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Apple May Reveal A Wearable Alongside New iPhones In September

Apple should have a very busy schedule for its (yet-to-be-confirmed) event on September 9: Re/code is now reporting that it will show off its wearable device on that day alongside new iPhone hardware. The report from John Paczkowski says that Apple’s wearable will incorporate HealthKit, the upcoming software found in iOS 8 that adds fitness and health tracking features to its mobile platform, and that it will also have HomeKit features to help it somehow work together with connected home devices.

This report counters previous claims that any new Apple wearable device likely wouldn’t break cover until 2015, but it’s possible that Apple will reveal the hardware design and still launch the wearable at a later date, in the same way that it gave us an early preview of the new Mac Pro desktop computer long before getting it out to the buying public.

Including its new wearable in its September event is said to be a late-stage change in plans by the new Re/code report. The most credible claims thus far regarding the iWatch (or whatever it ends up being called) suggest it’ll be a sensor-laden device that can measure things including blood pressure, hydration, heart rate and steps, and that it should feature smartwatch functions like notifications of incoming messages, too.

Read more: Apple May Reveal A Wearable Alongside New iPhones In September

An international CEO’s guide to Silicon Valley

Stéphane Le Viet is the CEO and Founder of Work4.


To the international community, Silicon Valley is the heart of the startup world. Entrepreneurs from around the globe are drawn in as they look to follow in the footsteps of others who have successfully launched companies in the US – Elon Musk, Sergey Brin and Mikkel Svane – to name a few.

While it’s not a requirement, relocating a startup to Silicon Valley makes sense in many ways as access to venture capital, mentors, talent and business infrastructure can help a company grow.

While international entrepreneurs see the opportunity, many underestimate the key differences in Silicon Valley’s business climate compared to other parts of the world. As such, they should be ready to adapt.

After three years of building and ultimately selling my first company in France, I felt that the company had been a David up against international Goliaths. From that experience, I knew that to make a bigger impact in the global business landscape, my next venture would benefit from the power of a strong presence in Silicon Valley.

In 2010, I founded my second company and shortly thereafter opened a US headquarters and began to grow a team there. It was a stark difference from the European business climate I was used to, and I’m certain that most entrepreneurs relocating to the area would feel similarly.

Here are three lessons I learned for any entrepreneur looking to move their company to the area.

Focus on scaling, not going 100 mph

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Silicon Valley thrives on ambition. Entrepreneurs come here with plans to become the next billion-dollar business, and the pace of change and growth is fast. It’s a complete departure from the pragmatic approach that is common in many other international startup hubs.

Every company has a certain rate of growth it can sustain – and it’s not always limitless. If a company grows too fast, the results can be counterproductive, as it can create unreasonable strains on all parts of the organization.

Moving at such a fast clip amplifies difficulties much earlier on in a startup’s lifecycle. A startup must be agile to overcome problems generally encountered by a much more mature company, otherwise it will be forced into failure. The common Silicon Valley mantra “fail fast, fail often” is prevalent for a reason. It’s better to move on from something that isn’t going to work.

The fast pace of conducting business trickles into other aspects of the startup ecosystem, which leads to my next piece of advice.

Beware of being over-invested

Venture capital funding and angel investors are not only abundant in Silicon Valley, they are also willing to make investments quickly. We raised $10 million in a couple of weeks, whereas in Europe I’d had multiple conversations over many months and that was still relatively early in a typical funding cycle.

One of the first VC firms I spoke with in Silicon Valley wanted me to sign a term sheet before I even left the initial meeting.

I know firsthand how exciting it is when people believe in your idea but being overeager can be risky. Silicon Valley sometimes feels like you’re in a money machine, but before reaching out for grabs you should think twice about the terms you’re entering into.

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You should also ensure you’ve thought long and hard about the size of the market opportunity, and you’re practicing intellectual honesty. As an entrepreneur, it’s incredibly easy to be blinded by your own belief in an idea and convince yourself that the market is bigger than it really is.

Not to say market size dictates success, because even in a small niche there can be demand, but it should dictate whether you seek funding at all. If it’s limited, which it was for my first startup, you’re better off bootstrapping.

