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Israel, The Silicon Valley Of The Middle East Welcomes VCs & Social Media

Israel is considered by many to be the Middle East's Silicon Valley, ranking second to North America in number of companies in the high-tech field. With odds stacked against them, according to research reported by the ISEMI College, an online business school for entrepreneurs, "historical necessity has forced this tiny country, with a total area of 8400 square miles and a population of 6.5 million to become a technological powerhouse."

The Israeli government can be credited with creating the underpinnings for the Venture Capitalist community in Israel. Yozma ("Initiative" in Hebrew) is a VC fund established by the government with an initial sum of $100m, in an effort to help develop technological start-ups. The Israel Export Institute currently works with approximately 1000 high tech start-ups, offering seminars and workshops on every relevant topic, focusing especially on marketing and management.

Within six years, after an impressive record of successes, the government allowed Yozma to be controlled by the private sector, so it could become the source for the more than 150 VC funds currently operating in Israel. Many of these funds were created with foreign partners and act as conduits through which a great deal of funding is funneled into the country.

In 2008, Mashable held their first International MashMeet in Tel Aviv called the "MashBash TelAviv." At that time the social media blog reported that Israel, in addition to the venture capitalists also had over 15 Technology 'incubators,' featuring such companies as Granot Ventures, Lab-One Innovations and Haifa Hi-Tech Acceleration Center.



Even though many foreign VCs have either set up offices in Israel or have joined Israeli VC firms, US companies have been, for the most part, slower to invest in Israel than their European and Japanese counterparts. This reluctance is due in part to geographical distance. Typically, if US investors can’t get to a board meeting quickly, they prefer not to invest. However that may change with Continenta Airlines in the final stages of a feasibility study for a Tel-Aviv-San Francisco route.

Tel Aviv Stock ExchangeTel Aviv Stock ExchangeWhen Ester Levanon, CEO of the Tel Aviv Stock Exchange, spoke with Steve Forbes last year, she detailed the ingenuity of Israel’s tech sector, indicating that natural resource scarcity forced Israeli companies to create a start-up mentality. “We like to come with new ideas, (and then) rush and see whether we can implement them,” she told Forbes.

Levanon feels Israel's tech center is an international phenomenon. Out of 600 companies on the Tel Aviv Stock Exchange, 140 are tech companies justifying her belief that Israel is a hub for tech companies in the Middle East, as well as "Asia Pacific, maybe Europe," she adds.

One of the turn-offs for some investors and analysts regarding the US' Silicon Valley is its continued focus on alternative energy. Google, alone has invested $38.8 million in two wind farms in North Dakota that will generate energy to power more than 55,000 households. Tech guru George Gilder sees this as a distraction and a reason to consider investing in Middle East versus the States. As a "worthless side pursuit," he sees Israel as the new Silicon Valley in contrast to our own Silicon Valley "paled over by green goo." 

In the online chat space, alone two start-ups have surfaced out of Tel Aviv within this past year. Rounds promotes itself as a live meeting network, where it allows users to talk to their friends or for a random chat that is presented in 3D bubbles accompanied by user profiles. AnybodyOutThere.com is a chat service that allows you to focus on specific topics with random users from around the globe. With this service you can ask a question or share a thought and you will receive responses from people with similar interests.

As far as social media, the world has watched intensely as protests in country after country are intent on securing a democratic foothold. Israel is no exception According to a Bluhalo report, "savvy politicians and skilled diplomats have walked a policy tightrope for more than a half of century," to secure peace in the often volatile Middle East.

But instead of continual strife, Israeli president Shimon Peres thinks the answer might lie with the popular social networks of Twitter and Facebook. He called both the Egyptian and Tunisian revolutions "opportunities for peace." And building on the need for the tech community to continue to grow exponentially in his country, the president added that Facebook, Google and Microsoft have much more money at their disposal than many national governments, and they could use some of these funds to actively support democratic movements in the region.

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Ron Callari
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Comments
Mar 9, 2011
by Anonymous

you are wrong,

the 'gift' is given but it do come with strings and needles .

1. All the money is tunnled back to the USA meaning they (USA) give money to Israel, so that israel will buy only in the USA thus reroute the money to the US industry (and economy).

2. This 'gift' gives the US president the 'legitimacy' to tell the Isreali PM what to do as if isreal were to be the 51 nation in the USA and not an independent country.

3. The tech in isreal is inependent to the 'gift' since the 'gift' comes with clear instruction and limitation..and investing in the Isreali high tech is not one of them.

so don't talk about pride