to launch one in Tel Aviv.

Mobileye was acquired by Intel in 2017 for roughly $15B, and spun out as an independent company about three months ago, making it probably the largest Israeli company by market cap. Prof. Amnon Shashua, founder and CEO of Mobileye, gave a presentation at CES last week. He shared his views on the state of the autonomous driving industry and gave some updates on Mobileye’s progress. (full disclosure: my brother works for Mobileye).

The Israeli media made sure to call out his previous promises about launching a fully automated robotaxi service in Tel Aviv by 2022 (which obviously did not happen). Shashua explained that while the sentiment pendulum has swung to the skeptic “no AV before 2050” side, he thinks that their technology creates a viable path to scale up Autonomous Vehicles in the near future. I’ll make sure to let you know as soon as something is launched in Tel Aviv.

In terms of business strategy, it sounds like Mobileye have shifted their plan from building their own robotaxi service (which was the reasoning behind the Moovit acquisition back in 2020), into licensing their tech to partners. Shashua claims that the challenge in launching a robotaxi service is no longer technical, since it is limited to a specific metropolitan area. It is at this point mainly a business challenge of building a profitable service and establishing a customer base. There are a number of deals and POCs that were announced.

There are still technical challenges on the Consumer AV front though, since the cars are not limited to any specific geographies. Mobileye takes an incremental approach, introducing a portfolio of products that are meant to gradually automate more and more of the driving tasks over time.

Link to video

Taking It To The Bank

While some of America’s most successful entrepreneurs were engaging in a “billionaire space race” in 2021 (between SpaceX, Blue Origin, and Virgin Galactic), a somewhat similar race is developing amongst some of Israel’s successful entrepreneurs. Only with a goal not as ambitious as launching a rocket to space and landing it back safely. The Israeli version is a race to build a digital bank.

Outside of being the founder and CEO of Mobileye, Prof. Shashua is also a co-founder of AI21 (which I’ve mentioned in edition #5), and the founder of ONE ZERO Digital Bank, the first bank to open in Israel in over 40 years. Self-Driving Cars plus the “Israeli OpenAI” plus a digital payments company - the only things missing to qualify as the Israeli Elon Musk are buying a social network and launching rockets into space.

How exciting was it to learn that in addition to the banking license earned by One Zero in 2019, another banking license was granted in late 2022. Another digital bank was born in Israel - Esh (Hebrew for “fire”), founded by Nir Zuk (founder of Palo Alto Networks).

Esh just raised ~$30M at $500M valuation from Clal (one of Israel’s lead financial institutions), and is run by Yuval Aloni as CEO, who is the former Israel Securities Authority chairman.

Amnon Shashua and Nir Zuk are trying to challenge the Israeli bank duopoly of the last 100 years. In a country with a limited TAM of less than 10 million people, and two banks dominating the local market since before the State of Israel was officially founded in 1948, this might turn out to be just as monumental of a task as launching rockets into space.

Link to article about Esh recent funding

Personal Anecdote of the Week: Dinner at Dizengoff Square

Meir Dizengoff was the first mayor of Tel Aviv, and Dizengoff Square was named in honor of his Zina in the 1930’s. Wikipedia says that it was referred to as "the Étoile of Tel Aviv" back then, since it is a roundabout at the meeting of six streets.

My wife and I had dinner at a nearby cafe this week. Dizengoff Square is centrally located - 15-20 minutes walk away from where most tech offices are located (or 6-7 minutes by scooter), and a 10 minutes walk away from the beach. Even so, I didn’t remember it being a nice spot before I moved to San Francisco in 2014. The square has changed a lot since then.

The city was shifting its priorities in recent years, from accommodating cars to focus on pedestrians and urban-friendly modes of transportation, like buses, bicycles and perhaps a robotaxi service in the near future. The square was rebuilt as part of this shift in 2018, and turned into a very popular spot during Covid. With bars and restaurants being closed, people used to hang out together over dinner or drinks all around the square.

We had a great time walking around the square just before sunset. It’s also fun to see how the city transformed a spot that used to be unpleasant to walk through, into such a nice and lively gem.

Monday Uֿnplugged

“Startup for Startup” is an initiative operated by monday.com to share knowledge, experience and insights between startups. Its annual live event, “Unplugged: next level” took place this week. While I couldn’t make it in person to the new Monday campus (at the heart of Tel Aviv’s “scooter triangle”, where most tech companies are located), I was able to join a few sessions online.

The “Unplugged” event is just one of many ways by which “Startup for Startup” promotes knowledge sharing within the local ecosystem. Its podcast has already recorded 190 episodes, many of which feature one of the company founders. They cover topics such as financing, recruiting, product-market fit, company culture, and more. The style is usually very open and transparent, with concrete stories from the history of monday.com or other Israeli companies.

Back to Unplugged - one of the talks I joined was about measuring the impact of a new feature, given by a director of product at monday.com. Monday, the “Work Operating System” company, describe themselves as being obsessed with numbers. They have a whole team dedicated to building and maintaining their internal BI system - “Big Brain”, which is heavily relied upon to drive the product roadmap.

Screens across the Monday office constantly display different metrics from Big Brain, which I guess is partially responsible for the culture of transparency that I could sense in their podcast.

The talk raised some interesting insights about Big Brain - how it started with simply displaying monthly active users count, and how it evolved as more metrics were added around customer wins and engagements. The speaker used to be lead PM for BigBrain, and it was interesting to hear about how she was driving the roadmap of this internal tool. How do you define and track metrics for an internal tool, which in turn is meant to enable the rest of the company to track metrics and make data-driven decisions about its products.

Then there was a live exercise of creating metrics for the “My Work” feature, a single view that summarizes all the items that are assigned to the specific users, across different “boards” (which I guess is monday’s terminology for “projects”). Together with the speaker, we’ve used the TARS framework and tried to come up with a definition for the Targeted users groups, and ways to measure Adopted, Retained, and Satisfied.