However, if the market opportunity is big enough and you do seek funding, make sure it is an appropriate amount. Being overinvested is a surprising challenge here, and it can create organizational complexities. Like many startups after they receive early rounds of funding, we quickly built out a senior leadership team full of great strategic thinkers, rather than hiring developers and expanding our sales team.

Looking back, our rate of growth compared to our rate of scaling resulted in a top-heavy organization. Thankfully, we were able to overcome that because we had early customer adoption that fueled bottom line growth. We also looked back to our European roots and adopted a “think lean” approach to our business practices.

Many international startups tend to be bootstrapped and international entrepreneurs can use that lean, pragmatic thinking to their advantage. Once you are in a financial position to bring people on…

Be ready to fight 100x more for your talent than anywhere else

Top employees in the US have a great deal of opportunity to move from company to company. In Silicon Valley, this mobility is exaggerated due to the concentration of startups fighting over the same set of in-demand skills.

Team 730x280 An international CEOs guide to Silicon Valley

To stay competitive, companies have upped the ante with the expected elements of employee recruitment and retention such as compensation, work environment and perks. What I didn’t initially realize is that intangible elements can have an ever greater impact on attracting and retaining top talent.

Consistently communicating with and selling your team on the company beliefs and vision is critical to engaging employees. You want the entire company to be passionate and work towards a shared goal – they need to feel a personal stake in the company.

It’s something that I didn’t do in the early days and, as a result, employee satisfaction and retention took a hit. While you may be one in a million in Europe, in Silicon Valley your startup is one of a million.

International CEOs each have their own reasons, from networking opportunities and access to capital to mentors and talent, for wanting to move to Silicon Valley. I hope that sharing what I didn’t know coming in will make the transition smoother for future CEO’s – the benefits certainly exist, but so do the differences.

Featured image credit: ROBYN BECK/AFP/GettyImages

Original post: An international CEO’s guide to Silicon Valley

Music in the midnight sun: Behind Norway’s edge in online music

If Capsule.fm has its way, Siri and Samantha will be replaced by Miranda.

The first two AI assistants are ubiquitous to Apple users and audiences of the film “Her.” But Capsule.fm co-founder Danielle Reid hopes that Miranda and her co-star, Carl, will pivot the streaming music space.

Earlier this year, the German startup launched its new iOS app, The Early Edition (an Android app is in the works). The Early Edition offers more than music suggestions: it creates unique audio narratives from users’ online content. These users listen to headlines from their favorite news sources, their latest email messages, trending topics on Facebook and Twitter and local weather updates – all in between curated music.

Miranda and Carl act as the app’s “hosts” to transition users from news updates to curated songs from several of their libraries.

“The Early Edition by Capsule.fm is built for a passive morning experience,” Reid tells The Next Web. “We pick a broad spectrum of great sources, which listeners can fine-tune. They can also add their own music playlists from WiMP and iTunes and hear their SoundCloud stream. We also feature selected artists using Capsule.fm to broadcast their music.

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“We’re building for a fully interactive audio experience, where your mood and context will define the content. While we will still curate sources to make sure that they are high quality, we also let you select and deselect individual sources, such as The New York Times in news content.”

One might expect the US to be The Early Edition’s top market. In fact, the app’s highest penetration lies in Norway, and users can consume content both in English and Norwegian.

Co-founders Espen Systad and Tor Langballe hail from the small Scandinavian monarchy. Reid cites their knowledge of Norway’s music market as the reason why it’s an ideal “…sandbox to experiment and play with different content, before we decide to include it in the English version.”

Music in the midnight sun

Far from the hills of Silicon Valley, Norway doesn’t often jump to mind as a global startup giant. But in terms of music streaming, it’s not called a pioneer for nothing.

Together with Sweden, Denmark, and Finland, Norway averaged 73.6 percent of overall subscription streaming revenues in 2012. This placed them well ahead of the UK (27 percent), France (12 percent), Germany (8 percent), and the US (also 8 percent).

Full-year figures for 2013 showed that the Norwegian music market grew 11 percent last year, with streaming a strong 65.3 percent share of the country’s total recorded music market. That puts Norway only behind Sweden in global leadership of subscription service revenues.

