Israeli VC Blogs

Israel Must Keep Stanley Fisher on As Governor of the Bank of Israel

Michael Eisenberg — Mon, 23 Nov 2009 15:39:00 -0800

Governor of the Bank of Israel Stanley Fisher announced today that he would be raising interest rates by 0.25%. He is full of surprises. Just one week after Fisher announced that there was no real estate bubble in Israel despite the rising prices of real estate here, Fisher surprises the market with an anti-inflationary move. In fact, just yesterday, the Mintz firm in Israel suggested that interest rates would not rise much in 2010 (Link in Hebrew) and one day later, Fisher surprised with a 0.25% upward adjustment.

As I have written before, Fisher keeps 'em guessing in a brilliant fashion. He jumps in and buys dollars, easing the Shekel into higher value so that the exporters can get used to it. He raises interest rates when few are expecting it, attempting to keep inflation in check while still letting the economy expand with easier credit. Some would argue that the job of the central banker is to provide predictability and stability. However, I disagree. In these crazy times, caginess and targeted action is critical to keeping speculators on the sideline and keeping the economy in check. A reporter told me this evening that just after the Bank of Israel raised rates, the press team at the Bank of Israel was on the phone telling every reporter who would listen that this was a one time event. Brilliant! Fisher is using every tool at his disposal from interest rates, to buying foreign currency to effective PR. I bet Paul Krugman would love to have Stanley Fisher in place of Obama's economic team right now.

Which brings me to the next point: Fisher's term is up in May. He is using all of his weight to turn the Bank of Israel into the super regulator of the Israeli financial system. The Finance Ministry is pushing back. Fisher seems to have conditioned his return for a second term on this structural reform. Prime Minister Netanyahu and Finance Minister Steinitz would be wise to put the Treasury Bureaucrats in check and ensure that Fisher returns for a second term to help keep the Israeli economy out of the Global Great Recession. We need Governor Fisher back at the helm for another 5 years.

Israel's Design Problem

Michael Eisenberg — Sun, 22 Nov 2009 03:08:00 -0800

The world of software, internet and services has changed rapidly over the last two years. We all know the buzzwords: Social, Cloud, Saas and Crowdsourcing to name a few. What I think has been lost in this tectonic shift is a fundamental change in how and why software and services are built and its potentially dire consequences for many legacy software companies and particularly for Israeli start ups and companies. Here is why:

Software has moved from being a technology challenge to a design challenge. Today, all software is like a consumer product. Even consumers sitting inside enterprises expect their "software" to be user friendly like their web services at home. Salesforce.com should be friendly, usable and simple like Youtube and Facebook. In fact, reducing features and functionality is more important than adding them in the world of cloud. Social design and flow is critical for enterprise apps as well. How you onramp your customers on your website needs to flow like uploading a video to Youtube or posting a blog.

In today's web world, first the product should be designed by a designer (or founder) who does some mockups of his/her vision (not an architect or a coding genius). Then you do some UI A/B testing; then you code it as rapidly as possible using the fastest and cheapest tools out there (read: Ruby and Rails and cloud hosting) and then you test the UI again. Only then do you work through the tech innovation. You see today's products are meant to serve a need, not wow a programmer or prove his complex genius. The user's aha! moment comes from how fast I solved MY specific need.

This is a radical change. Facebook has many designers (read: artistic folks with a flair and sense of design) on staff. Google thought long and hard about how they kept that home page simple. Designers are as critical today as ninja programmers were. If you are an entrepreneur without a design sense or vision in today's web and mobile world, you have a problem. Users give you 5 seconds after they have typed in your URL or downloaded your app from the appstore to decide if they want to stick with you. If the onramp to your SAAS or consumer web service is not dead simple and the value proposition not completely obvious, they will leave you immediately. This is a major change. You must, in Harvard economist Umair Haque's words, have "awesomeness."

Now, why are Israeli companies particularly challenged? Israeli companies have never been good at UI. See the dearth of consumer products coming out of Israel. How many Israeli software and web companies have you met that have designers on staff or on the payroll? You need a world class designer, not someone who has a few years on Photoshop. Another interesting indicator of this is the dearth of Rails programmers in Israel. You can't find them anywhere. Israel is still one giant .NET shop and we all know what Microsoft's design sense is like. It is why in this design-conscious, user friendly web world there are few if any Israeli mega hits in either consumer internet or SAAS. I am running into this issue in company after company that I am looking at.

Umair Haque (@umairh) says this well in the Awesomeness Manifesto and in Discussing how amazed he was with Prezi

"Insanely great stuff. What is innovative often fails to delight, inspire, and enlighten — because, as we've discussed, innovation is less concerned with raw creativity. Awesomeness puts creativity front and center. Awesome stuff evokes an emotive reaction because it's fundamentally new, unexpected, and 1000x better. Just ask Steve Jobs. The iPhone and iPod were pooh-poohed by analysts, who questioned how innovative they really were — but the Steve has turned multiple industries upside down through the power of awesomeness"

Think about awesomeness and the need for great, simple and amazing design. It is real!

The Best Way to Get Your Favorite Airline's Attention

Michael Eisenberg — Sun, 22 Nov 2009 02:59:00 -0800

On Thursday, I was returning home from New York and my El Al flight was delayed out of JFK because the crew was stuck in traffic. In my frustration, I tweeted this out:

Well, I got El Al's attention. How do I know. I just got this email.

Gotta Love Twitter!

Founder CEO, CEO Founder

Daniel Cohen — Sun, 15 Nov 2009 19:47:19 -0800

Last week I had an interesting call with one of the founder/CEOs in my portfolio. This is someone I highly trust, and I truly believe he has the potential to take his company all the way, from zero phase to a successful IPO.

During our conversation, we talked about the stage of the company: A working product, growing distribution, a good team, and some initial revenues. We both agreed that it’s time to take the company to the next stage. Leverage the existing foundation of the venture and build a real company: Roles & responsibilities, clear processes, scalable models. It’s time to graduate from elementary school to Junior High.

