Archive for March 2012

Explaining tech to an “ignorant” investor

March 30, 2012

Chat with any entrepreneur, just as they are about to launch into an explanation of their whiz technology, and you will get the same response. “I will just take ten minutes to explain the basics of my revolutionary tech, which I invented whilst studying for my doctorate. I will refer to only 10 long words that do not appear in the Oxford English Dictionary.”

To the dumb investor, the story ends up sounding like goobledygook. English? The presenter might have used Vietnamese.

But is that person, who is holding on to the money, really that dumb? Just because he or she does not understand turbines or internet connections or chemicals, remember that they often possess another asset. Their speciality is to spot a product or service, suitable for commercialisation, and a team that can support that drive. 

However, if the entrepreneur retains the language of a university textbook (from east Asia), their investor will cut the conversation short and return to playing poker on his iPhone. So how to avoid the trap?

A recent blog by from 3Sixty tackled this very point. Their three-point approach can be summed up as: –

Think of your data or technical information as a blank canvas. You need to paint a slightly different painting for each audience. You need to ensure that it’s relevant to each audience and that you answer the question – why is this audience interested in this information, what does it mean to them and what do I want them to do as a result of experiencing this presentation.

Simple? I am not so sure. I have seen some clients adjust rapidly, while others repeatedly prefer to whip out their 30 slide presentation at any opportunity, which is often inappropriate.

One techy, who was supreme at “dummying-it-down” was the late Steve Jobs. His biographer, Walter Isaacson, argues that:

…. the real lessons from Steve Jobs have to be drawn from looking at what he actually accomplished. ……. (Jobs) said it was Apple the company. Making an enduring company, he said, was both far harder and more important than making a great product. How did he do it?

Well, Isaacson gives a detailed response to hiw own question. And I will add one further consideration. Surely, one aspect has to be that Jobs made his products appealing and obvious to even the greatest of non-techies, including this writer.

Start-ups and society; Jerusalem’s investor case study

March 23, 2012

The incubator model for creating growth in young companies is simple and can be very effective.

Build a hub of similar companies. Take a large chunk of equity. Provide them with logistical and financial support. Then sell them off a.s.a.p. for as much as possible.  Get a few deals wrong along the way, but when it goes right, you hit the jackpot. Simple!

Israel has over 20 incubators, one of the first country’s to pioneer the idea. Many were initially set up via a government initiative, although they have since been privatised. One of the more successful one is JVP, Jerusalem Venture Partners, which occupies premises that formally belonged to the mint of the central bank. (Ironic?)

JVP was originally set up by Dr Erel Margalit around 20 years ago. He had previously worked for the legendary mayor of Jerusalem, Teddy Kollek, driving high tech and conferences into a city whose main export up to that point in time had been religion .

Margalit tells a fascinating story, beginning with an initial daunting overdraft. Banks practically laughed when he asked for support for his “new children” that would create software codes or other intagibles not in known established curriculae.

Today, JVP’s website relates of companies like Chromatis, Precise, Cogent and others, whose positions have been valued at over US$1 billion. JVP considers itself a media center, where there is a heavy emphasis on young companies, usually providing content. A simple example are their start-ups in the field of animation, who are currently in discussions with Hollywood studios.

What makes JVC different from other incubators is its vision and its value system. As Margalit stated this week: “The new master is the individual…..To meet the individual, you need creativity”. And Margalit does that on two separate yet connected levels.

First, JVP looks for a long-term relationship with its clients. While many entrepreneurs are often looking for a quick exit to get some money back for their efforts, Margalit’s team keeps to a broader picture. Experience dictates that the big profits are located that bit further down the commercial road – to be attained and realised with patience and continuous evolvement.

Second, and in parallel, Maragalit looks at the community. For example, JVP invests in schools – religious and secular, Jewish and non-Jewish – specifically targeting early teenagers on the edge. JVP has sunk resources into the performing arts. And just for variety, the incubator is involved in programmes for community leadership. The link? Again, it is all about promoting individual development and initiative.

The point being that a successful incubator cannot exist in a social vacuum. When will others learn?

POSTSCRIPT: This week, the Bank of Israel published figures that for the first decade of this century, the income of the average Israeli household rose by 10%. GDP person rose by 12%. However, the income of the poorest households only climbed 4%. Now what would Dr Margalit have to say about that?

