Deloitte recently released the results of its VC Indicator Survey (PDF), conducted among Israeli VCs this past month. The complied results are so pessimistic they paint a warm and fuzzy aura around Sequoia’s Doom & Gloom presentation.
Participated by approximately 80 Israeli venture capitalists, the survey predicts 2009 will be an extremely painful year for the Israeli startup industry in most every respect.
Here are some of the highlights:
- 92% of those surveyed predict at least 3000 people will be laid off.
- 92% also believe that companies who do not lay off employees will slash salaries.
- 74% predict that at least 10% of venture backed startups will be shutdown.
- 95% foresee harsh times in the fund raising department.
- 54% expect a slowdown in seed investments.
- 87% expect a decrease in company valuations.
- 26% are confident that commitments by limited partners will not be withdrawn, while 51% believe they might.
Israeli VCs have always been more conservative than their American counterparts. I just hope they’re also more pessimistic, as opposed to realistic.
I haven’t seen the effect of the worldwide financial collapse impacting the Israeli startup community – yet. You have to remember that the VC community has only invested in a small percentage of the startups and most of the startups were struggling for cash before the current crisis. For all intents and purposes the current situation leaves the startup in the same state: “no money before and no money now”.
Yes – startups will close (as they have been closing and opening in the past). Yes – there is less cash to be had. And yes – there will be layoffs. The flip side is that there will be lots of available people with ideas and skills to make current and future startups successful.
So let me understand this. You publish a post with some fancy charts to sate the obvious? So obvious a 3 year old can understand this without the friking surveys?
Right.
Sounds about on par with what VC’s everywhere are saying (and if they aren’t, they’re delusional).
Hardly ‘exceptional.’
There is a war going on right now and you post this about Israel. Wow!
Amir, Israel is always at war. The life goes on.
With all the talk about how the recession should generate a historical amount of innovation, you would think that investing in a war zone would be even more incentive to be innovative, but I guess trying to write code amidst shellings could be difficult. And we think our economy has it bad …
Mark, you are comparing apples to oranges. The set of circumstances is always complex, multy dimensional and not as black and white as you suggest. Caricatures would not help in explaining this. They are as flat as the charts…
Okkkkaaayyyy, that was a joke. Hold back the reigns, friend. Interesting enough, though, I recall a NY Times article published during the 2007 war when blogging really became heavy in the warzone. Bloggers would sit on their roofs on opposite sides and as they were watching the fighting and bombings unfold, they would engage in debate on the subjects via the internet. It does bring a hole new life to innovation in a crisis zone, whether war, international policy or economic crisis.
The vast majority of Israeli start-ups are based in the center (Tel Aviv/Hertzeliya) and in some hi-tech centers up north (Haifa, Yoqne’am).
Relatively, just a few companies are based in the missile range of the current conflict (there is an Intel FAB, if not a few, in Kiryat Gat which is currently being bombarded by missiles).
If you take into account that during the Lebanese war hi-tech companies up north still operated under the rain of missiles and acted “business as usual” – when investing in an Israeli start-up this “war zone” isn’t really an issue.
Thanks for starting this story with “Oy Vey!” First of all, that’s not an Israeli mode of speech. It’s Yiddush, a german sub-dialect. So it doesn’t even make sense.
Second of all, using that in a headline about Israelis is just as offensive as if you’d start a story about black investors with a headline in ebonics.
Not clever, not cute. Just offensive and really unprofessional.
Darren, oy vey, its such a chutzpah for you to talk like that. I didn’t schlep myself all the way to techcruch to hear you all farklempt with PC speech. Who made you such a mavin anyway?
LOL, that shpiel was G’valt!
I totally agree with you Darren. I was quite startled that something so unprofessional would show up on Techcrunch.
Darren–I think you might be reading too much into this. I’m an Israeli so I’m pretty well versed with the meaning of Oy Vey… I can pretty much assure you no one would take my use of it as offensive.