As the company grows, it’s also time for the CEO to change its title. No longer “founder & CEO”, but rather “CEO & Founder”. Think about it – at the early days of the business, the founder roles are the most critical: Being agile, identify quick opportunities, recruit fast, make unusual bets. At the second stage, it’s about professional management: all the structures I talked about before.

Not all founders can grow to become great CEOs. But I actually do think that many of the founders can make that leap. Maybe the first thing they need to do is to change their business card and embrace their CEO title.

Smartest Man in Investing from Byron Wien

Michael Eisenberg — Wed, 11 Nov 2009 01:57:00 -0800

I tried to find a link for this article so I could credit it and excerpt but I could not. Byron Wien seems to be an advisor at Blackstone today. The piece below It came from an investment professional I have a lot of respect for and I cut and pasted in entirety. Good read and conforms with much of what I think about the Market and economy.

Blackstone is pleased to offer the following Market Commentary by Byron Wien which shares his thinking on global economic developments, market insights and other factors that may influence investment opportunities and strategies. Learn more about Byron

The Smartest Man Sees Many Opportunities
November 2009

Several times a year, generally on more than one continent, I try to get together with the person I have come to think of as The Smartest Man in Europe. He earned that title in my mind over a period of more than twenty years by consistently identifying major shifts in geopolitical power, new investment themes and changes in the financial services industry. He correctly anticipated the dismantling of the Berlin Wall, the economic fall of Japan, the rise of Eastern Europe, the end of communism in Russia and the growing economic importance of China and India. More recently he saw the dark clouds forming over the world financial markets. My 2007 essay about our early summer meeting had the title “The Smartest Man is Wearing Rain Gear” and in 2008 the essay was called “Overcoat Time for the Smartest Man.”

I have always been curious about how people with a special anticipatory intelligence got to be that way. In Outliers, Malcolm Gladwell suggests it is a combination of when you were born, your support network and 10,000 hours of hard work. In the case of The Smartest Man, I think his ancestry has something to do with it. He is the descendant of a mercantile family whose roots go back to the operation of canteens selling food, weather protection and travel gear along the Silk Road hundreds of years ago. After his education, he arranged through Middle East contacts to be trained in New York at some of the leading investment banking firms. He returned to Europe to make his fortune as an investor and investment advisor as the continent recovered from the devastation of the Second World War. Although he is not a Rothschild, he is comfortable allocating his assets in real estate, art and financial instruments, as they did. Here are his thoughts, based on some conversations we had at the end of June, but confirmed with him prior to the publication of this essay.

The environment has changed dramatically since the summer of 2008. The demise of Lehman Brothers and Bear Stearns, the merger of Merrill Lynch into Bank of America, the enormous investment by the U.S. government in American International Group and other financial institutions, and the automobile industry debacle and subsequent government involvement there have brought us to a new place in economic history. America is no longer free market capitalism at work and you cannot expect the economic vitality of the old days to return any time soon, if ever. We are in a serious period of reflation and assets will have to be allocated accordingly. Over the last two years I have been worried that the world was becoming too dependent on the continuous accumulation of debt at every level (from the consumer through the federal government), and that had to come to a bad end. That meant the stock market had to decline substantially and real estate prices had to fall from their debt-inflated levels. Consumer spending would drop sharply as a result and unemployment would rise everywhere. European countries and the United States would slide into recession.

In spite of all that has been done the policy moves have probably been insufficient. Both the government (through stimulus) and the Fed (through monetary expansion) have to do more. Some of those so called “green shoots” are turning brown. I wonder if the U.S. lawmakers realize that down the road, taxes are going to have to be raised and entitlements are going to have to be cut. That is the only way to bring the budget deficit back in line. It’s part of the dose of reality that America will have to taste. It will be politically unpopular but there will be no other choice. It will be a true test of leadership. I am also worried that the U.S. doesn’t realize that its dominant position in technology innovation is eroding and the government must do something to get it back on track since this area is part of the lifeblood of America. The only way to keep enough money flowing into the economic system so that the U.S. economy avoids slipping back into recession is for the Federal Reserve to become an agent of the government and thus lose its independence. Bernanke may resist this and if he does, Obama will have to replace him.

With so many people out of work, there is no wage pressure, so inflation stays low even though commodity prices may be rising. Oil continues to move higher because consumption in the Middle East, China and India keeps climbing and the Organization of Petroleum Exporting Countries cannot keep up with the rising demand. Their most productive wells are depleting about as fast as the world finds new sources of supply. China and India continue to grow at 5% or more even though the United States and Europe are in recessions and are importing fewer goods from Asia. China and India have 2.5 billion people, an expanding middle class, and the continuous need for improved infrastructure. As a result there will be further upward pressure on industrial commodity prices. I don’t have an opinion on agricultural commodities.

In time, after the recovery in the West picks up, there will be some wage pressure as well. The fact that so much money will be available will cause some increase in inflation, but I don’t expect to see anything like what we had in the 1970s when inflation surged past 10%. I think we will have 4% inflation and 2% real growth. That’s a nominal expansion of 6% and in that context earnings can improve and stock prices can do well. If I am wrong and inflation moves up beyond 6% to 7%, I believe that the U.S. government will institute wage and price controls. I know that seems unlikely now, but it will be part of facing up to the fact that we are in a new era. I know you are worried about the growth prospects for the United States once the stimulus is spent, but your country cannot afford to go back into recession, so if the economy weakens, I think we’ll have a second wave of stimulus. Basically I see the pattern of a “W” in the U.S. Stock prices will rise later this year, fall back sometime in 2010 and then rise again when the second stimulus-induced recovery phase becomes clear. I don’t see 10-year Treasury yields rising much above 4%. Rates higher than that would create too much of a problem for the housing industry. The Federal Reserve would step in with quantitative easing if rates got beyond 4%.

