Open Letter to TechCrunch’s Sarah Lacy

It seems our friends over at TechCrunch are having a “who can get the most comments” competition because their posts keep getting more provocative by the day. Today’s winner, Sarah Lacy with her post: Now that China Is the New Israel…What’s Israel? As of this post, she’s tallied up over 100 great and as usual racist comments. I’ll bet she’ll break 200 with this doozy. That said, there’s an important conversation to be had here.

In the post Sarah writes:

By 2004, an executive from Silicon Valley Bank was quoted in the San Francisco Chronicle after leading a contingent of VCs back to the Holy Land saying Israel was poised to explode again. He crowed that the crash and violence aside, Israel was getting more venture money than anywhere other than Silicon Valley and Boston and it was only ramping up.

But it turned out, he was wrong. Money continued to invest along the same $1.2 billion-to-$1.4 billion a year range, and returns fell off a cliff. Israeli companies have raised just over $10 billion since the beginning 2001, but acquisitions and IPOs have returned just over $860 million over that almost eight-and-a-half-year period. 

And continues … 

Ten years after the peak of the last bubble, it’s clear that when foreign investment fell in Israel from about $4 billion a year to $1 billion a year, the country wasn’t just weathering a recession. Somewhere along the way, the entrepreneur scene here lost its mojo.

So I don’t say this to trash Israel, but facts are facts. In sheer numbers, Israel’s place on the global scale of investing has been dwarfed by China, and matched by the United Kingdom. And after three days of talking to dozens of entrepreneurs and investors in Tel Aviv, this seems like a country wandering in the desert, looking for a new tech movement to own and dominate.

Was a booming Israel just a relic of the 1990s boom like Webvan and the Pets.com sock puppet? I don’t believe so. But I’m in Tel Aviv for the next two weeks looking for the company and the tech movement that will prove me right. If you find it, drop me a note.

Here’s my note Sarah:

Sarah,

It’s a shame you jumped to post this misguided conclusion before spending your two weeks in Israel, but thanks for igniting the important conversation. The companies you need to meet are here and I’m happy to introduce you to any of the 300 founders you see in our startups tab. The tech movement you’re completely missing is the new generation of new media/web/mobile startups that are bursting onto the global scene from Israel. Yes, we’ve been historically strong in deep technology, but the kids graduating from the elite programming units of the IDF are building killer Internet-powered startups, not semiconductors. The seeds being planted now … Boxee, Kaltura, Outbrain, fring, Face.com, plaYce, Gigya, Innovid, Dapper to name a few are ushering in a new era of Israeli hi-tech — light companies focused relentlessly on user experience, not technology.

I’m a little confused, as perhaps you are, about your stance on the matter. Why would you ask if we’re a relic of the 90’s if you don’t believe so? As for your stats on M&A/IPO returns, why didn’t you mention their source? Please do. BTW, they’re wrong. Happy to send official data if interested.

Most importantly, have a great time in Tel Aviv.

UPDATE: Since many of you have asked, here is official data from the Israeli Venture Capital (IVC) Research Center:

israeli_ma_2000to2008

From 2000 to 2008, the 8 year period Sarah is refering to, Israeli hi-tech companies have returned over $40B in M&A transactions alone, far outpacing any country besides the US. I can post the IPO data as well, but its really not the point here. Sarah’s data is wrong, and that happens in the blogosphere (not usually by 40X) but her qualitative point about us “losing our mojo” based on conversations with Israeli’s in her trip to Israel should be considered. Its the perspective of one person in the first days of visiting our country. Fair enough. It’s unfortunate that pre-judged perspective took the stage on the most widely read tech blog in the universe backed by false data. It created a lot of confusion. As for mojo Sarah, spend an evening with the founders at any of the monthly TechAviv meetups worldwide and maybe you’ll consider a second TC post. Inperfect and challenged by a global economic meltdown we are. Mojo we most certainly do not lack.

Tags: , ,

Categories: Conversation, Israel

18 Comments on “Open Letter to TechCrunch’s Sarah Lacy”

  1. SM
    March 26, 2009 at 6:13 am #

    Is Israel moving from a “hot spring” of innovation to a “shrinking pool”?http://whatmatters.mckinseydigital.com/innovati…When telecom / security were hot we had competitive advantage (leveraging military technology and experience)…What competitive advantage do we have now? Sure, we have entrepreneurial spirits and culture in higher ratios than other countries… but in sheer numbers we don't have more brilliant entrepreneurs than the US or even China for that matter

  2. March 26, 2009 at 12:07 pm #

    Here is a video conversation on this topic.

    http://seesmic.com/R8YBLpn1ch

  3. March 26, 2009 at 12:07 pm #

    Here is a video conversation on this topic.

    http://seesmic.com/R8YBLpn1ch

  4. March 26, 2009 at 8:56 am #

    Yron, No need to get defensive. We do need to admit that in the last several years no new Mercury, Checkpoint or DSPC has emerged in Israel. I am talking about companies with substantial revenues and even profits! Yes, sometimes we get lucky and AOL/Yahoo buys a start-up for a lot of money, but relying only on pre-profit M&A of early stage companies is not enough. We are already seeing less of these right now.I have low regard for Tech Crunch myself, but calling everyone that criticizes Israel raciest is not the way to deal with criticism. We have a problem. Let's admit it, and figure out how we Israeli entrepreneurs can do better and actually create companies that make money and not just air. None of the companies in the last Tech Aviv at Stanford made a profit or even significant revenues (and if so, they did not disclose it). It would be great to have at least one company that makes at least $5M in revenues per year, so they can tell us about how they grow their top line.