Who is buying these subscription music services? One of the world’s most well-off groups of citizens.

norway flag Music in the midnight sun: Behind Norways edge in online music

Norwegians rank higher than global averages on health, happiness, education, and life expectancy. They tend to have more disposable income despite working fewer hours.

Norway is one of the few countries that can claim a 100 percent literacy rate. All of this makes them an ideal audience for subscription services – but comparisons to Sweden remain inevitable.

“Sweden and Norway share many characteristics with the rest of the Nordics,” explains Arnt Maaso, associate professor in the Department of Media and Communications at the University of Oslo. “But Sweden has higher self confidence and better track records in tech innovation and startups.

“Norway is a more individualistic culture in many ways, which I think fosters small, interesting niches and acts in music, but may work against Norway becoming the tremendous hit factory and music exporter that Sweden has become in the last few decades.”

High fidelity

Launched in Norway in 2010, WiMP is a music streaming services that is listed on the Nasdaq OMX stock exchange in Stockholm. Unlike Spotify, its Swedish competitor available in 57 countries, WiMP is only available in five – Norway, Denmark, Sweden, Germany, and Poland. This hasn’t hindered its growth – WiMP is one of the world’s top ten music streaming services.

“The Norwegian startup scene, looking at it from a music industry perspective, is in its infancy,” explains Ervin Draganovic, product director at WiMP. “In fact, I would go so far as to say that when compared with the other Scandinavian startup hubs, like Stockholm, Copenhagen and Helsinki, the Norwegian startup wave is significantly smaller, but growing.”

Draganovic says there’s no magic bullet for why Norwegians lead demand for music streaming services. But alongside citizens’ relative wealth, he cites high bandwidth speeds and coverage throughout the country as a strong factor in both creation and consumption.

A look at bandwidth troubles faced by London’s Tech City confirms how essential this infrastructure is.

bandwidth Music in the midnight sun: Behind Norways edge in online music

“[High bandwidth] not only supports large content consumption through desktops centric devices, but also empowers consumers to consume content on the go through mobile devices by utilising 3G/4G connections,” Draganovic explains. “On the other hand, digital purchase and downloads of music content never became very popular, which meant that the entrance of music streaming services weren’t cannibalized by a substitutional product.

“Moreover, in the period from 2008-2010, there [was] a lot of anti-piracy coverage in the media, and laws were introduced which have pushed people away from illegal downloading.”

Smartphones outpaced desktops in 2012 as the main source of music streaming in Norway. And unlike other countries where a digital divide hinders the elderly, Norwegians tend to be tech savvy at any age.

“For example, my 68-year-old mother streams music at home, in her hybrid car and at the cottage in the mountains using 4G, all while Snapchatting with her grandchildren,” says Espen Systad, co-founder of Capsule.fm. “The Nordic startups try to satisfy and surprise a very tech-curious and media-savvy population – and they have to be creative in order to do that.”

All about me?

153853784 730x307 Music in the midnight sun: Behind Norways edge in online music

Like The Early Edition and WiMP, Deezer is a music streaming service that thrives on subscriptions. The Paris-born startup is available in 182 countries, including Norway (Deezer’s Nordic team was unavailable for comment).

But in the tradition of WiMP, Deezer uses content curators that are local to each market and has avoided the US market until recently. Julie Harari-West, Deezer’s global head of PR, told me that Deezer’s expansion goals excluded the US in its early years because “the market is not mature enough.”

It remains to be seen whether music streaming trends in more robust markets are too insular for wider adoption. Narcissism has been on the rise for years in the US, both through social media and popular music. These mediums collided with Spotify’s Facebook integration in 2011, which allows users’ playlists to feature in their friends’ social media feeds.

CEO Daniel Ek has cited Spotify’s social sharing service as essential to their growth. But Masso thinks this focus on sharing also contributed to content fatigue.

“In one sense, Facebook obviously was important because it was so socially pervasive and contributed to people seeing others stream music, and becoming aware of Spotify through the network effects of social media,” Masso argues. “But I think it contributed to oversharing, and many people being annoyed with both having sharing as a default and seeing to much of other users’ music.