Life in America will continue to be good, but the standard of living may decline somewhat. That might not be a bad thing. I read where 35% of your people are overweight. Perhaps a period of hard times will force them to slim down. People may have to work harder and adjust their aspirations but America will still be a major economic power for a long time to come. It can no longer afford to be the police force for the world, to provide extensive foreign aid to countries everywhere and to spend so much on maintaining its military strength. The U.S. is hardly in a position to go around the world preaching about human rights. After what you did to Native Americans when you expanded your territory westward, your treatment of the slave population, the Japanese internment camps during World War II and finally Abu Ghraib, it’s tough for you to lecture others. America believed it could dictate foreign policy for the rest of the world because of its economic and military strength. That is no longer true. That’s also part of entering the new era. Asia is much more important now and China, India, Russia and ultimately Brazil are going to want to exercise their influence. The sun is setting in the west and rising elsewhere.

The countries with the fastest growth are where the opportunities are, so that’s where I’m investing in equities. You can make money in the United States and Europe, but you can probably do better in the BRICs even though their markets have recovered. We haven’t yet seen a decoupling between the major industrialized stock markets and the emerging markets. The volatility in New York has been exported everywhere making investors apprehensive. If, on the next down wave, China and India decline less and rise sooner, the decoupling will be confirmed. I think the price of oil will continue to rise but it may not go much beyond $70. At that level the Middle East countries will have enough money for their internal needs and yet the price won’t be so high that it will inspire a major alternative energy effort. I am very bullish on gold. In the reflationary world I see developing, the price of gold has to rise. Major industrialized countries will suffer weakening currencies and that will drive the trade surplus countries to buy more gold. I know you have a target of $1,200. I can see that being realized sometime this year or next but ultimately the price will get to $1,800 or even higher. The dollar may not weaken too much because Europe and Japan are in bad shape also and who wants to own their currencies? If you want to have some paper money, buy Swiss francs. I cannot understand the rise in the Japanese stock market because it is my understanding that nothing good is really happening in the domestic economy there. It may be a reflection that the recovery in China is real and Japan is a beneficiary. I think the meeting of the BRIC countries in Siberia was a significant event. They talked about using a basket of currencies in which the dollar was still dominant but gold was a component. The rising standard of living in the BRIC countries will also increase demand for gold. It is underrepresented in all global institutional portfolios and it can also serve as an inflation hedge.

Taking a look at some of the larger issues, your President Obama is certainly an improvement on the second Bush, but he is not the hero abroad that he appears to be in the U.S. His most important recent speech was in Cairo. There he reached out convincingly to the Muslim population everywhere and the response was positive. No Western head of state has ever been able to do that. Considering the number of Muslims in the world today and their growing influence, he has started to build a critical bridge. Fear is a factor on both sides of the Atlantic. Europe will have a slower growth rate going forward than the U.S., but no inflation. The European Central Bank will have to lower rates to stimulate economies there. In Europe they are worried about excess stimulus creating Weimar-like inflation. This is driving Germany toward Russia because they believe Russia’s growth can fuel German prosperity. In the U.S., there is a sense that your children won’t have the same opportunities you had and that’s discouraging spending.

I think this is a fantastic time to be a macro investor. You don’t even have to be a stock picker any more. You can have a concept of what is going to work and there is an Exchange Traded Fund out there for you to implement your idea. There are 1,400 of them, every conceivable permutation of an investment idea. Once again asset allocation is the key. It’s much more important than individual stock selection. My biggest worry is that Western leaders are too defensive psychologically. They are not sure what to do and whether what they’re doing will work. That’s part of the reason they haven’t done enough. The Chinese and Indians know they have to invest in infrastructure. Eventually the Chinese consumer will start to spend more and save less. That’s when that economy will really take off.

There is a bright future out there for hedge funds, but it will take time to develop. All kinds will flourish: long/short, macro, natural resources and credit. Long-only funds will have a tougher time. Creative investors will also make money in Egypt, Morocco and South Africa, although it’s hard to put big money there. Since March the investment environment has been evolving as I believe it should. The BRIC markets are doing well, the dollar is weak, U.S. equities are strong and gold is making new highs. So I’ve taken off my raincoat and I’ve stored my overcoat and I’ve rolled up my sleeves, because I am starting to make some serious money again.

Making Sense of the AdMob Acquisition

Michael Eisenberg — Tue, 10 Nov 2009 07:09:00 -0800

With Congratulations to the AdMob team, Sequoia and Accel, since yesterday, I have been trying to make sense of the price tag on Google's acquisition of AdMob. $750MM is an eye-popping number for a company at that stage that is probably still losing money.

This morning the nickel dropped.

Google is repeating the same strategy in mobile that gave it dominance in the search ad business. It is buying distribution relationships with mobile publishers at a loss in same way it bought search and Adsense distribution on the web. Big payouts to AOL, MySpace, ASK and others brought liquidity to their ad marketplace and a large volume of searches that led to dominance in the search and text ad business. On the web, Google bought the network of publishers with ad sharing revenue. They bought the big ones by using their balance sheet to conclude whopping business development deals and they bought the small ones through automated web sign up and simplicity

When it came to Mobile, Google may have faced a dilemma. There are not one or two whopping business development deals that can move the needle and automated sign up is still challenging. Therefore, they concluded that the best way to jump start a network of mobile publishers is to buy it which is what they did with Admob. Time will tell if the same strategy that worked on the web will work on Mobile.

This points to a bigger trend: As the web fragments (which it is doing at an accelerated pace partially because of Google search), value is moving to those who own and maintain distribution. Distribution comes in three forms on the web and mobile: A high traffic home page like Yahoo, Facebook and Google; a deep vertical site like Edmunds or Zillow (Full Disclosure: Benchmark investment) or A NETWORK OF PUBLISHERS. The tail is increasingly valuable from a distribution perspective and there are not many companies that can boast a network of publishers for either content distribution or social purposes. Admob had such a nework in Mobile but the number of independent web networks is small. I have had a first hand look at the value of the Network of Publishers through our investments in Gigya and Conduit. Gigya has recently announced that it crossed 2500 publishers on its Gigya Socialize network. Another portfolio company, Conduit, has over 200,000 publishers on its very large Network of Publishers. Conduit's publishers such as MLB, Greenpeace and, my personal favorite, www.buysellcows.com have over 60,000,000 combined users that can also help each other through the Conduit Marketplace. When the network works, it is very powerful for all involved.