While the Adopted and Retained groups can be measured based on the product analytics metrics, measuring how many of the users are actually Satisfied cannot be done unless we directly ask them. That led to another interesting discussion around effective ways to survey users.

Oh and in case you’re wondering - yes, of course the audience was asked to fill out feedback forms at the end of the day (powered by monday.com).

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Israel’s Economy Doubles Down on Tech

Taub Center, is an independent socioeconomic research institute based in Jerusalem, has recently published its “State of the Nation Report: Society, Economy and Policy 2022”. A few data points illustrate how strong is the dependence of the Israeli economy on its tech sector.

“In 2021, the high tech sector in Israel employed about 10% of the workers in the economy and accounted for about 15% of GDP. The sector includes both manufacturing industries and service industries … the contribution of high tech workers to GDP is 50% higher than their proportion of the workforce in Israel.”

Tech percentage of overall exports is still growing rapidly, even after reaching 50% in 2019:

One thing to note in the chart above is how the export of tech services (which include software) dwarfs manufacturing. Israel used to be a strong hub for semiconductor design and production, and in 1985 Intel opened its first FAB outside the US in Jerusalem. The weight has been gradually shifting toward software since the emergence of the internet and the rise of the cloud, which make it possible to start a new SaaS company without any upfront investment. This is an important point for a nation where capital is scarce, and the primary available capital is human capital.

Here is another graph that shows how software is eating the Israeli tech sector. What’s driving the rise in number of tech jobs are the red bars - “programming and other computer services” jobs.

My last highlight is around the effect on the rest of the economy. I mentioned in Edition 4 that there is a heating debate about how success of the tech sector and the wealth it is generating impacts the overall society. A “Labor Market Overview” study may provide some positive news. In a spotlight section about the relationship between tech and non-tech wages, it concludes that a wage increase of 1% in tech creates an impulse response of 0.11%-0.12% increase in non-tech wages.

To end on a positive note, I’ll skip the description of the research methodology and its drawbacks, and jump right to the happy conclusion:

the results seem to imply that the growing high tech industry — the Israeli economy’s “growth engine” — is indeed pushing wages up in other industries as well.

Link to report

Personal Anecdote of the Week: Apollonia National Park

I was planning to meet a friend for lunch during a work day, when he suggested that we take a walk together instead. What a great call.

We’ve met at Apollonia, a park that’s overlooking the mediterranean sea, around the remains of an ancient city first built in the sixth century BCE. You can read about the history here, though we didn’t focus much on that. It was just fun to spend time outside and catch up on each other.

We were amused by the sign that said “moat” (on the right photo), which led us to a nerdy comparison between that physical moat from the 13th century, and the business moat of some current day Israeli tech companies who are headquartered nearby.

It was a very nice break during a busy week. Till next time!

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Here are a couple of highlights from the recent week:

Israeli Tech and The New Government

One thing that prevented this from being a chill week for local tech folks is the new government that was inaugurated in Israel today. While I have zero interest in writing about politics, I don’t think that I can ignore the reactions from the Israeli tech industry. In some ways I am reminded of the general vibes in San Francisco after the 2016 election.

It began a couple of weeks ago with the “techies letter”, signed by senior leaders across the tech industry. In an open letter to incoming Prime Minister Netanyahu, they warned against “destructive implications on the economy” if the new government goes through with legislation that harms the independence of the Israeli judicial system. The letter argues that such legislation might jeopardize the ability of Israeli tech to attract foreign investments and operate in the global markets.

Michael Eisenberg of VC firm Aleph, a right-leaning orthodox Jew who is also considered one of the most successful Israeli investors (in terms of returns), expressed his empathy but lack of support for the letter. He called to take action by trying to improve the reality of life in Israel, rather than writing letters or making threats.

The tension really heated in recent days, as plans were announced to overhaul Israel’s anti-discrimination law. The response? Some financial institutions responded by declaring they will not extend credit nor deal with any business that practices discrimination. Wiz, Israel’s fastest growing cybersecurity company, have required all its suppliers to commit to preventing discrimination of any kind. You can read more about it here.

While many Tech CEOs have taken to Linkedin, writing posts about their “unwavering commitment for inclusiveness and equality”, the boldest words came from Adam Fisher. An Israeli-based partner in Bessemer Venture, Fisher is also considered one of Israel’s top VC investors. In a viral post titled “Business in the Opposition”, Fisher expressed a strong disapproval of the incoming government.

While I feel reluctant to share a personal take, I believe that this discussion is something that you should be aware of, if you’re following Israeli tech.

Israel’s Most Promising Startup?

This is the time of year when the financial media publish their annual summaries, and several Israeli news sites have published their “2022 Most Promising Startups” list. Of course these rankings are anything but scientific or official, but they all follow a fairly reasonable methodology where a group of leading local investors are asked to rank the top startups (with some restrictions around promoting their portfolio companies). I figured that cross-referencing the lists could help me learn which Israeli startups are so promising that they have been ranked at the top of more than one list.

The interesting finding is that all three lists were completely distinct! No Startup has made the top-10 of more then a single list. The only company that appeared in two lists was Mesh Payments, which offers a smart corporate credit card (#7 in Globes and #15 in Calcalist).

I suppose the key takeaway is that there are simply PLENTY of startups in Israel. And also a high number of investors, with lots of different opinions.

Link to “Most Promising Startups 2022” by Globes Calcalist Mako

Personal Anecdote of the Week: Rain in Hanukkah

Our kids got to celebrate Hanukkah in Israel for the first time. Their grandparents helped them build and decorate their own menorah, and both kids enjoyed lighting candles and singing songs together with their cousins (though they weren’t really into eating sufganiyot, the traditional jelly donuts).

I also enjoyed a special treat -

I’ve been complaining about the “fake winter” in Israel for some time now, with people wearing jackets and sweaters while temperatures are still in the 70’s (or 23 degrees Celsius). This is obviously concerning in the context of climate change. The good news is that we got a break just at the right time to create the right setting for Hanukkah, and it was raining for almost three days straight. I couldn’t resist the urge to go running in the rain.