Moving forward, music startups are focused on both context and content. Spotify acquired US startup The Echo Nest earlier this year, with Ek citing their next goal as “…understanding the context in which people listen to music” (Spotify was unavailable for comment, and The Echo Nest declined to comment).

Tyler Goldman was hired as Deezer’s US CEO earlier this year, with Harari-West confirming to The Next Web, “…it’s no secret that we’ve been exploring opportunities in America. Watch this space.”

WiMP is more focused on offering audio mixed with print and video content within each country than expanding globally. And having topped App Store charts in the paid news app category – including both the US and Norway – Reid says of The Early Edition, “Our sights are set on becoming the go-to audio companion that our listeners use daily, challenging old-fashion radio as the number one source for audio entertainment.”

music pix 730x276 Music in the midnight sun: Behind Norways edge in online music

As recently as 2012, Norway’s status as a global startup player looked average at best. An EU report published that year showed that the country was achieving only “moderate” levels of innovation and declining in investment innovation.

But the two years since that report have seen strong gains in revenue from music streaming subscription services. Mesh, Oslo’s first bespoke hub for entrepreneurs, is trying to bring the all-consuming startup mindset to a working world where most clock out at 4 p.m.

Athough it’s an uphill battle, there is a growing push to bring more venture funds to Norway beyond the oil and gas industry.

Perhaps most crucially, there is strong demand for further innovation in the music streaming space. Norwegian Dag Kittlaus is the man who introduced Siri to the world; what might emerge next is anyone’s best guess.

“Perhaps hybrids, where you get a huge local, default library on a chip, for instance with the purchase of a phone, and then can stream newly released music on top of this,” Masso hypothesizes. “But, as the Danish physicist Niels Bohr famously said: ‘Prediction is very difficult, especially about the future’.”

Read next: Why we crave human-curated playlists

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Here are 11 of the first services to use Product Hunt’s API

Product Hunt, the increasingly popular website that helps you discover new apps and services, is about to grow its presence on the Web after it began allowing other services to plug into its treasure trove of information.

Founder Ryan Hoover last month announced plans for an API, which allows other developers and software makers to build services that make use of Product Hunt’s data. Now the switch has been hit, letting the first services in.

Here are 11 of the initial group that you can tinker with — many of these previously scraped the site for information, so will perform better using the API:

  • Huntlytics: simple Product Hunt analytics for products
  • Product Hunt Roulette: a StumbleUpon-like discovery service for navigating ProductHunt
  • Producthunter Chrome Extension: serves up the most recent entries in a new tab
  • The News: an iOS app that combines Hacker News, Designer News, and Product Hunt
  • Panda: lets you browse Hacker News, Designer News, Product Hunt, and other resources in a single place
  • The Scoop: like Panda, this brings Hacker News, Designer News, and Product Hunt together in one place
  • Yo PRODUCT HUNTED: sends a Yo update when an entry clocks 150 upvotes
  • Roost for Product Hunt: sends a notification when an entry hits 100 upvotes
  • Product Hunt Alert: sends an SMS if a specific domain is mentioned on Product Hunt
  • HunterData: a Product Hunt leaderboard
  • Spear: Product Hunt command line interface

The API isn’t open to all at this point, but around 300 developers have gotten access. Others who are interested are invited to request early access here.

In his post, Hoover admitted that the move is scary. “I worry people will abuse the site or create something that “steals” engagement… we also lose the ability to measure how people are using Product Hunt,” he wrote, though he recognizes opening up enables huge opportunities since “Product Hunt is all about inspiring creation and entrepreneurship.”

Product Hunt actually hired the developer behind the Chrome Extension — so it’s fair to say that this is a good way to catch the companies eye. The company is planning its first hackathon, which Hoover tells me will take place in the coming weeks. That’s more evidence that the team is passionate about working closely with the developer community.

The company is currently going through the hallowed Y Combinator accelerator program. That, coupled with its intention to work with the developer community and its existing successes, suggests that its service has a bright future.

➤ Product Hunt

Related: The 7 (mostly free) tools Product Hunt used to build its early-stage community

And also: The 7 best Product Hunt lists you didn’t even know existed

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UberPool Lets You Split Uber Fares With Other Passengers Along The Same Route

uber-money

In the ongoing war between Uber, Lyft, and all of the other me-too ride-sharing services, competitors are looking for any way they can better utilize their supply of drivers and reduce costs for their riders. Today, Uber is announcing UberPool, a new feature that will let you pick up other riders on the way to your destination and split the bill.