What is interesting is that Facebook gets this which is why it is pursuing Facebook Connect. Google gets this which is why it bought AdMob, developed adsense etc., Twitter has this through its open strategy. However, Microsoft and Yahoo do not seem to playing in this game for some reason.

Jason Calcannis had an interesting blog post on how Bing can take 10 points of market share from Google in 6 months.

Essentially, I put forth a simple strategy for Microsoft to pursue with Bing in which they would go to content providers like the New York Times or Wall Street Journal and offer them 50% more revenue then they are currently getting from Google search referrals to be exclusively indexed in Bing.

Here is another approach: Microsoft can buy a network of publishers or a number of them. They need this reach out onto the long tail of the web to get their brand in front of others and to get liquidity.

Self Interview

Daniel Cohen — Mon, 09 Nov 2009 04:13:57 -0800

Since no one is really interested in interviewing me, I decided to do a self interview. This is my version of “self portrait”, especially since I can’t draw (or sing. or dance. Shows something about the qualities of VCs)

Why haven’t you blogged for since mid September?

Can’t really say. For some reason, I couldn’t bring myself to write. It’s not that I didn’t have anything to say. I actually had a lot to say, but my typing hands were heavy.

Do you think you are now officially back to blogging?

I can’t promise anything. But I will try. I will also be blogging at the Gemini blog.

Can you highlight the top 3 events that happened in your life in the past 60 days, just to fill the gap.

Sure. Business: We made another investment (eKoloko, an official post to come tomorrow). Music: I saw Pearl Jam live again, and I also saw Shalom Hanoch live. Sports: Patriots are back at it, Hapoel Haifa are not. Overall, seems like everything is “normal”.

Do you feel the Venture Industry in Israel is active again?

Absolutely. Deals are happening, especially since a lot of funds have dry powder to invest. However, Israel is part of the global venture industry, which is going through some turmoil. Nothing dramatic will happen in Israel in 2009/10, but we may see some changes in the local investment scene in 2-3 years.

What makes you optimistic?

AdMob. Mint. Gomez. Good companies are being acquired, and it feels that if we invest and support good companies, we will be rewarded.

Finally! I Agree With Tom Friedman! Stop Trying to Microwave the Peace Process

Michael Eisenberg — Sun, 08 Nov 2009 01:58:00 -0800

Tom Friedman has a great op/ed in the NY Times. He nails it and here is the crux:

"Administration has ever dared to do: Take down our “Peace-Processing-Is-Us” sign and just go home.
Right now we want it more than the parties. They all have other priorities today. And by constantly injecting ourselves we’ve become their Novocain. We relieve all the political pain from the Arab and Israeli decision-makers by creating the impression in the minds of their publics that something serious is happening. “Look, the U.S. secretary of state is here. Look, she’s standing by my side. Look, I’m doing something important! Take our picture. Put it on the news. We’re on the verge of something really big and I am indispensable to it.” This enables the respective leaders to continue with their real priorities — which are all about holding power or pursuing ideological obsessions — while pretending to advance peace, without paying any political price.
Let’s just get out of the picture. Let all these leaders stand in front of their own people and tell them the truth: “My fellow citizens: Nothing is happening; nothing is going to happen. It’s just you and me and the problem we own.”
Indeed, it’s time for us to dust off James Baker’s line: “When you’re serious, give us a call: 202-456-1414. Ask for Barack. Otherwise, stay out of our lives. We have our own country to fix.”

Yup. That is right. The more lights that are focused on this problem, the less likely it is to succeed. The more pressure we put on the sides, the more they pander to the extremes so as not to be seen as caving. This is the dynamic of the Middle East. This has been the problem for a while but bored diplomats, avoiding their own internal problems, have found it convenient to focus on the headline grabbing Israeli/Palestinian conflict, possibly as a short cut to the Nobel Peace Prize! As I have written before, there seems to be endless pressure to Microwave Peace. However,

"Peace works when everyone comes in the right frame of mind to end conflict entirely. It is a process that is based on building trust between leaders and trust between peoples. That trust is built by fulfilling past agreements to the letter and not moving on when the situation changes and agreements are inconvenient. When leaders take their commitments seriously, so do do everyday citizens and that builds trust. It is true in business, it is true in friendship and it is true in diplomacy.

You cannot microwave peace. It does not happen overnight or because two leaders decide to make peace. Peace comes when a people, a nation, wants to focus on building its own society instead of destroying another's. It comes when citizens have jobs and a decent living and are striving for a better education and a better society. Peace requires a bold change of mind and heart at all levels of society in order for it to be stable. Nuclear saber rattling, rocketeering, and educational incitement are not conducive to bilateral peace nor regional stability. No Annapolis microwave will change that. But, over time, we can and we will."

President Obama and the Quartet should stop looking for quick microwaved solutions and should instead let history take its course in the MIddle East. For those familiar with the Bible in the Book of Judges and the Book of Kings you will note that the prophets note a few times that the "land was quiet (free of wars) for 40 years." That was the aberration and not the rule. Let us patiently wait for coming of of the peaceful vineyard and fig tree where the swords will turn to ploughshares.

רוח חדשה בארגון המורים היא חיונות לחינוך ילדינו

Michael Eisenberg — Thu, 05 Nov 2009 05:34:00 -0800

כל הכבוד לדודי, שמולי וינקי מרוח חדשה בארגון המורים. המאבק שלהם הוא המאבק שלנו לעתיד חינוכי טוב יותר. רן ארז לא יעצור אותם: לא באיומים ולא בבריונות כי המהפכה החברתית חינוכית התחילה באותו לילה בסמינר הקיבוצים.

תצפו בסרט ותתמכו. זה חשוב לכולנו.

As Chairman of a School Board, This Video is Priceless and Hilarious

Michael Eisenberg — Thu, 05 Nov 2009 03:06:00 -0800

Wow! The New Yorker and Cass R. Sunstein of the White House Picked Up on My Meme from 2005!

