Israel is legendary as a tech powerhouse – the entire IP communications market owes its success to engineers from this middle-eastern country where compulsory army training has a side benefit of immersing the population in engineering specifically applicable to communications.
I remember fondly over the years attending SuperComm, VON, Computer Telephony Expo, Communications Solutions and ITEXPO and always seeing new and innovative startups from this land of milk, honey and falafel.
Sadly, over the years, things have changed – over a decade earlier, investors were making such large amounts of money from IPOs and acquisitions that it made lots of sense to reinvest much of it back into new companies.
Many things have changed over the years – IPOs are a much trickier proposition thanks to Zynga, Facebook and more jittery investors as a result of the dotcom and communications crash from early last decade. The cloud has made it easier to invest in companies which don’t need much capital to get going. Cisco was an acquisition machine and so were Lucent and Nortel but things have changed dramatically over the years. In fact Alcatel-Lucent spun Genesys off to raise cash so an acquisition strategy seems to be the opposite direction of where they are currently headed.
The end result is that while the US seems to have no shortage of startup investment, in Israel the situation is different. In fact instead of massive investments from VCs, startups have to rely on incubators and accelerators who reduce the overhead needed to launch a new company.
The good news is Israel is on track to see 600 new companies started in 2012 or about the same number as 1999 and 2000. The biggest challenge many of these companies may face is getting the credibility associated with American investors. Read more at JTA.