While the feature should do a lot to cut costs for passengers, not everyone will want to ride with a stranger in addition to the driver picking them up; Uber notes that the new feature also serves as a kind of “social experiment.”

Since there’s not much data about how people will react to the new service, Uber isn’t going to release UberPool across every market it serves. The company has begun rolling out a private beta, and starting August 15 a public beta will launch in the San Francisco Bay Area. Uber also notes that the company’s “friends at Google” will be joining the beta as early adopters, as they “share [Uber's] vision of a more energy-efficient world with less traffic congestion and pollution in our cities and are excited to be early adopters of UberPool.” This signals continued cooperation between the companies following Google integrating Uber into Google Maps for iOS and Android.

Getting more riders into a single car to make rides cheaper isn’t exactly a novel idea. In June we covered Hitch, a ride-sharing service whose biggest differentiator from Uber and Lyft was the fact that it tries to use software to maximize the number of passengers in a single car to increase driver utilization and reduce prices for riders.

Go here to read the rest: UberPool Lets You Split Uber Fares With Other Passengers Along The Same Route

Fly Or Die: LG G Watch

Like anything in this world, the LG G Watch has its pros and its cons.

It’s LG’s first venture into smartwatch territory, meaning that the company is just now figuring out its design aesthetic in the space. That said, it looks and feels surprisingly nice, with options for both black and gold.

The G Watch also has pretty solid battery life, despite the fact that its 1.65-inch IPS 280×280 display is always on. However, our own Darrell Etherington reported display issues in his review.

The smartwatch is outfitted with a Snapdragon 400 1.2GHz processor with 512 MB RAM and 4GB of on-board storage.

The question isn’t necessarily over the G Watch. It’s one of many new smartwatches in the market, all the way from the early Pebble to the forthcoming Moto 360. The more important question is whether you want a smartwatch.

At $229, LG’s G Watch might not be the best option out there, especially if you’re willing to wait and see what other companies have in store and how the market reacts to them. If you don’t have time, the G Watch will still make you feel futuristic, according to guest co-host Adam Clark Estes from Gizmodo.

So will the LG G Watch fly or die? Only time can tell.

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‘A new mobile expression’: Yo confirms seed-stage funding from Betaworks and Pete Cashmore

Remember Yo? Of course you do. Well, the single-button, zero-character communication tool that hogged headlines for weeks has just announced Pete Cashmore and Betaworks have participated in its $1.5 million seed-stage round.

Betaworks, a seed-stage VC firm and startup studio based out of New York, made a separate announcement earlier today. And it seems that John Borthwick, CEO at Betaworks, has been a big fan of the service for months.

“At the end of May, Matt Hartman invited Or Arbel, the co-founder of Yo, to visit Betaworks, and we started using the Yo app,” he says. “Since then, Yo has become part of our communications flow at Betaworks and in my life. We Yo with co-workers alerting them that a meeting is starting, I Yo with my wife as a hi during a busy day.  I Yo with friends, without any more expectation or need than a Yo back.  I get Yo’s from services that I am interested in tracking without having to download their apps.”

On/Off

It’s the on/off simplicity of Yo and its associated API that seemingly appeals to Betaworks here, with Borthwick noting that more than 2,000 developers have already started working with the API. “It’s a new class of apps…and as always Betaworks is excited and ready to take a plunge into a fundamentally new mobile expression and join the seed round of funding in Yo.”

There are some other big names on board that aren’t being revealed yet, but Mashable founder Pete Cashmore’s involvement is an interesting one too.

While it was already known that Yo had notched up around $1 million in early-stage funding, today officially completes the deal, and bumps that original figure up to $1.5 million. Not bad at all for an app that only lets you say ‘Yo’.

“The value of this round goes far beyond the dollar amount that we received,” explains Yo founder and CEYo (yes, seriously) Or Arbel. “Bringing such incredibly smart, talented, and experienced people into the Yo team at this stage is an incredible advantage that will allow us to accelerate the growth and provide more and better value to our users.”