    • March 26, 2009 at 9:16 am #

      Wasn't trying to be defensive Arnon, rather answer Sarah's questions and provide accurate data to correct her post. Sarah's commentary has nothing to do with revenues. It was a post about invested dollars and returns from Israeli hi-tech companies over the last decade as opposed to the previous decade. She also asked if anyone knew of companies and movements that she was missing. I hope my post addressed those things. As for “calling everyone that criticizes Israel raciest” — you're going to have to help me on that one. What are you refering to? I linked to the comment thread of on TC post saying that they were great and racist comments on there. Perhaps you misread. Did you read the comments on the TC post? As usual, whenever TC writes about Israeli startups, the anti-Israel and anti-Semite hate flows freely in the comment threads, without any reference and relevance to the post itself. Sad but very true and telling of the world we live in.

  5. asagy
    March 26, 2009 at 10:36 am #

    Yaron, Sarah should have known better that the devil was in the details. Being off by more than $39B shows that she picked her data of a very lame source or just misinterpreted what she read. My guess is that she looked at start-ups which were incorporated in Israel. On any case, this was a very unprofessional article. Why wouldn't you ask Michael Arrington to promote your post? I'm sure that TechCrunch will be open to receiving data backed critique.Assaf Sagy

    • March 26, 2009 at 10:53 am #

      I doubt Mike would promote the post/data especially considering that this post was not even referenced as a response in the comment thread of TC. Odd. Not a big deal, but thanks for helping spread the word. I'll ask Sarah if she's willing to update her post with the correct data.

  6. Ariel Navon
    March 26, 2009 at 3:42 pm #

    Good on you Yaron. Great reply.

  7. Joseph
    March 26, 2009 at 7:18 pm #

    high-tech includes a lot of industries. your official data is too broad.sarah was referring go internet and software industries.any data there ?

    • March 27, 2009 at 5:50 am #

      Sarah was referring to “Israeli hi-tech companies” in general but even is she were only talking about Internet and software companies her data would still be way off. Think Mercury, Shopping.com, Quigo, 888 and you're already over $4B in returns. I have no idea where she got the $860M number from. Still waiting to hear back from her. Odd that she hasn't even responded in her own 350+ comment thread. Would of been proper to update her post with official data, but lets move on.

  8. March 28, 2009 at 11:25 am #

    Yaron, thanks for posting this response and always being a driving force behind us Israeli entrepreneurs and start-ups! Kol HaKavod!

  9. asagy
    March 28, 2009 at 2:35 pm #

    Well she responded today in another post. http://www.techcrunch.com/2009/03/28/risk-avers…She claims that her numbers are Dow Jones based. I never saw such a lame argument in the tech media. Shame on Techcrunch.See for yourselves: (From her piece)”…Since 2001, according to Dow Jones, $10 billion in venture investments have yielded only $860 million in IPO and M&A exits. The study of venture economics is at best imperfect, so it’s quite likely there are several big Israeli exits the numbers are missing. It’s like measuring Web traffic. Most Internet companies will tell you their traffic logs report higher numbers than measurement agencies like Hitwise or comScore.But the Dow Jones numbers aren’t likely to be off by, say, a factor of 50 or 100. And since the same sources—usually venture firms—give firms like Dow Jones the investment data and the liquidity data, the relationship between the money going in and the money going out is pretty reliable, even if the absolute numbers are not. Put another way, if Dow Jones is missing some exits, they’re likely also missing some investments going into the country. In any case, the returns are down dramatically from the 1990s—period. Be mad at me all you want; those are still the numbers…”

  10. A friend
    March 29, 2009 at 1:15 am #

    I don't think most industry insiders take Sarah's words (or Arrington's for that matter) seriously. TC's “blogging” is a form of news where you do not need to substantiate your facts, and in addition you can base your claims on your own personal agenda and bias. Just see for example how TC covers certain Y-combinator companies or how they cover competing blogs and events. While it might be fun reading Sarah's posts, this is a good opportunity to remind everyone that there's a difference between real, ethical news and TC “news”…

  11. March 30, 2009 at 3:58 pm #

    She may just be trying to attract attention; For now I know her tech presence is irrelevant in my books. And my TechCrunch personal rating has moved down a full grade as well – bbhboston

  12. traintalk
    April 20, 2009 at 6:40 am #

    Your fresh post of April 17 seem to put these prior ones into perspective. http://www.techcrunch.com/2009/04/17/venture-ca…You have been looking for new trends and new rules and not surprisingly not getting there. M2CW – no one knows the “real” value of any company or individual – or country for that matter – any longer because there's no way to evaluate whats potential, whats kinetic and whats used up. There used to be value in business and financial information and you can still pay for it but it ain't worth its weight in bytes or pixels out there or on your screen. Look for new indicators and new drivers.

  13. traintalk
    April 20, 2009 at 6:45 am #

    “You” in my prior comment refers to Sarah Lacey. Sorry for any confusion.

  14. May 20, 2009 at 1:30 pm #

    great response, and excellent referral material. Tx, Yaron

  15. May 20, 2009 at 8:30 pm #

    great response, and excellent referral material. Tx, Yaron

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