Michael Eisenberg — Mon, 02 Nov 2009 07:40:00 -0800

The internet/twitter is abuzz this week about an article in the New Yorker suggesting that the internet and RSS breeds narrow-mindedness.

A legal scholar Cass R. Sunstein, according to the New Yorker (full article here), now head of the White House Office of Information and Regulatory Affairs and prolific author has proffered the following:

But, in Sunstein’s view, the Web has a feature that is even more salient: at the same time that it makes more news available, it also makes more news avoidable.
“The most striking power provided by emerging technologies,” he has written, is the “growing power of consumers to ‘filter’ what they see.” Many of the most popular Web sites are still those belonging to the major news channels and papers—CNN, the BBC, the New York Times. Increasingly, though, people are getting information from these sites in a customized form, by subscribing to e-mails and RSS feeds on their favorite topics and skipping subjects they find less congenial. Meanwhile, some of the fastest-growing sites are those which explicitly cater to their users’ ideologies. Left-leaning readers know, for example, that if they go to the Huffington Post or to AlterNet they will find stories that support their view of the world. Right-leaning readers know to go to the Drudge Report or to Newsmax to find stories that fit their preconceptions.
And what holds true for the news sites is even more so for the blogosphere, where it’s possible to spend hours surfing without ever entering new waters. Conservative blogs like Power Line almost always direct visitors to other conservative blogs, like No Left Turns, while liberal blogs like Daily Kos guide them to others that are also liberal, like Firedoglake. A study of the twenty most-visited blogs in each camp in the months leading up to the 2004 Presidential election found that more than eighty-five per cent of their links were to other blogs with similar politics. When the study’s authors charted the links in graphic form, they came up with a picture of non-interaction—a dense scribble on one side, a dense scribble on the other, and only the thinnest strands connecting the two. In 2006, Sunstein performed his own study of fifty political sites. He found that more than four-fifths linked to like-minded sites but only a third linked to sites with an opposing viewpoint. Moreover, many of the links to the opposing side’s sites were offered only to illustrate how “dangerous, dumb, or contemptible the views of the adversary really are.”
“I do not mean to deny the obvious fact that any system that allows for freedom of choice will create some balkanization of opinion,” Sunstein writes, in “Republic.com 2.0.” “Long before the advent of the Internet, and in an era of a handful of television stations, people made self-conscious choices among newspapers and radio stations.” But, he argues, Web culture takes choice to a new level.

Here is an excerpt of my post from 2005 entitled "Will RSS Undermine Tolerance?"

When I attended college, I purposely took a liberal arts route. Although, I knew I would end up in some form of business, I did not want to major in economics or go to the undergraduate business school. My rationale was that college was a place to expand my horizons, see and hear other points of view and learn about different and interesting topics.

As people leave university, settle into jobs, communities and opinions, we interact with other viewpoints in the workplace and by reading newspapers. While I do not believe that newspapers are objective despite their claims (every news editor and writer has his own biases which seep in), newspapers still include a reasonably wide variety of materials and some variety of opinions.

Today, more people are getting their news and opinions online. Initially, this came from online newspapers that were reaosnably similar to the written newspapers and varied in thier content. Now people are interacting more with blogs. Going and finding blogs that are interesting still forced one into contact with information and opinions that are not their own nor in thier comfort zone. This, one would hope, still expands horizons and stretches the mind.

However, RSS takes this one step further, a step that I fear may lead to self-reinforcing narrow-mindedness. I subscribe to RSS feeds, lots of them. They are very helpful for busy people. But as busy people (in an increasingly utilitarian world), we only subscribe to a feed/blog that really interests us or matches our current interests and opinions. These myopic intellectual interactions may lead people to become further entrenched in thier beliefs, having found sufficient like-minded content to keep them busy and close them off from other opinions. I am worried that personalized subscription will lead to even less tolerance than we have today.

Too bad I do not write books like Sunstein, but maybe I can get a job in the Israeli Prime Minister's office of Information and Regulatory Affairs. Oh, I forgot, we don't have one.

Job Opportunity: Seeking Alpha is Looking For An Editorial Administrator in Israel

Michael Eisenberg — Wed, 28 Oct 2009 04:54:00 -0700

Seeking Alpha, a leading stock market website based in Israel and New York, would like to hire an Editorial Administrator for our Hertzelia office. The position is fulltime and reports to the Editor in Chief.

Requirements:

- Proven experience or strong aptitude for a demanding administrative role
- Extremely detail oriented
- Ability to handle multiple ongoing tasks in an efficient manner
- Native English speaker
- Strong computer skills: internet, word processing and some database experience preferred
- Outstanding communication skills - written and verbal; ability to serve as an effective liason between various teams
- Self-starter who doesn't require or desire constant supervision
- University degree from English-speaking nation preferred

If you're interested in the position, please send an email to contentjobs@seekingalpha.com <mailto:xxxx@seekingalpha.com> with the following:

- A brief description of your prior experience in administrative roles. If you have none, please state the reason you'd be interested in such a role.
- Why you are specifically interested in working with Seeking Alpha (no more than 2 paragraphs)?
- Your resume in English.
- References from prior relevant positions, including phone numbers.

Please note that we'll only be able to respond to relevant applicants.

What Obama Can Learn from the NFL and NBA about Salary Caps and Driving Innovation

Michael Eisenberg — Tue, 20 Oct 2009 12:09:00 -0700

For almost a year now, Washington has been abuzz about compensation caps for Wall Street executives. I can give a long litany of reasons why I think that is a bad idea that creates disincentives for recruiting great people to run these companies at their greatest time of need. As I have written in the past, America (and my home country of Israel for that matter) needs to invest in innovation. Interestingly, salary caps may be a way to spur brainpower into innovation. However, it is an inversion of the populist approach to salary caps currently in vogue.

President Obama's administration could learn a lot about salary caps from the NBA and NFL and in the process can help America turn on the innovation engine that America really needs to climb out of this deep recession. You see, the place to enforce Wall Street salary caps is not on executives but on fresh college grads and MBAs like the NFL does on rookies. This helps spread the talent wealth in the NFL and NBA in a way that it is not currently allocated in American industry.

