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[Eyal] The key factors, in my opinion, for the Israel’s relative success in IP/technology entrepreneurial activities are: (a) a culture of self selection that is rooted in the Jewish education  (b) profound science/tech education system  (c) mandatory military service that exposes people, when they are young, to leadership, teamwork, and management aspects, as well as to risks and to cutting edge technologies they can later continue developing in the civilian world; and finally (d) Israel is a very small place and the diffusion of the entrepreneurial innovation happens much faster when you meet your company partner/co-founder in the army, or you work in a range of 10 minutes walking distance from 20 VC firms.

To all these key factors you can add a successful governmental help during the 90’s that effectively created an entire VC community from scratch and still helps start ups with R&D grants provided by the chief scientist .  Having said all that , one can also claim that the real reason for the Israeli technology success is the fact that we simply don’t have a choice  -  as a nation that is half the population size of Seoul metropolitan , which lacks natural resources and surrounded by nations to which it cannot export  - Israel really did not have a choice but to become innovative , encourage intellectual property and go global.

Korean entrepreneurs have many things in common with what I described above,  however they do  have the privilege to  launch and test their products in Korea and even get to a profitable stage while still focusing their efforts on Korea.  In addition,  Korea has many of the world’s largest companies in automotive , semiconductors and consumer electronics which can be a very fruitful place to gather market information , learn customer needs , start  a beta trial and even initial sales.  It is a long and a separate discussion, but successful Israeli startups mostly end up being acquired and we have only few big technology companies to look up to that grew to become global market leaders (i.e.  Comverse, Checkpoint, Amdocs ), so in that sense Korea has excellent in-house role models in building great companies.  

[Web 2.0 Asia] How is the Israeli startup landscape these days, in this economic downturn? For example, are there many university students who aspire to start their own companies? 

[Eyal] The startup landscape was affected in direct correlation to silicon valley . Even though Israel has a reasonably healthy VC infrastructure , the Limited Partners at most of these VCs are the same US-based financial and pension institutions. The end result is that late stage companies with a proven B-model will get funded and survive , very early stage ideas can also get enough funding to get through the rough turmoil times, but the rest will have very challenging times.  As an interesting anecdote that relates to the self-selection culture we discussed above  , I will note that the month when the financial markets crashed was a record month in terms of new start ups being founded in Israel , so the lack of job security actually created an entrepreneurial waive as people want to be more in -control on their own future.

[Web 2.0 Asia] I assume many Israeli startups might also experience similar cultural/language barriers when they go to Silicon Valley, as experienced by the Asian startups. How do you think they overcome such barriers? Are there any parties, such as those who came to the Valley and succeeded earlier, or some kind of Israeli venture association in Bay Area (if there is one), that provide help? 

[Eyal] There are many unique and some time funny (or frustrating) cultural barriers for Israelis in the Valley. While the Asian culture is more introvert and patient , the Israelis are much more edgy , easily excited and in many cases aggressive to the US potential customer or investor that tends to be more ‘politically correct’.  So for example, when an inexperienced Israeli sales person or founder hears “your idea is interesting + thank you for dropping by  + we will get back to you in few weeks”,  he will get very excited from the prospects of this partnership and will start calling the American partner again and again for weeks just to get voice messages , before understanding that the real message was  ”I did not get so excited about your idea, but I don’t feel comfortable to just tell you NO and send you away after you took such an effort to come over”.  Another , more language related story I heard of , is that while a major agreement was drafted and integration talks already started the US executive shared a major technical concern with the Israeli field engineer. The engineer promptly replied “this is not a problem for our technology ”  (meaning , we can address your concern ) while the American executive heard  ” your concern is not our problem ”  and therefore decided to cancel the deal. There are many more of these funny/frustrating stories.

Luckily , many of these barriers are overcome by the network of other entrepreneurs that already progressed in the learning curve and also by the fact that many US companies and investors already got used to work with Israelis and know their pros and cons.  In addition - the Israeli consulate in San Francisco and the CICC organization are doing their best to help the newcomers to get around and expand their network. Another organization that is amazingly instrumental is the Bird foundation which has financially supported partnerships between Israelis and US companies for over 30 years.

[Web 2.0 Asia] How would you describe the Israeli VC industry, compared to, say, that of the Valley’s? (In terms of deal size, willingness to take risks, overall quality of practice, etc.) 

[Eyal] The Israeli VC industry is a relatively young one, founded around 15 years ago ( meaning only  2+   full investment cycles ). During these years we witnessed three bubble burstings  (Web , Telecom and now Financial)  - so if you put aside the hype around Israeli high tech and measure pure financial returns, the Israeli VCs, for the most part, did not exceed their US peers and many of them did not generate positive returns  (picapp’s investors at Carmel Ventures are on top of the list with nice returns!   : ) . 

The quality of the practice was substantially improved once the first generations of high tech entrepreneurs started to join the VCs. Also, Israelis who gained experience while working in the US corporates or graduating ivy league universities came back home and started to help the local companies. Competition always helps to improve, and the industry as a whole enjoyed the fact that US VCs aggressively open branches / affiliate offices in Israel or routinely sends their representatives to Israel to compete on the deal flow ( Sequoia , Benchmark , NVP ,  USVP , Accel , DFJ, etc).

[Web 2.0 Asia] Could you name several “legendary figures” in the Israeli startup scenery? (I only know very few, like Yossi Vardy.) Are there any stories of successful startup founders giving back to the Israeli venture community?

[Eyal] Part of the reason why we see bigger and better Israeli start ups are the fact that the young entrepreneurs have now many successful veterans to learn from. Many of these veterans became VC or angel investors and help companies voluntarily or even by teaching courses at local universities. While Yossi Vardy is definitely a more recognizable one , there are many others legendary figures that are busy with helping local start ups such as:   Ed Mlevski  [ Tyco]  , Efi Arazi [ Scitex]  and Uzia Galil [ Elron]   (i.e “the high tech industry founders” ) , Shlomo Dovrat [Tecnomatix ]  , Yanki Margalit [ Aladdin]  and Gil Shwed  [ checkpoint]  (” i.e. the first generation”)  and even younger ‘legends’  such as Yair Goldfinger [ ICQ] and Yaron Galai  [ Quigo] already started their second round of entrepreneurial ventures and are also helping other start ups to make their initial and most crucial steps.  I am confident that soon we will be seeing an evident and similar pattern in Korea once the first cycle of student of Ahn Cheolsoo’s class at KAIST will graduate and start initiating new ventures. (*Editor’s note: Eyal studied with Ahn Cheolsoo at Wharton’s executive MBA class.)

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Eyal Gura is happily married (soon to be a father of a young girl) and lives in San Francisco. He graduated from Wharton MBA and the Sam Zell’s entrepreneurship program at IDC. He co-founded IEC - the first entrepreneurship club in Israel - and served in the submarine when he was serving the Israeli military. Eyal founded the first online video hub for recruiting (way before the right time), and co-founded (this time right on time) the company that became the world leader in online image monitoring  - www.picscout.com. He also recently founded www.picapp.com, with the ambitious goal to enable online publishers to get free access to the best legal visual content and use them  - or in simple words, bloggers can use professional photos from gettyimages or corbis for free, while Picapp uses online advertising model to monetize and pay content owners. The images comes with an ‘SEO steroid ‘  that helps the blogger’s blog be better indexed on google images or other image search engines. When not working, Eyal enjoys aikido (used to practice tai-kwon-do in Israel but did not find a traditional tai-Kwan-do dojo in SF ), reading and scuba diving. He also twitters and blogs every once in a while at the picapp blog.