➤ Yo | Betaworks

Excerpt from: ‘A new mobile expression’: Yo confirms seed-stage funding from Betaworks and Pete Cashmore

Google Previews A ‘Material Design’ Inspired Look For Chrome OS

All of Google’s properties will eventually bear a look inspired by ‘Material Design‘ and Android L, and Chrome OS is part of that sweeping visual overhaul, too. A new preview posted by Google “Happiness Evangelist” François Beaufort today (via 9to5Google) shows a very early design inspired by the card-style multitasking view that made an appearance in Android L, the new Material Design-based update for Google’s mobile OS.

The new look, which clearly lacks polish and yet bears some hallmark resemblance to Google’s other Material Design reimaginings, is actually available already on the prerelease Chromium OS builds, and those keen on getting an early look and not afraid to get their hands a little dirty can follow along with fresh updates to the new look as they happen.

What’s interesting about this new look is that it resembles not only Google’s other efforts around Material Design, but also Apple’s use of Time Machine and Microsoft’s stacked multitasking view introduced in Windows 7. The Cards metaphor is not new by any means, of course, but its use across Google properties looks to be a certainty, although this is a test only and things can definitely change before we see any major alterations committed to the final release of Chrome OS.

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DigitalOcean Closes $10M Equipment Lease From CapX Partners

DigitalOcean today announced that it has secured $10 million in equipment financing from CapX Partners. CapX previously invested in DigitalOcean’s $3.2 million seed round in 2013. The announcement comes on the heels of its huge $37.2 million funding round earlier this year led by Andreessen Horowitz to fuel its fast growth.

We don’t usually hear all that much about equipment financing rounds these days, but that’s probably because most startups these days don’t have all that much equipment that needs financing.

For DigitalOcean, however, getting discounts and lines of credit with Dell and other vendors was very important during its early days because it does actually have to incur quite a bit of cost to keep its co-located data centers running and scale them up as demand grows.

Early on, DigitalOcean often had a hard time coping with the ever-increasing demand and had to limit access to new cloud computing instances on a number of occasions.

“CapX was impressed with the company’s product offering, customer growth, and the trend for small business to move IT needs to the cloud,” said Peter W. Washington, Vice President of CapX Partners, in a statement today. “DigitalOcean’s impressive management team and support from its lead investor, Andreessen Horowitz, convinced CapX to step up its financial commitment to the business. We look forward to growing our relationship with both DigitalOcean and Andreessen Horowitz.”

DigitalOcean COO Karl Alomar said today that, “CapX is providing a meaningful contribution towards our overall syndicated leasing structure and remains one of our key partners in this regard.”

CapX says that in the process of working with the company, it has helped Digital Ocean to “draw down incremental tranches of capital to better match the company’s scaled financing needs.” This “Lease Line of Credit” structure is meant to help the company “manage its capital efficiently during the new shareholder’s investment period,” CapX noted in today’s announcement.

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Israeli High Tech Gets Aggressive

Editor’s note: Adam Fisher is a partner at Bessemer Venture Partners, where he manages the firm’s Herzliya office focused on investments in Israel and Europe.

Israel has always taken a disproportionate share of global media attention. This has long held true in international politics, where Israel would prefer a little less attention, but also in high tech where the media attention on startup success has often been overstated and anecdotal.

For the better part of a decade, Israeli venture returns have been disappointing, frustrating many who were once convinced they had found the next big thing. But more than a decade after the last bubble burst, the Israeli venture capital industry has steadily matured, reaching a turning point over the past year.

The return profile in Israeli high-tech investments is improving remarkably as entrepreneurs build stronger, more ambitious startups with eyes on a much bigger prize and a higher probability of success. The Israeli tech industry may not be advancing at the pace that impatient investors and reporters demand, but the last decade has also proven that Israeli high tech is far from a fleeting trend.

As a fund that has been investing in Israel since 1992, with a dedicated office there since 2007, we at Bessemer see a stark difference today versus what we found in the Israeli startup environment 10 years ago.