The fat paychecks that Wall Street was and is able to pay the best and the brightest college grads from MBAs, to mathematics majors and engineers has pushed that brainpower from technological, business and medical innovation to financial engineering. Analyst salaries at Goldman Sachs and Morgan Stanley are able to attract the best and the brightest away from pursuing engineering or energy jobs where the brainpower could develop alternative energy sources, more sustainable agriculture and faster telecommunications and not just the next complex derivative. Imagine if all of Americas best brains and management talent were focused on innovation and not financial engineering or lawyering.

The best way to do this is an investment of resources and disincentives to shift brainpower into productivity and ingenuity. The stick is an NBA-style salary cap for rookies so they do not get into the financial system coupled with an investment in PhD and post doc research grants. If ingenuity jobs will pay better than financial engineering it is obvious that most bright grads would prefer innovation over all-nighters preparing boring pitch books and number crunching for bankers.

It is not Jerry Maguire-esque but it is a good way to stack the incentive system to focus on innovation.

Surfing on a Wave of Marketing Problems

Shai Tsur — Tue, 13 Oct 2009 09:45:16 -0700

Over the last couple of weeks, nearly everyone in my social network who has any connection to the tech world has begged (sometimes desperately) for an invite to Google Wave. This is reminiscent to the kind of excitement that GOOG managed to generate a few years back when it first started handing out invites to Gmail, but greatly balloon-ified.

Going by the hype being generated, it seems clear that Wave is destined to become the next big online thing.

Or is it?

I’m not entirely certain. (Full disclosure at this point: I am one of the sad proles still waiting to try out Wave. The opinions contained herein are based not on what Wave is, but what it appears to be, which is just as crucial).

Google has launched and killed more than its fair share of applications and services over the years without too many issues. But I think what we’re seeing here, at least in the short run, is the company’s first high-profile product marketing flop.

There are a couple of reasons IMHO:

1. Overselling the undefined - For all the techheads desperate to play with the shiny new toy out of Mountain View, I’m not sure how many would be able to describe what Wave actually is in two sentences or less. Google has done a pretty bad job explaining it so far.

Take the lengthy accompanying video (see above). It paints the new technology as an amalgamation of all the online communications tools available today, but redesigned to fit the needs of the 21st century. From this has arisen much talk that Wave is the ultimate email/blogging/chatting/Twitter/whatever killer.

The reality of the matter is a bit more prosaic. The main use case appears to be online collaboration. But collaboration tools are not mainstream consumer applications. So does this mean that Wave is more for businesses? And if not, then what can regular people do with it better than what they can do with email/chat/Twitter/whatever?

I would imagine that all these issues will become a lot clearer once Wave starts growing its user base. But in the meantime there will be a lot of disappointed people thinking they are going to get some nebulous-but-nonetheless-super-nifty Thing A and instead get Thing B which doesn’t suit their needs.

2. Rollout tripping on early buzz – At the moment, not a lot of people have gotten their paws on Wave. This is unsurprising, seeing how Google is rolling it out slooooowly in order to ensure proper scalability and stability.

However, many among the lucky few who have used Wave are less than thrilled with it. Most notably Robert Scoble, who wrote a sharply worded entry on his first impressions. Scoble paints Wave as being both cluttered and a productivity timesink.

Scoble is joined by numerous other early adaptors in talking down the new product. And this combination of slow rollout + negative early publicity gives potential Wave users plenty of time to read the rotten reviews without trying out the application for themselves. Not the optimal combination from a marketing perspective.

3. Privacy issues – Even assuming that Wave manages to overcome the above problems, it is still likely to run into a number of other thorny issues, primarily in the realm of privacy. On the one hand, the collaborative nature of the application allows anyone to see what you are writing in real time, which I suspect will turn a lot of people off.

Then there are the continued questions of just how much of our personal and business information Google has access to. Wave will only make the debate thornier.

None of this leads me to conclude that Wave is heading into the land of epic fail. Google has enough money and enough time to fix all but the most horrifying mistakes. However, for a company that has managed to become the Web’s reigning monster without too much vocal opposition, this is an uncharacteristically high-profile boo boo.

An Open Letter to Prime Minister Netanyahu About Forcing Hard Decisions

Michael Eisenberg — Thu, 01 Oct 2009 03:51:00 -0700

Dear Mr. Prime Minister,

Shana Tova. First, I would like to commend you on your superb speech at the United Nations. In general, you have done a good job running our country in your first 6+ months from the 2 year budget to the stable coalition. You have jumped on the swine flu threat with alacrity and put Iran on firm notice. You have steadfastly stood up to President Obama's demands on settlements and correctly pointed out that we should make our own decisions and not be forced by a US President. Congratulations.

Therefore, I was struck by your recent decision to ask for a 2 billion NIS reduction in all the current government ministries to finance the swine flu vaccines and secret military needs. I do not object to the budget cut. I think that is called fiscal responsibility which is in short supply in the world today. What I object to is the broad cut. A 2% reduction in spending across all ministries is running away from tough decisions and tough politics.

On a smaller scale, but very similarly, board members at start ups force budget cuts in tough times. However, we do not turn to the CEO and say cut 10% in R&D, Sales and Marketing and GA. We look at where we can afford to cut and where we need to invest and make deeper cuts in some and no cuts in others. No everyone is happy but that is what needs to be done and that is what you need to do.

We cannot cut any more in education. We need to invest more there. Gideon Saar is right. We cannot cut more in infrastructure spending, job retraining or R&D spending because we will not be competitive globally. We need to invest in creating jobs because unemployment erodes societal solidarity and I do not see your ministries working hard to create these jobs yet. We cannot cut police spending because the crime here is intolerbale. So we, no you, need to make hard decisions that will be unpopular with some of your colaition partners.