Agreed. Couldn’t have said it better myself. The “oy vey” crowd doesn’t fly F16s and doesn’t stand up for itself.
You’d be surprised, boby baby…
Oy Vey – though hardly reflective of the moods for Israeli startups as Roi would have you believe, is just right when it comes to the moods of our F16 pilots these days… or the rest of us Israelis, for that matter.
Oy Vey is so widespread, it doesnt even “sound” Yiddish to most Hebrew-hearing ears.
Stop being so sensitive, the headline is funny.
What these VC’ realize is:
-they don’t know anything since too many of them never took any risks.
-most have never sold lemonade much less a real product
-they must look at businesses as businesses, if there is profiit, then its a business.
-they must look at technology that has a short revenue cycle.
-they must grow testicles, and sit on be willing to eat tuna fish, and sit on broke broken chairs in cheap offices.
-last and most important, they should get off their high horses, and be more down to earth, and then just maybe they’ll be able to cultivate a more creative and open atmosphere between themselves and start ups.
Israeli VCs are a bunch of has been insiders, under achievers. Totally over appreciated. I wouldn’t spend a second with them, instead of nurturing companies they are killing them with their VC stupidity.
“…they are killing them..”
Killing – that’s their specialty.
Can someone tell me. Are there no cookies at Techcruch, it doesn’t remember the login? Is this intentional?
Thanks for sharing this Roi. I saw the Survey on the Deloitte Israel website last week but didn’t get a chance to view it and now I guess I won’t have to
While it doesn’t paint a pretty picture for Israeli VCs, I don’t think it will be as bad for everyone else. Regarding the layoffs (and this is partially for Mark above), I read online last week that about 270 startups were founded in Israel in 2008, 40 of them in something like the last 2 months. People who are victims of layoffs aren’t sitting idle and a lot of really innovative great ideas will come out from this.
Second, while the VC community is in a bind because of the economy and will be holding back, this past September a VC and Angel panel at TechCrunch50 basically said that this is the time for angel investors. While there’s less money going around, especially coming from VCs, there’s still money out there for the right ideas. Basically, 2009 will be gloomy for Israeli VCs (unless a lot of companies get acquired), but not necessarily for entrepreneurs and angel investors.
“conducted among Israeli VCs this past month” – So this was even before current flareup over there?
In any event, VCs (like the rest of us) typically overshoot on the upside (what offer did GLAM turn down a few months ago?) as well as the downside. 2009 will no doubt be tougher compared 2006-2007, but unclear whether it will dip far below the depths of 2008. However, because it might we all need to tighten our belts to make it through the tunnel to the other side.
Never met 1 Israeli VC liked – avoid like the plague.
They are painting gloom, in one way its good! Less money will go towards funding wars.
Ken Billy, please don’t fill you gas tank next time, because this is how modern wars are financed really.
Ben Atlas, I agree with you. I have already started using Hybrids or taking trains .Lesser the gas better for all of us. Peace Please!
they are actually being optimistic
Thank you for your analysis someone linking the VC community in Israel to wars and conflicts in the Mideast. I’ll stop watching FoxNews now for all my commentary.
But seriously, you could substitute any country in front of “VC” and “Report” right now and come to the same obvious conclusions. The strength of a Silicon Valley or Wadi is not how well it prospers during an expansion but how well it bounces back and evolves during a recession. With all these regions trying to mimic the Valley’s success, it’ll be interesting to see who survives the next 6 months/years (how long this takes…)
I believe there is still opportunity for an investment from Israeli VC’s if you have the right type of start-up. Meaning proven execution and having started generating revenue. Sequoia Israel just raised a new $200 Million fund. I don’t believe it was raised to just sit on for the next year and a half. While it might be tougher for a company who’s revenue is based on Advertising, I do believe that start-ups with proven revenue models can and will still raise money.
One more point. Most VC’s in Israel don’t concentrate on Internet based Start-ups with a few exceptions like Gemini/LightSpeed & Greylock, but most Israeli VC’s do have a couple of internet based start-ups in their portfolio.