Running is one of my favorite activities, it has always been my most effective way to manage stress levels, clear my mind, and spark creative thinking.

And while San Francisco offers the perfect running-weather almost any hour at any day of the year, it certainly wasn’t the case since we arrived in Tel Aviv. It was really hot and humid day and night, throughout the months of September and even October. I tried going on a run a couple times during the “fall”, and gave up after a few minutes.

This week I had a blast running in the rain in Park Hayarkon (the closest it gets to Golden Gate Park in Tel Aviv). Today is already sunny again, I guess I should try running as often as I can before it also starts getting too hot.

Happy New Year wishes to all my readers!

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Generative AI Event

“Strive to understand the limitations of this technology. Don’t get blindsided by how exciting and magical it might feel” - This was one thing that all four speakers agreed on at the “Generative AI: Building to Last” event I attended yesterday. Yoav Shoham, co-CEO of AI21 Labs (the company behind WordTune), explained that while artificial intelligence has made an incredible leap in the last few years, the risk is that irrational exuberance might lead some people to overlook the limitations, and learn about them in a painful way.

AI21 Labs has been referred to as “An Israeli OpenAI”. Another insight from co-founder Yoav Shoham was that while images generated by DALL-E can be mind-blowing, there is far more than one “right” answer when something like “Pluto eating an apple on the moon” is typed as a prompt. There is a large area within the search space that would make us happy. Some other applications are built around a much more narrow target. It’s important to be aware of that.

One source of disagreement was around the role AI would play in creativity. The other panelists - a researcher from the Weizmann Institute of Science and two startup founders - debated on whether generative AI is just a tool that increases the productivity of a creative human, or can the AI algorithm be viewed as doing creative work on its own. While the algorithm can carry out technical tasks like combining objects into a visually appealing image, guided by a human, some of the dialogs and movie scripts produced by ChatGPT can be considered as creative work. It was getting a bit philosophical at some point.

All four panelists agreed that the space is getting crowded and the technology is moving fast. You have to “run as fast as you can just to stay in place”. Their advice to founders is to view this as an opportunity, and focus on a real problem that could benefit from the arms race in training Large Language Models. While Yohav Shoham agreed that it’s better to start with a problem and look for the right tool to solve it (whether it is AI or otherwise), he mentioned that he has never done that. He was always driven by a passion for pushing the technology forward. For him, the problem was found at a later stage.

VC fund Entree Capital have hosted the event in Meta’s hip Tel Aviv office. Almost 1,000 attendees have registered, and some had to watch the livestream due to lack of space. There is clearly a lot of excitement in Tel Aviv over the recent developments in AI. I still miss being able to attend these kind of events in Silicon Valley, where they would probably host speakers from OpenAI and Stanford who are at the forefront of artificial intelligence. Even so, I gained some interesting insights that kept me pondering for the rest of the day.

Oh, and in case you’re wondering - I have not used AI to write this newsletter. At some point I might give WordTune a try though.

Link to event page

Snyk’s Mildly-Down Round

In contrast to the booming Generative AI startup scene, cybersecurity companies have been facing an increasingly challenging funding environment. IT budgets are expected to come down next year, and so CISOs might no longer have blank checks to spend on protecting their companies’ digital assets as they transition to the cloud.

I’ve mentioned the Israeli cyber startup mania in edition #2, and while I don’t think the cloud and the need for zero-trust security is going away, Israeli cybersecurity companies are going to have a harder time demonstrating the triple-digit growth rates of recent years. Some might even end up losing market share, as companies consolidate around fewer security vendors.

In this context, there were two interesting things in the following announcement from Israeli-founded Snyk came last week:

Snyk Closes $196.5 Million Series G Funding at $7.4 Billion Valuation …

Snyk, the leader in developer security, today announced a $196.5 million Series G investment, further validating the company’s unique developer security approach as well as increasingly strong industry demand for this rapidly growing new market category. The round was led by QIA (Qatar Investment Authority) …

“In 2022, I’m proud that Snyk achieved a 100% year-over-year increase in revenue as well as net revenue retention of over 130%,” said Peter McKay, CEO, Snyk.”

The thing that got everyone’s attention was: this is a down round. Even though Snyk’s revenue have doubled, the valuation came down 13% from the Series F round that valued the company at $8.5B in September 2021. While we don’t know the full terms of the deal, being able to raise $200M in the current environment, and losing only 13% of the company’s valuation, is actually a great sign of strength!

Especially when considering public market security companies, like SentinelOne, one of the pioneers in XDR and machine learning based thread detection, that is led by an Israeli CEO. They experienced a stock price drop of a whooping 82%(!) from its 2021 peak. Even the more mature and stable Palo Alto Networks, founded by Israeli Nir Zuk, had its share price decline 30% from its all-times-high. That puts this “mildly-down round” in perspective. Other Israeli cyber startups might not be able to pull off what Snyk did.

The second interesting point to make here is about the Qatar Investment Authority leading the round. Outside of the “QIA is the new SoftBank” discussion, there could be an angle here about Israeli-Arab relations. This might require some squinting, but even though Snyk is a US company headquartered in Boston, it was started in Tel Aviv by three Israeli founders who had previously served in the Israeli intelligence. Israel and Qatar have no official diplomatic relations, despite some economic and cultural links in recent years, and the Israel-UAE and Israel-Bahrain normalization statements in 2020.

I might be forcing it, but this could perhaps be viewed as a positive tiny step toward more peace and stability in the region. At the end of a year so heavily focused around the terrible war in Ukraine and the growing tensions between the US and China, maybe it’s ok to be hopeful and over-interpreting a startup funding round.

Link to press release

Personal Anecdote of the Week: Coffee & Sea

We spent a sunny Saturday morning at a Coffee cart near the beach!