Who needs a business mentor?

March 20, 2012

So, if you could choose four people on your team, would a business mentor be one of them?

Business mentors do not necessarily come up with new ideas. It is unusual for them to invent the next best thing to the IPad or to facebook or to chocolate. Rarely do they come with a specific qualification, and yet they often claim that they can help allsorts.

What’s their game?

It is about a year ago that I was listening to Ron Bowman from the Carnegie Training Center in Israel. He took the example of the top golfers in the world. He pointed out that the average shot per round of number one in the world and of number 120 something is very similar. The difference is seemingly marginal.

However, the gap exists and becasue of that number gets all the lucrative endorsements.

How is that difference maintained? The top guys pay for the best trainers and for mentors. Why? Because for all their natural skills and experience, the players need perspective. They need to keep learning how to see things in a way that will keep them ahead of the pack.

Business is not a sport for most people. However, for most of us the concept of being one step in front and remaining there is crucial. 

Earlier this week, I was sitting with a baker, who had already seen one set up collapse around him. For all his tasty products, he had been unable to realise that he had to organise his time not just around his ovens. Clients needed to be met. Bank managers had to be addressed. Suppliers needed to be spoken to.

He described how he emerged from the gruelling exercise, valuing the need for overview and organisation in his new enterprise. Without expressing it, he wanted (and needed) a mentor.

A few days previously, I met up with a Jerusalem-based service company, owned by an analyst. The business was determined by an undeniably complex workflow.  After some initial successful years, the firm had entered troublesome waters.  For all of the CEO’s strong commercial background, he could not see what was the problem…nor the solution.

He was also sceptical if I would be able to help. After all, I have no experience in his field. What the CEO may be surprised to learn is that the solution lies not in knowledge of his specific sector, but in understanding the definition of creating an operating and practical business model – something which his internal manuals do not provide.

So, who needs a business mentor? Be you a start up in high tech or an established retail outlet or anything else, having access to a wiser and unbiased perspective could make that very significant and positive difference.

Angels, investments, and a holy land of “financial miracles”?

March 18, 2012

Angel investors are viewed as private individuals who look for financial opportunities, often in high-tech startups. And for the past two decades, the Israeli economy has seen spectacular growth, particularly as a result of its role in the fourth industrial revolution of telecoms.

So has the phrase “the Holy Land” taken on a new commercial meaning? Would it not be plain boring for entrepreneurs if all they had to do was to lift a rod or raise a hand? Even in Israel, an angels do not just appear, offering a million or two in cash.

Cute thought. However, Israel’s Ministry of Finance in Jerusalem in partnership with the Office of the Chief Scientist have come up with a more modern solution to financing new outfits, be they in biotech, new media or cleantech. Conveniently nicknamed “the Angel Law”, the aim is to encourage local investors to put their money early into companies at “seed stage”.

The tax break was recently outlined by David Krisman, KPMG Jerusalem, at a recent meeting of the Jerusalem Business Networking Forum. To put it simply, when an Israeli taxpayer invests up to around US$1.3 m per Israeli R&D company, they will be entitled to a deduction from taxable income, which can be spread out over 3 years.

The new regulations have only recently come into play. Investors, accountants and lawyers are already  crying “oi vay”, as the bureaucrats have wrapped the regulations in…well red tape and double talk. Simple, it ain’t for now.

That said, in an epoch when countries are looking for innovative ways to put money back into their economies, this is definitely a different and positive approach. A miracle it may not be, be it certainly kindles hope for enterprising new companies, creating employment opportunities and creating new wealth.

A Kenyan, Italian and Hungarian in Jerusalem

March 17, 2012

My youngest son took part in the 2012 Jerusalem marathon. OK, so he only completed the 10km route, as opposed to the full 42.2 km, but he did it.

This year’s race was billed as “Breathtaking”. Official blurb refers to “the race of nations”.

All I can tell you is that I braved the rain and strong winds to go and cheer on my son at the finish line. It was fascinating to see the people who had come from all over the world to take part. Italy seemed to have a several representatives. I heard Hungary’s name being called out. And of course, Israel has a large number of people these days, who were born in Ethiopia, and they were amongst the leading packs.

The winner hails from Kenya. The time of 2 hours and 19 minutes may not have been close to a world record. There again, Jerusalem is known to be built on 7 hills, and the runners came face to face with several of them as they jogged around the Old City, ending up near the Kenesset, Israel’s Parliament. 