We do not have money for subsidies for people who choose not to work, nor for the child allowances you reinstated. I wish we did. But we do not. People need to have families that they can afford to pay for. That is very Jewish. I am a big fan of an increased Jewish birthrate and believe everyone should have more children but the government does not have money to pay for that. We do not have money for more bypass roads in Yehuda and Shomron. The Smol Haleumi is right on this point. It hurts, but we do not have the money. Communities need to start paying for religious services like communities in the diaspora do. Sorry Minister Margi. The government does not have money for it. By the way, what does not Science Ministry that Minister Hershkowitz runs do anyway?

We need hard decisions. We need deep cuts in some ministries and services and no cuts in others. We need your proposed investment in railroads. We need a deep investment in broadband infrastructure and we needa huge investment in education and defense. We need to prioritize. We need to ask the question of one more F15 vs. 1000 more teachers. We need to ask the question of one more road in Yehuda and Shomron vs. smaller classrooms and a national railroad system. We need to talk about this clearly and not waver or hide behind broad cuts. It is time for hard decisions. Recessions tend to force this focus. Let's use it.

Thanks for listening and Chag Sameach
Michael

Farewell from LGiLab

Mon, 21 Sep 2009 02:18:49 -0700

After more than 3 great years, the LightSpeed Gemini Internet Lab is ending its operations. The joint venture from LightSpeed Venture Partners and Gemini Israel funds has been a great opportunity to fund and support some of the most interesting...

Shana Tova תשע

Daniel Cohen — Wed, 16 Sep 2009 15:00:00 -0700

Here it is, another Rosh Hashanah arriving, and the previous one still seems so recent. I looked back at my wishes from last year, and some of them came true. Obama won and showed the world what Leadership 2.0 is all about. Hapoel Haifa won, made it to the Israeli premier league, and did that with a lot of passion, commitment and style.

This year I decided to be a bit more specific, something beyond just general health and world peace. So, here are my 3 wishes for the new Jewish year:

5 great deals: When I talk about deals, I mean it in the most broad sense. Some combination of exits, strategic accounts, partnerships or massive distribution. 5 amazing business deals that will make a direct or indirect influence on Gemini’s success.
3 amazing rock concerts: I already have tickets for Leonard Cohen, Shalom Hanoch (1AM at the Barby) and Pearl Jam (again). Although we are back in Israel, I hope to attend at least 3 world class rock concerts with real emotional impact.
1 historical championship: Between the Patriots and Hapoel Haifa, how about another historic championship. Odds are low, but hey – I am asking for just one.

Add 5+3+1 and it equals Nine(9), the Hebrew letters of the new Jewish Year: תש”ע.

Shana Tova!

Crazy MA Week

Daniel Cohen — Wed, 16 Sep 2009 06:42:05 -0700

There are rumors floating around that Google is in the process of acquiring Brightcove for $500M-$700M. In addition, Adobe already announced the acquisition of Omniture for $1.8bn. In the “mid-range” deal category, Intuit swallowed Mint.com for $170M.

Aren’t we supposed to be in a downturn? Isn't the venture model seriously broken? Give us 52 more weeks like that and we will be just fine.

But still, this is not good news. A few years back I saw Paul Deninger speak at an Always On conference. Paul is a very smart guy, and extremely knowledgeable about the Venture Business. He said that one of the worst trends in the VC world is the growing gap between supply and demand. In other words, too many sellers, not enough buyers.

I saw Paul earlier this week at the E&Y Journey conference. We talked about the need for patience, and how the long term view of early stage companies is highly correlated to patience (both for the entrepreneurs and the VCs). Back to this crazy week of M&A, and we have 3 examples of short term gains, and no long term view:

Omniture: Already public, could have acquired a few companies in the upcoming years.,
Brightcove: Supposed to be profitable and very strong. Great potential for a 2010 IPO.
Mint.com: Early traction, at least 2-3 years away from real early success.

So – here is a wish for the new year, a post called “Crazy IPO Week”.

A Journey to the land of the North

Daniel Cohen — Mon, 14 Sep 2009 06:22:47 -0700

For some reason, this post got a bit of a bombastic title, a choice of words that reminds me the Lord of the Rings. In reality, I spend all of today in the Northern part of Israel, visiting 3 exciting companies that are operating in the Galilee.

As I am a VC, you would expect to hear now about some great portfolio companies, or at least about exciting product companies. That wasn’t the purpose of this trip. Together with 2 good friends, I went to visit Babcom Centers, Galila Line technologies, and Galil Software, three leading companies in the new emerging sector – the IT services industry based in the Galilee.

The rationale for this new trend is quite straightforward. There are a lot of Arab-speaking Israelis in the Galilee that are educated (Degrees from the Technion, TAU, etc.), extremely talented, yet can’t find the right position in high-tech or tech-services. Instead of losing these talents, new emerging companies in the Galilee hire them, train them, and leverage them to provide top notch services for the rest of the industry.

Here is a quote from Babcom Centers:

“Babcom is located near large Arab population centers in the Galilee, housing thousands of educated and skillful men and women interested in developing a career near their homes. The high availability of these high-quality human resources enables us to offer operational flexibility, quick response to our customers’ changing needs, as well as the ability to rapidly recruit educated employees, particularly women, meticulously selected in our uncompromising evaluation centers.”

And another quote from Galil Software:

“Galil Software is a software service company located in Nazareth. By recruiting from the highly skilled workforce available in the Galilee, Galil Software is uniquely positioned to offer high quality services at competitive prices. In addition, Galil Software’s proximity to major Israeli high tech centers ensures that customers have direct and continuous access to our R&D teams, significantly reducing the risk, cost, and management attention required to support off-shore outsourcing activities.”

We started the trip at 8AM, and were back home at about 8PM. Not a short trip, but much easier than a round trip to Bangalore. With a cost structure of 20%-40% lower than R&D in the center of Israel, the proximity (Combined with quality) of these emerging companies make them a really interesting alternative for outsourcing to Eastern Europe or India. Beyond that, providing real jobs to the Arab Israelis is a huge “small” step in making Israel a better place.

My Portfolio companies are not working with Babcom or Galil yet. Some are too small, some haven’t really checked these options yet. I was so impressed today, that I will talk about these ideas with all of my companies.