A lot of US based VC’s like to and have invested in Israeli based Internet Start-ups and will continue to do so.
Btw, while using oy vey may show some lack of knowledge by the writer – being offended by it is purely your choice. And although not common, some of us still use it here and there. Al hapanim would be more appropriate
Uri–You’re right, Al Hapanim is more appropriate but I figured no one would get that outside of Israel
We should start teaching them, then, shouldn’t we?
That said Roi, I don’t think I agree with the Oy Vey nor the Al Hapanim interpretation.
Israeli VCs tend to paint gloom in order for the lights to shine brighter later. The prevailing doctrine is “Remember we said it would suck? it didn’t suck so bad. Yea to us”.
It’s called valuation-lowering
This survey indeed reflect much of the feelings in this industry worldwide. However, while Israeli VC’s have to improve, adopt and get updated…still for Israel to grow a flourishing tech industry it is very essential to have a strong and healthy investment community. One that will fuel the seed and early stage in times of economic and political uncertainty. I would not discount the relevance of this survey and the impact this current crisis will have on the availability of funds for future innovations from Israel.
Maybe they are just too busy trying to figure out how to commit war crimes against Gaza and the Arabs. It takes a lot of planning, effort and money to destroy the infrastructure of even a glorified refugee camp.
Let’s try to keep focused on the content of the post please.
I think that moron deserves a response. I mean there is accusation of murder when we all know who was really etching for the fight. But lets focus on the content you said.
To than end I think they should encourage education in Gaza and elsewhere in the Arab world. Only education will bring peace and them we would be talking about VC downturn in Saudi Arabia for example, nor Israel. Than would be a nice change.
To J. come back again when you have more start ups per capita than suicide bombers.. And this bring us back to the lack of education. And when there is no education brainwashing will inevitably fill the vacuum. May I present you an exhibit “J”!
Ben–please, let’s focus on technology.
Sorry for the spelling. I am trying to multitask
OK Roi, but you didn’t think that you can post anything about Israel today without being attacked by some trolls. This is as much a reality today as your charts. Something Israeli business, including tech start ups will have to deal with for years to come.
Most experts agree that the slowdown will last about 2 years. This is about how long it takes a tech startup to release its first product. Therefore, now is the time to start a company, and be ready to meet the market when it’s ready for your product.
VCs in Israel and elsewhere should now focus on funding real innovation rather than feeling sorry for themselves. Just clean up your portfolio, write off your bad investments, and focus on the future.
On the supply side – from the LP perspective, venture capital is actually not doing so bad compared to other investment options. VC is a high risk, and downturns are expected and should be planned for. Traditionally conservative investments channels like real estate did not fare so well recently to say the least, and LPs still have money to invest (though admittedly less). I therefore find it hard to see the VC well drying up completely any time soon.
One thing we know for sure about the future is that we have no idea what will happen. Just ask the smartest financial adviser who handled your portfolio a year ago. These are all good projections but somehow they exclude a possibly that we are in the midst of a structural change that goes way beyond Israeli or any VC market.
Well, let’s see, hmmm, rocket science stuff here. Yeah it should be gloomy as hell, starting the New Year with barbaric acts is probably one of the many reasons for that. Having lived around both Jews and Muslims in the Middle East, it baffles me how arrogant Israel’s government and people are? How can you oppress specific people while every other country that surrounds you supports those people-you should be going out of your way to help them. I can see the future of Israel already, rockets being launched in 2020 with nukes in them, enough to wipe out the entire country if they continue on the path they’re going cause sorry I don’t see them doing much damage to the Arab world and us Americans are tired of being Israel’s bitch and we’re starting to see things clearly a bit, pretty pathetic if you ask me
Although I expressed my opinion about Israeli VCs, I do like the Israeli Chief Scientist program, which is basically government money for hi-tech companies large and small that help fund companies both in tough and good times. This money saved my start-up some years ago when all the “smart” money went dry.