Heightened Ambition

Israeli entrepreneurs have always been ambitious, but the maturity of the Israeli entrepreneurial ecosystem now gives emerging companies a better chance to deliver on big dreams and therefore a better chance of raising money to pursue them. Today’s crop of entrepreneurs has grown up in the startup ecosystem and seen peers disappointed by selling too early or shutting down only a couple years after raking it in. This means not only more serial entrepreneurs, but more maturity and experience in the first 50 hires these startups make.

The perspective shows. Venture-backed M&A and IPO exits have grown each year since 2011; Waze (Google) was the largest venture-backed M&A deal in 13 years, but so was Intucell (Cisco) when it was acquired earlier 2013 and XtremIO when it sold in 2012.

Wix, which started trading on NASDAQ late last year, was the largest IPO of a venture-backed Israeli start-up ever…and has since been followed by Varonis. But companies such as Mobileye, CyberArk, Outbrain and others will likely file this year if they haven’t filed confidentially already. And I am increasingly confident that in the near future, the first results of a Google search for “Israeli IPO” will yield links related to public offerings rather than the acclaimed Israel Philharmonic Orchestra.

Israeli high tech

In most cases, these successes come years after rejecting otherwise lucrative offers, with management choosing an independent path despite higher risks. Remaining independent is generally much harder for Israeli startups relative to American peers.

To start, emphasis on cutting-edge tech and strategic partnerships triggers interest at a very early stage, well before a proper business has been built. And because scaling an independent business 6K miles away from the customer base is always daunting for the Israeli founder, accepting an early acquisition offer is often a very rational decision.

Direct Customer Acquisition

Startups become large, independent success stories when they “control their destiny,” which requires owning the distribution channel and, most importantly, owning the customer relationship. Historically, Israeli companies and their venture backers thought it sufficient to be the owner of unique and proprietary IP. For this reason, Israeli startup success typically hinged on building strategic partnerships and OEMs that could bring strong technology to far-away markets at a relatively low cost and low risk. It’s often forgotten, but this is how Checkpoint (Sun), Amdocs (AT&T), and Gilat (GE), became success stories.

Twenty years later, Israeli startups now know that such partnership shortcuts come at a profound cost to the company’s ability to stay independent long-term. Unfortunately, Israeli startups still tend to hire biz dev well ahead of sales, but the successful ones stand out for making every effort to own the means of customer acquisition as well as the resulting relationship.

This industry-wide transition is exemplified by the rise of Internet, SaaS and mobile companies — something once thought unthinkable in Israel. Wix, Waze and Outbrain each devised a method for scalable direct customer acquisition, whether it was through advertising channels, mobile platforms or sales reps. The same is true with many enterprise-focused companies, which increasingly eschew the “white knight” OEM and build an independent go-to-market strategy.

ShakeUp in the VC Landscape

American VCs first entered the Israeli market in the late nineties, focusing primarily on follow-on financings in startups originally funded by local Israeli funds. Over the last five years, the traditional roles of early-stage Israeli funds and later stage American funds have become blurred. Six American VCs with deal-makers residing in Israel, including BVP, are among the most active early stage investors in Israel and at least four newly established Israeli VCs are focused exclusively on later-stage opportunities.

The resulting American imprint at the early stage has been substantial, further fanning the flames of ambition and independence of Israeli entrepreneurs. American investors have brought not only larger checkbooks but a better read of the U.S. market and competitive landscape. American VCs have also introduced a more aggressive set of venture tools aimed at helping Israeli start-ups grow faster including growth equity financings, acquisition strategies and previously shunned founder liquidity. It’s American VC influence that’s behind the direct customer acquisition strategy and the spurning of strategic partnerships.

The Future Is Rosy

Recent high-profile exits have investors once again focused on Israel. Active VCs are reaping the rewards after much patience, and institutional investors – who were heading for the proverbial door – have paused and are taking a second look.

Some see these startups as not yet polished enough to warrant attention, but they do themselves a disservice. Israeli high tech has matured to a point where we will continue to see a steady stream of large M&A exits and IPOs for years to come. Israel is the only real technology rival to the Silicon Valley, and the Valley know this well. Just as political observers no longer view Israel as the underdog, few tech giants and investors are willing to underestimate the potential of an Israeli startup.

IMAGE BY Shutterstock USER JCELv (IMAGE HAS BEEN MODIFIED)

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