Ouriel

Daniel Cohen — Sat, 12 Sep 2009 15:41:31 -0700

Here they are again, the winds of change… At the end of this month, the Lightspeed Gemini Internet Lab will officially end, and Ouriel will be leaving. Ouriel? If you don’t know what I am talking about, you have not been part of the Israeli and European Internet scene during the past 3 years.

In 2006, When we started the (LGiLab) we were looking for a great GM. Our thought – someone who has a great understanding of the industry, with good contacts and strong knowledge. We looked hard, and finally found Ouriel Ohayon, who was then the editor of Techcrunch France and doing Biz Dev at ICQ.

Back to 2009, I can easily say we made the right decision. Ouriel did a great job as he became the master of knowledge on everything that was consumer internet and mobile. He helped us find great opportunities, and analyze all of the many projects that came through the lab. He was personally responsible in finding us both Outbrain and Eyeview.

Now, after 3 years of working together, Ouriel is going back to his roots: Being an entrepreneur. He will be leaving the Lab in order to find the best possible project for him. It may be Appsfire, it may be Topify, and it may be a whole new project (that I haven’t seen yet). All I can say, he has A LOT of great ideas. Check out his blog to read more about his specific plans.

In regards to our lab, as I said, we are officially done. We will continue being best friends with Lightspeed, but the official partnership is over. Both funds will continue to invest in early stage (seed), and we will definitely do joint deals when relevant. As it relates to Gemini, we will continue having a lab-like program, but it will be run with internal resources. In other words, we are still very open to invest in early stage Internet companies.

In fact, with the help of Ouriel, we just closed an Internet seed deal (on our own). We are officially announcing this deal later today (Check later today on this blog). I am sure there will be many more like those in the next 24 months.

Ouriel – good luck on your new journey. I am sure you will build great things.

VC Trust

Daniel Cohen — Sat, 05 Sep 2009 06:37:12 -0700

Last week, TechAviv (We are proud sponsors) organized an “town hall” meeting between Entrepreneurs and VCs. the idea was to create an open dialog between the 2 groups, and hopefully discuss some of the more difficult issues that sit between the Venture Capital firms and the founders.

I will not cover all the topics that were discussed. Yaron created a beautiful presentation, and many of the issues are presented there (Check it out here). But I do want to touch upon one VERY IMPORTANT issue.

Trust.

The actual question that was presented: “What is the percentage of companies you meet just to learn about your portfolio competitors? Do you share the numbers you see in competitors’ info with your portfolio companies?”

I can write a very long post on how we never do this, and why doing this is wrong, and how VCs that do this should be fired immediately, etc. etc. Instead I will write a very simple sentence.

Never.

Never meet companies “just for learning” and never meet “to gather information”. Every information we share (with anyone) is done in full understanding and endorsement by the company. That’s it.

Still, if any company feels uncomfortable – they can easily use Confidela and send their material through the Watchdox system – and in that case no one can do anything with it. In the next few weeks we will fully integrate Confidela to Gemini's website, and sending secured documents to our firm will be very easy.

Good Thing Jeter and Mariano aren't Jewish

Michael Eisenberg — Wed, 02 Sep 2009 02:48:00 -0700

Major League Baseball and ESPN <http://www.nypost.com/topics/topic.php?t=ESPN> must be atone deaf.
The Yankees' Sept. 27 home game against the Boston Red Sox <http://www.nypost.com/topics/topic.php?t=Boston_Red%20Sox> has been rescheduled from 1 to 8 p.m. -- putting the first pitch well after the sundown start of Yom Kippur.
The move forces observant Jewish fans to miss the game or risk having a lot more to atone for next Yom Kippur.
"Baseball switched the time because ESPN selected the game," a spokeswoman for the Yankees told The Post. "We were upset by it, but we have no control."

(hat tip: Brother Noam and NYPOST)

Gemini Blog

Daniel Cohen — Tue, 01 Sep 2009 00:48:57 -0700

Today we launched the Gemini Blog. In the past few years, a few of us have been blogging (Adi, Ed, Tali, and myself), but all those blogs were independent. In our Gemini Blog effort, we are giving a platform for all the Gemini members to express their thoughts, ideas, and to have an open dialog between the fund and the tech community.

I am a big fan of VC blogging. I think that it’s a great way to show the personal side of the Venture Capitalist, and also to easily communicate our thoughts on the industry, our work, and our processes. Saying that, maintaining a personal blog requires a lot of effort. Fred Wilson, probably the most known VC blogger on the plant, posts at least twice a day. That’s amazing. I manage to post times a week (on a good week), and I sometimes go for more than a month with nothing to say.

The Gemini blog provides a great opportunity for our team members to share great content, and do that in a sporadic way. Some will write twice a week, and others will post something every 2-3 months. However, we guarantee fresh content every other day, and hopefully a site that will become a great resource for the Israeli high-tech scene.

Regarding my personal blog, Israel Venture Capital 2.0, it’s not going anywhere. I will continue to post here (a lot), and will also add some to the Gemini blog.

So, what’s the action item now? Add Gemini Blog to your RSS reader, and in any case check it out now.

Water Savings

Mon, 24 Aug 2009 16:35:52 -0700

This one came in from Brazil...

I guess you can call it clean - tech (?)

Technorati Tags: Water Technology,water conservation,Brazil

Derek Jeter and the Real Time Web

Michael Eisenberg — Tue, 18 Aug 2009 03:34:00 -0700

There I was sitting in my office in Herzliya Israel this morning. Somebody told me that Michael Arrington posted and interesting link on Facebook so I went to check my News Feed first thing when I arrived. As I logged in I saw that 2 minutes earlier my good friend and ePinions (shopping.com) founder Nirav Tolia updated that he was sitting next to Derek Jeter and other of my beloved Yankees in the lobby of the St. Regis in San Francisco. In realtime, from my desk in Israel I asked him to go over and get my kids an autograph. See below for full conversation. Incredible use of the real time web!

PS: Nirav Updates me that the fearless @sarahleary (who is a Red Sox fan) actually asked Jete for the autograph. Thanks Sarah!