Tel Aviv: The Start-Up Nation’s Hub

 

A refurbished 1904 building on Rothschild Boulevard, in the heart of Tel Aviv, is the site of eBay’s new global center for social shopping, a sign that the Israeli capital is making inroads in its bid to become a global tech hub.

It is also a symbol of the evolution of Israel’s high-tech sector. For years Israeli companies believed that the best route to success was to move their headquarters to the U.S. and leave research and development in Israel.

That is no longer necessarily the case. Israel is building  successful consumer Internet companies from Tel Aviv, as witnessed by the exit, in the last 12 months, of at least four Israeli start-ups. Among them was The Gifts Project. Founded in 2009 by 27-year-old Ron Gura and three partners, the Gifts Project is a social commerce platform that enables users to give and receive group gifts on social networks and ecommerce websites. It was purchased by eBay for $20 million last September. The Gifts Projects team, now crowded in a tiny office in a modest apartment building, will soon move into its tony new offices – located only a few blocks away – and start building up a team to work on new projects, such as eBay’s Go Together, a service that allows people who want to attend an event, such as concert or movie, in a group, to figure out the logistics and pool money for tickets.

Other recent notable exits include:

  • Wibiya, a company that enables web publishers to integrate multiple services, applications and widgets into their environment through customized web-based tool bars, which was sold to Conduit, for $45 million. 
  • PicScout, which monitors the use of images on the Web, was sold to Getty Images for an estimated $20 million.PicScout's technology identifies the digital fingerprint of images appearing online, even if they have been blurred or edited. The company has two products: ImageTracker, which locates the use of images online and reports it to the copyright owner; and ImageExchange, an add-on to Firefox and Explorer browsers, which can identify in real time copyrighted images and offer the users an option to buy them. 
  • Picapp, a spin-off which offered free premium-quality images, was sold to digital marketing company Ybrandt. 

 

All four companies, plus Lab Pixies, the first Israeli company to be sold to Google,  are graduates of the Zell Entrepreneurship Program, funded by U.S. business magnate Sam Zell, which has evolved into an acclaimed venture creation program.

Like Europe, Israel now has a swelling population of serial entrepreneurs. “It is a very supportive ecosystem,” says Liat Aaronson, the head of the Zell program. “Mentors are doing tons of work with young entrepreneurs.”

Entrepreneurship has always been part of the city's DNA," says DLD speaker Tel Aviv Mayor Ron Huldai. "It was founded by 66 families who build the city from sand so the city itself was the first start-up."

Hudai says he wants to “strengthen Tel Aviv as a global city for high-tech and innovative companies.” To that end, the city is trying to make itself as attractive as possible, not just installing free WiFi but also investing heavily in cultural projects. "Creative people don't just need infrastructure, they need atmosphere," says the mayor. "They want to live in Tel Aviv for the food, entertainment at night, the excellent beach."

Today, there are about 600 start-ups in Tel Aviv.  But many more have dreams of becoming an entrepreneur. Walk anywhere in Tel Aviv and you are likely to bump into someone who has a business plan in one pocket and the phone number of DLD Co-Chairman Yossi Vardi in the other.

Vardifounded his first technology startup in 1969 and has gone on to be involved in more than 60 Israeli tech ventures. He has taken seven companies public and sold many others, the most famous of which was ICQ, the first Internet instant-messaging company, which was acquired by AOL (TWX) for more than $400 million. Vardi has plowed his gains from ICQ and other successes back into start-ups, serving as angel investor and mentor to scores of young Israelis.

 Along with Vardi, a new generation of angel and early-stage investors has emerged, including lool ventures’ Avichay Nissenbaum and Eden Schocat, a general partner in Genesis, an Israeli fund focused on early stage investing, to help fund Israeli start-ups.

And, there are now a growing number of incubators and accelerators to give entrepreneurs a boost.

 Genesis runs an incubator called the Junction. On a recent afternoon it was packed with entreprneurs. Some were working away on their computers, while others were lining up to get free advice from Eyal Shahar, a respected web design specialist. A new facility called The Library, located in the heart of Tel Aviv’s business district, within the municipal library in the Shalom Tower, offers start-ups co-working space and facilities in addition to networking events and professional infrastructure. A new initiative called The Elevator hopes to serve as an accelerator.

There is even a program called Startup Seeds, which encourages school-age children who are passionate about computers and technology.

It appears to be working. A competition, organized during a DLD event in Tel Aviv last October, attracted 1,500 budding entrepreneurs, a sign that Israel’s reputation as a start-up nation isn’t about to change anytime soon.

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