It wasn’t until I first moved to the Bay Area that I learned about the “food truck scene”. I became a food truck fan, something about the limited menu size, and the outdoor setting, just did the trick for me. My two San Francisco favorites were Spark Social in the Mission Bay and Off The Grid events in Fort Mason and Presidio. Me and a friend were even toying with the idea of starting a Hummus truck.

According to Wikipedia, the Great Recession led to an increase in popularity of food trucks since 2010, due to a surplus in available trucks (as the construction business drying up) and chefs who were being laid off. Similar circumstances have happened in Israel in 2020.

While I don’t remember food trucks being a thing in Israel when I was younger, it has certainly become a thing during Covid, when restaurants were forced to shut down multiple times. A “coffee truck” (that also serves food) allows for far more flexibility.

Restaurants have long been reopened (remember the rapid Israeli vaccine rollout? feels like a decade ago, but it was just last year), but the coffee cart scene is still around. Luckily for us.

A short 15 minute drive out of Tel Aviv, “Kafe Veyam” (coffee & sea) is located on a cliff right next to the, well, Mediterranean sea. We were planning a hike, but settled for a short walk given it was too hot (yes, 80 degrees Fahrenheit in December).

Happy Hanukkah from Tel Aviv!

Moving back to Tel Aviv after living in the SF Bay Area for almost nine years, I can’t help but constantly doing “contrast and compare” exercises in my mind. This leads to interesting observations sometimes (interesting to me at least), and I’m using this substack as an outlet for these ideas.

As such, I published a long form post last weekend on why I think of living in Tel Aviv as by itself being an “Innovation Forcing Function”. While I plan to regularly publish this newsletter - “Tel Aviv Tech Weekly” - on a, well, weekly basis, I’ll also be sporadically posting longer form write-ups to explore a particular idea.

And now back to edition #4, here is some stuff I ran into this week -

Waze, Wix and Founder Aspirations

Google plans to combine the teams working on its Maps product and on Waze, a mapping service that Google acquired in 2013. The merger comes as the search engine giant feels the pressure to cut costs and consolidate operations, reports The Wall Street Journal.

(from TechCrunch)

Full disclosure: I work for Google, and therefore avoid writing my thoughts about the company. There is another Israeli angle to this story though, that I think is worth highlighting.

Google acquired Waze for over $1B in 2013. This was considered a huge exit for an Israeli company at the time, and was celebrated as a moment of national pride to the extent that the Waze logo was part of the Israeli independence day ceremony in 2015. One of Waze’s founders was included in the list of honorary torchbearers that year. There is something else that happened that year, just as important, if not more profound.

In November of 2013, Israeli website builder platform Wix.com began trading on the NASDAQ, making it the first Israeli software company to go public since 2006. Even though the Wix IPO was not celebrated in any official state ceremony, I think it had a more profound impact on the Israeli tech industry.

The StartUp Nation book was published in 2009, singing the praise of Israel as a world class innovation engine. While this title was very flattering, some tech industry leaders were calling for Israeli companies to go beyond the startup phase. They were voicing concerns over the trend of selling the most successful Israeli startups, and calling it a success. For Large US Tech companies, acquiring an Israeli startup was, in addition to buying a successful product or technology, a way to access Israeli R&D talent.

To this day PayPal operates a risk management operation in Israel, which evolved from the acquisition of FraudSciences in 2008. Similarly, Facebook leveraged the Onavo acquisition into an Israeli Facebook branch in 2013, and Salesforce established an Israeli R&D center when it acquired Datorama in 2018.

Wix can be viewed as the pioneer of the “ScaleUp Nation” phase, proving that it is possible to build and scale a successful internet company from an HQ that is based in Israel. The Wix IPO “opened the gates” for a whole cohort of Israeli tech companies like CyberArk, Fiverr, JFrog and monday.com, who got listed on the NASDAQ and are continuing to operate and grow as independent companies.

Waze on the other hand might end up symbolizing the frustration that might occur when an Israeli founder clashes with US corporate culture. To understand this better, look no further than the post that Noam Bardin, founder of Waze, have published after leaving Google. It went viral in Israel back in 2021, eight years after the acquisition. While I am not going to share my personal opinion over the specific arguments he is making, this story might make other Israeli founders think twice about selling as opposed to continuing to grow their companies.

While Wix were never invited to light the torch in an official Israeli state ceremony (unlike the founders of Waze), they have indeed carried the torch of building large and successful Israeli tech companies that can make it on their own.

State of Israeli Innovation, 2022

The Israeli Innovation Authority (yes, it’s a thing) have recently published their 2022 annual “State of Israeli Tech” report. It is packed with interesting stats and tidbits, three of which I want to mention here.

First is the clear statement that “Tel Aviv is the undisputed high-tech capital of Israel”. You may have noticed that I often refer to both “Tel Aviv Tech” and “Israeli Tech” as essentially the same thing. This is why. Tel Aviv is home to 37% of tech companies in Israel, and growing. Jerusalem is a distant second with less than 7%.

On to another notable data point. The StartUp Nation book called out how back in 2005, Israel was world leader in the percentage of the economy that is spent on research and development. It was 4.5% at the time. Well, that figure has increased even further! R&D investments have reached 5.4% of GDP, even though Israel’s GDP more than tripled since 2005.

I suppose that is the result of the amounts of VC funds that have been flowing to Israeli companies (significant amounts when considering the small size of the country), as well as the Big Tech companies like Amazon and Microsoft expanding their Israeli R&D centers. While that seems encouraging, there are some challenges on the horizon.

The most concerning graph was around participation in tech. For a variety of reasons, the Israeli tech industry is dominated by Jewish men who are not ultra-Orthodox. While women still account for almost one third of tech employees, the dismal share of Arabs and ultra-Orthodox Jews, two of the fastest growing demographics in Israel, is a source for concern.