The last time I checked this program was only open for start ups that develop new technologies…
Many start ups offer new types of services or fuse existing technologies together and in those cases I’m not sure this program is the way to go.
Josh Rob,, next year lay off the coolaid. Fact check: Israel left Gaza and instead of taking advantage of this opportunity Arabs started promptly lobbing rockets into Israel and blow up buses with innocent people.
Have no illusions that it will start or end with Jews.
You’re a troll. Make like a tree and leave.
Is a troll still a troll if he’s making all the right points?
They should start a fund that will help find a way to convert the blood of Palestinians into oil.
You could have produced a lot of energy from the shock waves coming under Palestinians cheering and dancing after 9/11. So next time thousands of Americans die in New York or where you live, you could light up the city again using all that good, positive, peace embracing Palestinian energy of joy.
Well, you don’t say! Funny you should mention people dancing.
http://www.yout...h?v=tRfhUezbKLw
Explain that one please!
9/11 was clearly a Mossad op.
There is a war going on right now and you post this about Israel. Wow!
To hell with the anti-semites!!!! Nothing but mental cancer.
You should avoid Israeli VC if you’re building web 2.0 , or any web services company for that matter.
There are no Israeli partners who know how to deal with such companies, and the best ones know that the sooner an American who knows his s#*t will jump on board the better – and that’s not because they like Americans, it’s because they don’t trust Israelis with such companies.
However, if you are in software or biotech, then there are some great Israeli VCs who will be able to help you.
Just as with Lebanon II, so now with the present Gaza operation and, apparently, the local VC environment – Israel is in the top league of the few countries broadcasting it all in real time. That includes the loss of perspective and the rule of the last event and conformity of opinion and mood that is part of the phenomena.The bottom line is this does not equate into bottom line investigative reportage or analysis – and is certainly not predictive of tomorrow. It is more like watching microevents like a tickertape – the likelihood of making sense out of that is null. Yes, Virginia, it is depressive and pessimistic. And no, NASA, you are unlikely to figure it out as it unfolds. But it would be nice to come up with an O-ring solution…
Thanks for the summary of the report. Take a look at some additional comments and analysis on http://startupsummary.com
@Daves: I watched the stupid movie. It is a stupid movie proving nothing but the fact that you are insane.
For hard evidence about what Neo was trying to tell you ,watch : http://www.yout...h?v=3vOJCQr1Now
Ohy Vey is not offensive, I agree Roi is just making the point so the rest of the non-hummus tech crowd that reads techcrunch regularly gets it.
Good report, sad to see that things look so gloomy entering 09. Will definitely be time for the worthwhile to show their value and the not so worthwhile to really fall apart, save being sold to bigger entities.
I also agree that most all Israeli VC’s have been more conservative then their SV counterparts, question is will that stay this way with the currently declining positions in tech?
btw- Al Hapanim wouold have been funnier ( but I agree not as easily understood) my African American as well as Asian Friends in the US use Oy’ Vay! its become a popular english idiom.
Boycott israeli web 2.0 apps:
Jajah
Aniboom
Metacafe
Speedbit
Foxytunes
MySupermarket
Zlango
MyHeritage
WeFi
eSnips
PicApp
Not always the case.
My company, poketalk.com, just got a brand new round of funding.
We are the first completely free “phone to phone” calling service on the internet.
And in less then three months since our launch we have accumulated over 70,000 users.
Agreed. Couldn’t have said it better myself. The “oy vey” crowd doesn’t fly F16s and doesn’t stand up for itself.
I also agree that most all Israeli VC’s have been more conservative then their SV counterparts, question is will that stay this way with the currently declining positions in tech
These are all good projections but somehow they exclude a possibly that we are in the midst of a structural change that goes way beyond Israeli or any VC market.
Good report, sad to see that things look so gloomy entering 09. Will definitely be time for the worthwhile to show their value and the not so worthwhile to really fall apart, save being sold to bigger entities.