Jews have a phrase – “Next Year in Jerusalem”. I am sure that the 2013 Jerusalem Marathon will be even better.

4 updates on the Palestinian economy

March 10, 2012

The Palestinian economy may still dwarf in size compared to its Israeli neighbour. It still looks to the international community – particularly the World Bank and the EU – for taxpayers handouts. That said, times are a changing.

1. Exports

The security situation has finally eased enough for Israel to enable trade to recommence between Gaza and the West Bank. On 6 March, after negotiations with the World Food Programme (WFP), 13 lorry loads of date bars from Gaza were transferred to the West Bank, the first such transfer since 2007.

2. Business Development Loans

Thousands of young Palestinians will receive access to financial loans to support their new businesses through a United Nations-backed initiative, which seeks to stimulate the creation of new jobs. The “Mubadarati” loan programme will be carried out by the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) in collaboration with Silatech, a social enterprise company that focuses on creating opportunities for youth in the Arab world.

3. Energy

On a slightly negative note, one problem which continues to plague the Palestinian economy is the lack of continuous energy in Gaza, most of which is supplied via Egypt. Ismail Haniyeh, the Hamas Prime Minister in Gaza, has been quoted as blaming his friends in Cairo. Although a temporary solution has been found, it looks as if factories will be operating on a shortened working week for sometime to come.

4. Israeli involvement – Healthcare

While Palestinians and Israelis are not known for being the best of friends, in the medical sphere the story is often different. Palestinian journalist, Abu Khaled Toameh reported this week that the Palestinian Health Minister, Fathi Abu Mughli, organised a tour of Ramallah by an Israeli team of professionals – although the visit was cut short after strong local protests.

This is no new phenomenon. Israel has consistently proved its willingness to cooperate in the medical arena. Official stats show that in December 2011 and again in January 2012, around 1,400 humanitarian permits were issued to allow Palestinian patients and accompanying relatives into Israel. Back in May 2011, the Sheba hospital near Tel Aviv had supported a project to enable 1,000 Palestinians in the Tulkarm area to receive hearing aids.

Just how large are economies in the Middle East? The World Factbook puts the Palestinian GDP per person at US$2,800. Israel’s figure is over US$31,000. The countries of Qatar, UAE and Saudi Arabia leave everyone way behind.

Yet you have to wonder if these kingdoms invest in their Palestinian friends as Israel does.

Israel, the Labour Market, and International Women’s Day

March 8, 2012

For Israelis, International Women’s Day in 2012 coincides with the festival of Purim, when Queen Esther took on Haman, the wicked minister of Persia. The story describes a triumph for female brawn, daring and courage. The Jews of 127 provinces were saved. Haman and his sons found their place on the gallows, and their property was transferred to Esther’s family.

As in most countries around the world, the position of Israeli women in today’s labour market is not brilliant compared to the male species. Simple stats show that women:

  • Earn around 15% less on average per hour.
  • Hold less full-time positions (66% compared to 87%)
  • Hold only 34% of the managerial positions

In a global context, Israel is doing quite well. “The country is ranked in 11th place among the 59 developed countries for the participation of women in the workplace. The rankings also list Israel in 24th place with regards to women in executive positions…” And at the top end of the scale, Forbes billionaire grouping, Israel has 13 members, including Ms Shari Arison.

There are three bright spots that I have picked up in the stats.

First, if only a third of managerial positions are filled by women today, back in 1990 that percentage was a mere 16%. That is a noteworthy improvement. And it should be pointed out that Israel’s three major political parties in opposition are led by women, as is the former outgoing chief justice of the Supreme Court.

Second, 56% of all university students are women, again another factor that is likely to lead changes in the future.

Third, figures released this week show that more men from the ultra-orthodox Haredi communities are now to be found in the workplace – a 7% jump to 45% between 2009 and 2011. The point is that in this section of society, it is common for the wife to get the children off to school in the morning and then work part of the day, while the husband studies religious texts on behalf of the family.

Therefore, not only will this employment shift release some pressure on the female section of society. It will also expose more stridently religious men to the machinations of life as a whole. They will no longer be so cut off and they will no longer be so dependent on government subsidies.

So, as ever, “booting the man out to work” is to be seen as a significant social and financial benefit for Israel as a whole.