It’s worth noting that in recent years, the internal debate has already been heating in Israel around the impact of the successful tech sector on the rest of society. Critics have been warning that Israel might suffer from the “Dutch Disease”, and that the rise of Israeli tech is making a small part of the population ultra-wealthy, at the expense of hurting the rest of the economy. While Israeli techies have been pushing back on most of the criticism (I may expand on that in a future writeup), the concentration of tech around one city and one demographic might in fact result in a dual-class society, which makes it an important issue to address.

In addition to the economic equality considerations, Israeli companies have been complaining about shortage in talent. There could be a strong win-win opportunity here, if someone could figure out how to increase tech participation among underrepresented groups. Programs to provide training and support for both the non-Jewish and the Ultra-Orthodox populations are already being operated both by the government as well as through independent initiatives of large tech companies. The impact is yet to be seen.

Link to report (Hebrew version)

Personal Anecdote of the Week: The Israeli Handyman/Salesman

This experience felt like a page pulled right out of Robert Caldini’s “Influence”, the famous book that uncovers the psychological techniques employed by salespeople.

While it has been a few months since we moved back to Tel Aviv, we just finally bought a TV last week. Moving to a different country is a lot of work, there are still dozens of other tasks on our spreadsheet. I made the order and was happy to learn that it comes with free install. They even provide the wall mount. Several tasks I could cross off my list at once.

That was a very naive thought.

“The rule says that we should try to repay, in kind, what another person has provided us.”

While the people who came over were very professional, their main expertise seems to be in selling. They install the TV for free in order to invoke the Reciprocity principle, much like the way Hare Krishna devotees would offer a flower to strangers at the airport and then ask them for a donation. Having received a flower, which they are going to throw away in a few minutes, people felt obliged to do something in return.

It turns out that this is a common practice when buying electrical appliances in Israel. They do something for you - install your TV for free - and now they gained a foot in the door. You feel an obligation to reciprocate.

The things they are selling are as valuable as a random flower at the airport. First they compliment for the choice of television screen (somehow everyone end up buying “the best one”). Next they express concern over voltage spikes (don’t you want to protect the electronics inside the TV?), and offer a surge protector. They invoke Authority and Social Proof in order to convince you to buy the specific one that they’re selling (it’s the best one, everyone are buying it).

And on the story goes with an extended warranty (it’s 20% off only if you do it before we install, why should you pay a higher price) and upgraded wall mount (you paid so much for the TV, get the best brackets).

At least we have a TV now. Protected from voltage spikes. The installer said we got the best model.

This and future articles could be found under the “Posts” section of my substack.

And now back to the third edition of “Tel Aviv Tech Weekly” -

Interview with Oren Zeev, “Lone Wolf VC”

“It’s very skewed, 80% [of investments are in companies based in Israel and/or led by Israeli founders] … I think I have a crazy effect on Israeli high-tech, but I don’t want to claim that it is all due to Zionism. Being Israeli doesn’t drive my decisions and the reason that my portfolio is this way is mainly due to the fact that my network is very Israeli.”

This is from a recent interview Oren Zeev gave to Israeli newspaper Calcalist during a visit to Israel. Zeev is famous for the unique nature of his solo VC operation. Zeev Ventures, which reportedly raised over $1.5B, has a single partner (Oren Zeev), no analysts, and not even an office. The solo route makes more sense to him: “How contrarian could I be if I needed to convince six partners in an investment committee to do something that the rest of the world thinks is a mistake?” His last name, Zeev, is Hebrew for “wolf”, which warrants an obligatory “lone wolf” pun.

There is something else that I found interesting in the interview, beyond the very honest observations about the frothiness of 2021 startup valuations (“some things made me want to throw up”), layoffs (“no entrepreneur ever said ‘I wish I had fired fewer people’. It’s better to just rip the bandaid off”) and the road ahead (“we’ll have to wait until companies run out of money, to find out who is doing something important”). This is all pretty common VC speak these days. I found myself pondering about his response to a question about his reputation for having “a golden touch”:

“Maybe it is the reputation, but the main reason for my success is that the right entrepreneurs want me. And the chances of that increase when it is an entrepreneur in my network. More than half of my investments come thanks to a connection between one of my entrepreneurs and other entrepreneurs, or when someone I trust whispers in my ear ‘hey, that person is really something’. VCs publicize themselves as if they make companies great, but in fact, it is entrepreneurs who make the VCs great. One of the reasons that entrepreneurs love me is because I understand that. I’m not the story. They are the story.

“When good entrepreneurs want you because they believe you have a golden touch it becomes a self-fulfilling prophecy.”

The first thing that stands out is that Oren Zeev is humble enough to recognize that success in VC is very path-dependent - some of his early investments worked out very well and set his flywheel is motion. But I think there is something else that is interesting here, about relying on his network to source and evaluate investments, that could explain why 80% of his investments are in Israeli companies.

When I first moved to San Francisco in 2014, I was surprised to realize how wide the culture gap between Israel and the US really is. Ohad Samet, founder and CEO of TrueAccord, once wrote a blog post titled “Why are Israeli people so hard to work with?” The fact that Israelis have an “almost complete lack of respect for authority“ and “We are confrontational to a level that makes people in the Valley uneasy” were two of the reasons he mentioned.

I heard several investor stories about the challenges they faced working with Israeli founders. They often operate in an “Israeli” style that could be hard for US folks to grasp, and communication can easily get out of sync (luckily for you, you’re reading my newsletter, and you’ll know all about the nuances of Israeli startup culture!)

A successful VC who was born in Israel and has been living in Silicon Valley for over twenty years, can definitely help bridge this gap. I highly doubt that he would favor an Israeli founder as an act of discrimination, it’s just that this is where he has an edge. Oren Zeev is leveraging his network to source most of his deals, and is also relying on it to get feedback on prospective entrepreneurs. Given his strong brand within the tight Israeli tech network, where almost everyone are closely connected and generally like to help each other, he is in the perfect position to identify and invest in great Israeli startups. Then there is the strong culture fit that enables him to successfully work with those founders in a productive way.

