Venture Capital Investments

– Israeli VC funds needed to re-adjust to their strategy to capture the potential of Israeli consumer internet applications. Gemini Israel Funds was the pioneer in the field, by creating LGiLab, an joint venture with LightSpeed Venture Partners that dynamically invests small amounts in promising pre-seed projects. The shift paid off, since Gemini got involved in no less than a total of nine investments, five of them through the lab.

– Most of the startups that managed to raise capital from VCs were in the large part founded by experienced entrepreneurs. Their ideas were more than just features, but to echo Gemini’s Danny Cohen in his interview to Venture Beat, we haven’t seen game-changing products coming out of Israel this year.

– A trend that grew this year is vc investments in Israeli companies made by international funds. Israel was marked as an attractive target for investors and most likely the reasons for such investments are:

• International funds recognized the potential of the Israeli internet industry
• Lack of supply of disruptive ideas in some of the international markets
• The added value that international funds provide is likely to be higher than a local investor
• Israeli entrepreneurs seek international investments when they experience difficulties raising capital from local vcs.

This trend is likely to continue growing next year.

Thecoils compiled the informative table below, summarizing all the internet investments in Israeli companies during 2007 (Click to maximize)

Short recap of this year’s investments in Israeli web startups by international VC funds:

- Mayfield: Fixya.com
- Accel : Dapper, MetaCafe, MyHeritage, Zlango
- First Round Capital: Gigya, Reimage
- Crossbar Capital: Reimage, BitWine
- Spark Capital: 5Min

– There’s also the opposite trend – Israeli funds investing in foreign ideas: Gemini had two of those in France this year: Wikio and Bahu.

– Not all the startups didn’t receive funding, and for many it took a long time to get there. It’s not a bad thing – natural selection and angel investors play a big role with this bunch.

Private investors and angels

2007 will be remembered as the comeback year for the angels in Israel.

– Yossi Vardi alone, who recently interviewed with BusinessWeek magazine, invested in 65 companies in the past five years. Most of them are Israeli. He said that third were a success.
– Private funds started appearing, organizing groups of investors. One example is Igal Ahuvi’s private fund, Partam Properties Ltd.

– Angel Clubs such as afterdox and Tevel are becoming more and more popular. This year they haven’t made an impact in the investment arena, but next year you are likely to hear more about them.

Israeli Internet Exits

– 2007 returned the glory to the Israeli exits. The dream to start a company and get rich even evolved into “Mesudarim“, the Israeli version of ‘Entourage’ – a show about four friends that sell their startup to an American corporation for $217 million and live it up with the new found wealth.

– Quigo, Kassamba and Oridian Online were some of the biggest Israeli internet exits of 2007 adding up to more than $400 million dollars in returns.
– Yedda gave hope to all the startups that didn’t open an American branch. Terms were undisclosed. dPolls that was acquired by Toluna.

– Smartshopper was sold to Zango for $9M and Rawsugar that was thought to be dead but eventually sold to Suggestica inc, likely for peanuts.

Israeli Internet startups got more traction

You’ve got to hand it to some of the tiny Israeli startups that managed to catch the spotlight using creative marketing, originality and the well known Israeli ‘hutzpa’. A few noteworthy startups include:

– Gigya: started as a fun email application for kids, but today its one of the leaders in the widget industry. Seven out of the ten big sites uses their products. This is one to keep an eye on.

– Pando: revolutionized large file transferring using bit torrent technology. Getting close to 15M users.

– 5min: a life videopedia and one of the biggest collections of how to videos on the web. 5mnin recently raised $5M from Spark capital and are now in the process of opening offices in the US.

–BlogTV: a broadcasting platform that is trying to get a stand in a new market

– Oberon Media: online game manufacturer signed an agreement with Myspace.com and is likely to be the next giant Israeli internet exit when it goes public in 2008. (see more here)

– FoxyTunes: one of the top ten most popular plugins for firefox, allowing users to control any media player through the browser.

– Fring and Pudding Media: bring the VOIP revolution and IM chats to the mobile phone.

– AniBoom – The youtube of Online Animation

and many more. (click for a long list of Israeli startups)

Global recognition and awards

Israeli companies brought some pride home with a few significant achievements in global startup competitions :

TechCrunch40: Kaltura wins the people’s choice, Ceedo is nominated

LeWeb3: PLYmedia and G.ho.st won the second and third place respectively (see more here)

Crunchies: iMedix, aniboom, Fring, Gizmoz were nominated among the finalists in four different categories (see more here).

Alternative search engines: Omgili and Answers.com ranked in the top 10 alternative search engines (see more here).

Fast 500: Israeli Tops Deloitte Technology Fast 500 Ranking: Takes First, Second and Third Places in Europe (see more here)

Wrapping up 2007

I join the authors of thecoils in congratulating the Israeli internet industry for doing much with little and redefining the meaning of bootstrapping. May 2008 be full of exits and exciting new technology. I’d like to use this opportunity to reach out to Israeli startups that are interested in being featured on VC Cafe if you are launching a new product, looking for funding or introductions, contact me at eze@vccafe.com.

1. eSnips, an Israel-based “social content-sharing site” released ‘Social DNA’. Social DNA is a series of quick ‘tests’ that allow users to find like minded people. The concept is not new as it is implemented by many dating sites and Facebook Apps such as: compare people , similar friends and many online dating sites. eSnips’ CEO Yael Elish reported to have approximately 13 million monthly users, out of which 200K are Israelis [Sources: Techcrunch, The Marker]
2. New VC Fund focused on India-Israel investments. Footrpint’s focus is to invest $2-4 million in lifestyle, retail, financial services, security, education, clean technology and life sciences companies in the India-Israel-India corridor. Footprint is led by Neill Brownstein, co-founder of Bessemer Venture Partners, as well as Linda Brownstein, Josh Bornstein and Shalini Elassery. Footprint already signed an agreement in July 2006 with Infinity—an Israeli-Chinese technology fund with $350 million in its current fund—to invest in Israeli companies and technologies that target Indian markets. [via LiveMint and VC Circle]
3. Electric Cars in Israel? Following Shai Agassi’s and Idan Ofer’s “Project Better Place”, Israel is attracting foreign investments related to electric cars. French car maker Renault SA is studying a possible plan to build a manufacturing plant for electric cars in Israel. [via Businessweek]
4. JaJah loves Jangl – Israeli VOIP Platform JaJah recently announced a series of new deals. It started with an ad for minutes campaign, enabled by a partnership with Oridian (also Israeli). The geographically targeted ads allow JaJah to monetize while providing a free service to its users. Now, JaJah announced a partnership with Jangl, a VOIP platform that enables users to get a virtual telephone number on the web. Jangl will help JaJah to extend its reach to Jangl’s 40M users and Jangl will in turn use JaJah’s monetization platform and gain entry to the 122 countries in which JaJah is active. [via Mashable]
5. Video discovery made simple – Israel based Taboola wants to enable content discovery style ‘Stumble Upon’ for video sites. EverGreen believes in the idea – it will finance a round of $1.5M to make it happen. Taboola allows users to integrate ads onto a site’s video player using java script tags. Israeli 5min.com has been testing the service and it reported a 23% increase in watched videos and 53% increase in session length since it started the test. [via NewTeeVee]

See an example of Taboola (click on related, bottom left):

• Ukraine planning to create free trade zone with Israel. Among the priorities of Ukraine’s development the president identified the development of industry, specifically machine building, space- and aircraft construction, and chemical industry. [via]