One last thing about the interview, they couldn’t avoid the classic “do you plan to move back to Israel in the future?” question. People I’ve met who moved to Silicon Valley from France or the UK or other countries weren’t constantly thinking about moving back to their home countries. For Israeli expats though, the question of “moving back to Israel” is always top of mind, even after living in Silicon Valley for a couple of decades. It’s part of the Israeli ethos in some way. Oren Zeev gave a pretty balanced answer - '“I have a house in both Israel and the US, I feel good in both countries, and I can work remotely from everywhere.”

Link to interview (Hebrew Version)

Status of Tech Layoffs in Israel

lastartup.co.il/layoffs is probably the closest thing to an Israeli layoffs.fyi. Israeli tech layoffs have been correlated to the global trend: number of jobs lost has peaked during June-August, slowed down in September-October, and has been spiking again since November1. There is one difference though.

The dashboard recorded a total number of 7,063 Israeli employees who were let go so far, across 115 companies (eleven of which have already shut down their operations). While every person losing their job is a sad story on its own, these numbers seem mild compared to other regions: there estimated to be over to 200,000 “tech employees” in Israel, which puts this figure at less than 3% of the tech workforce. Facebook alone has let more employees go than the entire volume of tech layoffs in Israel. The New-York tech ecosystem is estimated to employ roughly twice as many tech workers as Tel Aviv, yet layoffs.fyi have already recorded three times as many layoffs in New-York.

Why has Israel seen fewer layoffs so far? One reason might be that an Israeli office of global tech company tend to be skewed toward R&D personnel, whereas layoffs have been more prevalent in customer and business facing roles. It might also be because that Israeli startups are focused mostly around Cybersecurity and Fintech - areas that in general recorded less layoffs compared to industries such as Travel and Food that aren’t very well represented in the Israeli startup ecosystem.

Based on social media posts, and my biased data points, folks who got laid off seem to be able to find a new job rather quickly. So far. I also know some founders who are taking advantage of the sudden increase in available talent. The fight for talent was very aggressive over the last few years, as Eretz Nehederet (Israeli SNL, sort of) captured in their 2021 "high-techs" sketches (“competing offers? give him another Tesla then, so that one is always charging.”). The Israeli founder on that sketch ended up hosting a recruiting event for fifth-graders. Folks seem to have more humble expectations around title and compensation these days.

Summer of 2008 was when I joined the Israeli tech industry, and I still remember the panic that followed the great financial crisis. It felt like no one was hiring. I was surprised to see a few friends who were more talented and hard working than I was, spending several months playing video games at home because their timing was unfortunate. There were no interviews to go to. Today’s situation is still far from those difficult times.

This round might just end up as a healthy rebalance of talent around companies with more sustainable business models. Or it might develop into a real crisis that we have not experienced in over a decade. We’ll have to wait to find out.

Link to dashboard

Personal Anecdote of the Week: Bubble Dan Shutting Down

This time I’ll try to tie in an anecdote from my last week together with a current event and a perspective into the economic culture in Israel. Bear with me here.

Last week I took advantage of the fact that the Bubble Dan service is still running and used it to get to work. Think UberPool, but with a 10-seat black van instead of a Prius. The Bubble service is operated by Dan, an Israeli bus company, and powered by Via, an Israeli transportation-tech unicorn. Once you book a ride through the Bubble app, Via’s algorithm finds the best match, though you might have to walk a few minutes to a bus stop nearby.

The Bubble service is shutting down at the end of this month, as per the announcement made last week by the Israeli Transportation ministry. The explanation was that the number of riders does not justify the government subsidies for the Bubble shuttle service. A few insiders however claim they haven’t lost hope on the fight to reverse the decision. They have three more weeks, and it’s very typical in Israel to see dramatic changes at the eleventh hour.

For an outsider it might sound strange that the government is the one making these calls. The Israeli economy started as a highly centralized economy that was planned and controlled by the government, and it wasn’t until the hyper-inflation crisis of the 1980’s that the course has shifted. The stabilization plan of 1985 is seen as the birth of a market economy in Israel. But old habits die hard, and public transportation is still centrally planned in Israel.

Uber has launched in Israel in 2017 and was quickly forced to shut down. The Israeli taxi drivers union operates a strong lobby. And so a free market approach to public transport was never tested in Israel - there might have been a profitable path to operating a shuttle service without subsidies, allowing some group of passengers to get to work in an efficient and environmentally-friendly manner. Alas, we will never know. The government has set the fixed prices of the Bubble service, as well as the number of vans, hours of operations, and area of service.

I’ll end with the advice Rotem Kolus gave on Twitter, for dealing with the shortage in taxi drivers that Tel Aviv is experiencing since the pandemic started. Gett is the only ride-hailing app that is available in Israel, and can only be used to book a taxi. Unfortunately, sometimes there are no available drivers. Not a huge surprise given that taxi prices are set by the government, as well as the number of licensed taxis. And there is no notion of “surge pricing”.

Rotem’s advice? “type in ‘50 shekels tip’ as a comment when you’re booking a ride through the app. I guarantee you’ll be matched with a driver.” Just don’t tell the ministry of Transportation about this hack.

Yahoo buys a 25% stake at Taboola, forming strategic partnership

This story stood out in between the headlines about tech layoffs in Israel. From TechCrunch:

Yahoo is taking a nearly 25% stake in advertising network Taboola. In exchange for this move, Taboola is becoming Yahoo’s native advertising partner through a 30-year commercial agreement.

The story of Taboola resembles the story of many other Israeli tech companies who went public (mostly via SPAC) at the height of the Covid internet boom. Taboola’s market cap peaked at $2.3B in November 2021, and dropped 84% by early November 2022. Much like many other Israeli “Covid winners turned zombie stocks”. The announcement of the Yahoo deal sent the stock soaring over 80% higher though.

It’s been an impressive journey for Adam Singolda, who founded Taboola in 2007 and has been CEO for the last 15 years. While “web content recommendation” has since became the core business of internet tech giants, he didn’t give up, and may have been able to carve a viable business for what Taboola calls “the open web recommendation platform” (“open”, unlike the walled gardens of Facebook, Google and Amazon).

If you’re not familiar with Taboola, you may have seen its content recommendation widgets on popular news websites, such as USA Today, Insider and The Weather Channel. They mostly feature sponsored links that lead to third-party websites. Those links appear in recommendation widgets at the end of news articles or in the middle of a content newsfeed.

This isn’t the first time Taboola is signing a strategic partnership that covers some of these properties. In 2015, Verizon acquired AOL. The next year, Taboola and AOL signed a strategic partnership that led to integrations of Taboola’s ads on AOL properties. Shortly after, Verizon also acquired Yahoo and merged AOL with Yahoo.

And now, the second incarnation of Yahoo, which includes AOL’s activities and operates separately from Verizon, is doubling down on digital advertising. With this new deal, Taboola becomes the exclusive partner for native advertising across all of Yahoo’s digital properties.

It means that you’ll soon scroll through news articles on Yahoo Finance and see an item that looks just like a normal article. But it will be a Taboola-powered advertising unit instead. Or at least, that’s the idea. Advertisers will be able to buy Taboola through the Yahoo DSP.

The Taboola story was presented as “arming the rebels” in the online advertising space. Their Jan 2021 investor presentation said “TABOOLA IS FOR ADVERTISING WHAT SHOPIFY IS FOR E-COMMERCE”. While they haven’t compared themselves to Shopify recently (the sentiment toward Shopify stock is not as positive as it was in 2021, to put it gently), Taboola still seem to be executing on the “arming the rebels” strategy.

Said “rebels” are likely be traditional news publishers like Bloomberg and CNBC, and web portals who fell short of their initial aspirations such as MSN, AOL, and now Yahoo. It remains to be seen how far the rebels could go using Taboola’s ammunition.

It’s worth mentioning OutBrain, another Israeli company with a very similar content recommendation platform, albeit of smaller scale (I previously mentioned their contribution to the Israeli software development ecosystem). While joining forces in “rebelling” against the internet giants seemed like an obvious move, Taboola and OutBrain called off their merger talks in September of 2020. Both went public as independent companies shortly thereafter, and the Taboola-Yahoo deal might leave OutBrain’s platform further behind.

Link to full article

Israeli Tech Review, October 2022

A couple of interesting anecdotes stood out in the latest report by IVC & Leumi Tech. While the investments and exits trends in Israeli tech are mostly in line with the overall global ecosystem - early rounds activity (seed & pre-seed) remains strong, a significant drop in mid to late rounds compared to 2021, and a completely closed IPO window - I found a couple of data points that reflect some characteristics that are unique to the Israeli tech industry.

The first is just how concentrated the Israeli tech industry has become in the area of cybersecurity - while the investments in this vertical (the pink bars on the chart below) were of similar magnitude to other verticals until 2017 or so, recent years saw a meteoric rise in the dollar amounts invested in Israeli cyber startups.

The origins of the Israeli cybersecurity expertise can be traced to the Israeli intelligence, as told by the Startup Nation Book: alumnus of these units have started companies such as publicly-traded Check Point, and Fraud Sciences which was acquired by PayPal.

These are older stories though. It feels like the more recent success of publicly traded Israeli companies like Palo-Alto Networks and Sentinel One, valued at tens of billions of dollars, has created a “cyber mania”. The expertise for building and selling software security products has spread across the Israeli ecosystem, as well as word about the high flying valuations and amounts of investor dollars chasing cybersecurity startups.

While the demand uptick was real - the accelerated post-Covid cloud adoption has created a wave of security concerns for a lot of companies - Israeli startups might have overdone it. The current economic slowdown could challenge the rapid growth of the Israeli cyber industry, and it’s unclear if that pink bar is going to keep its position far above the other startup sectors in 2023 and beyond.

Another interesting observation is that in the distant past, going public wasn’t the typical “Israeli startup dream”. Israeli founders used to have more humble dreams of being acquired by a large US company, and retiring after a few years of working as senior directors while their stock grant vests. They would often retire to start another company. This slide shows very little Israeli IPO’s taking place before 2020.

The pandemic internet boom allowed a wave of Israeli company to go public at extremely high valuations, among which Taboola that was mentioned in the previous section. This created a lot of internal tensions due to the rise in inequality, and some theories about how the SPAC phenomena is powering a dramatic rise in Tel Aviv real estate prices. I’ll leave it to another post.

The interesting question in my opinion is how long would it be before we see the next large Israeli IPO. The general tech IPO window will reopen at some point, and I imagine that companies like Stripe and Databricks will go public sooner or later. Israeli founders might continue to focus on more comfortable exits through M&A though, following the trauma and hardship that many Israeli public companies have been experiencing in the public markets in 2022. This is another case where I am curious to see how the graph shapes out over the next few years.

Link to full report

Personal Anecdote of the Week: Dresner Park

One of the things I liked most about San Francisco is the amount of beautiful open space reserves right in the middle of the city. You can make a turn from an urban SF street, walk a short path, and find yourself completely immersed in nature. We’ve made it a family tradition to spend our Saturday mornings exploring places like Glen Park Canyon or Mount Sutro, to name a few of our favorites.

Well, I’m happy to announce that we’ve found a place like that in Tel Aviv! Dresner Park is right on the edge of Ramat Aviv neighborhood (which some would argue is the Israeli version of Palo Alto). A short path between two buildings leads to a large reserve where you can leave the city behind you.

After a full night of rain the sun came out on Saturday morning, and we felt like it’s the kind of day that is best spent outside. The kids took advantage of the opportunity to splash some muddy paddles (though some parents weren’t as excited), and eventually found an awesome tree house. They decided to build a camp around it and told us that this is our new home.

They had such a good time exploring nature, that we only covered a small portion of the park. We’ll have to go back on another weekend, trying to make the most out of this nice time of year - the temperatures are in the 70’s now (23 degrees celsius) and mostly sunny.

Unlike the Bay Area, where you can enjoy hiking almost any day of the year, the hot and humid Israeli summer is very challenging, and it was impossible to spend too much time outside up until recently. The upside is that when it is nice outside, we don’t have to strategize around how to stay away from the fog (which was very hard to predict in the Bay Area). I wonder how long will I keep comparing the two places for.

Reversim Summit 2022

The early 2010’s brought a new wave of internet-first concepts and technologies like MongoDB and React.js. Even deploying software on AWS was still being viewed as cutting edge. While Silicon Valley was buzzing with meetups and tech talks, often by the very same people who built these products (you could probably just walk into a random bar in the SoMa district in San Francisco and find a NoSQL or a jQuery expert), I was still living in Tel Aviv at the time and felt like I was struggling. I was working in a new company, and we were desperate to find other Israeli startups that had any experience with this new tech, in hope that they could help us get started and answer some questions. Some other companies were probably struggling with the same stuff, there just wasn’t an easy way for us to find each other.

A couple of R&D leaders from Outbrain (a web recommendations company with an R&D based in Israel) have tried to do something about it, and started hosting tech talks in their Israeli office. I joined a few sessions in 2012, and can still remember the sense of relief that I felt when I came across this resource. They also started a Hebrew podcast for software developers, that over the years evolved into a community-driven annual conference.

Fast forward 10 years later, Tel Aviv today is bustling with meetups, tech forums, Hebrew-speaking podcasts, WhatsApp groups, and experienced mentors. The Reversim summit is the major annual event for Israeli techies. Over 2,000 participants attended Reversim 2022 a few weeks ago, with Joel Spolsky, founder of StackOverflow, as the keynote speaker. The agenda covered a wide variety of topics, from frontend development and AI to craft and culture.ֿ

At the 1:08 mark you can see a funny moment: two old friends of mine, ‍Yoni Tsafir and Iftach Bar, software engineers by trade and hobbyist songwriters, have made a tradition out of performing at the Reversim conference. This year they made the audience go wild to the tunes of their hilarious new song - “That is not the way to code” (link to full video).

Israeli CISO Fund

“We’re a group of 16 Information Security Officers, working in international cloud based tech companies from diverse fields such as fintech, internet services, retail, gaming and more. Most of us are based in Israel” - the Kmehin Ventures group told tech12, an Israeli tech news website (“Kmehin” is Hebrew for Truffles). The group of leading Israeli CISOs (from companies such as Agoda, JForg, SimilarWeb, Iron Source and others) created a cyber security investment consortium, following an exuberant discussion in a WhatsApp group about the nature of working with Israeli cyber entrepreneurs. (yes, Israelis are BIG on WhatsApp groups).

“The discussion raised the point of many meetings with startups as part of our job. One group member shared a screenshot of their calendar, showing four new cyber pitch meetings in one day. That same person suggested that we formalize the way we help startups in a way that would help us as CISOs, and also make the process more efficient. We figured that operating as a group would be a force multiplier. We could meet them together and share our thoughts with each other. This is a win-win for both sides - we’re seeing new technologies that are important for us as domain experts, provide guidance, validation, as well as take part as investors.

… What started as a calendar optimization exercise, has turned into a small investment group. Kmehin is a tiny fund with $2.5M of capital.”

This is a somewhat similar model to the “Silicon Valley CISO Investment” (SVCI) fund, which has been operating for a while. Some SVCI members are in fact Israelis, which might make one wonder what is the need for a yet another CISO fund.

The Kmehin thesis for an Israeli-focused CISO fund also highlights some unique characteristics of the Israeli startup culture:

“Since we are a group of Israelis with a million different opinions, it took us around 10 months to distill the initial idea into the current structure of Kmehin…

“Israeli CISOs are exposed to a larger number of cyber technologies and startups, due to the huge diversity in Israel compared to anywhere else… Furthermore, we’re Israeli just like them, and we’ll always be more accessible compared to any other country. Often it will be easier to onboard a new half-baked product in our companies, unlike American companies who often require more bureaucracy and tedious processes. We very much like innovation, short cuts and hacks…

“To avoid conflict, all member CISOs have signed a conflict of interest agreement with their employers. An investment is not a guarantee to purchase the product…

“When one of us meets a cyber entrepreneur, they would tell them about Kmehin and offer to meet with the whole group. This will not be for validation purposes, but rather to discuss an investment…

“We don’t compete with other funds since we’re writing small checks, and don’t lead rounds. What we do have is deep technical understanding.”

Kmehin made 9 investments since getting started in January 2022. Other than the interesting dynamics around a CISO-led cyber security investment fund, four Israeli-specific traits stand out: an explosion of cyber startups in the local market, a typical Israeli willingness to take short cuts and use half-baked products, genuine interest in innovation and novel technology, and also - the Israeli tech network is very dense, it’s relatively easy for an Israeli entrepreneur to cold-email another Israeli executive.

Link (Hebrew)

Personal Anecdote of the Week: House of Coffee

This week I visited one of my favorites places in Tel Aviv: HOC (“House Of Coffee”). When I had first moved to San Francisco I kept complaining about coffee in America, and even though SF was going through the third wave revolution, I just couldn’t get used to it. A couple of coffee places in SF grew on me eventually, and when I moved back to Tel Aviv I found myself longing for Blue Bottle Coffee.

Luckily for me, there are almost as many coffee shops in Tel Aviv as there are laptops, and some of them take their craft very seriously. House Of Coffee is probably at the very end of that spectrum.

I spent a morning working out of HOC this week. I had the El Salvador espresso (incredible!) and got some reading done. I wasn’t hungry and just had coffee, though they do make a super-popular “egg sandwich” (creamy omelette in challa bread). Blue Bottle don’t serve anything like that.