An Israeli cyber-security specialist saved some major face for Facebook this year. Of course I am referring to Mr. Nir Goldshlager, a cyber-security specialist with the Israeli cyber-security firm—of which there are a growing number—Avnet.
Why am I taking the time to present this Nir Goldshlager fellow, you ask?
Well, according to the Times of Israel this year Goldshlager found a way to gain control of any Facebook account he wanted—twice. That’s right, he informed Facebook about the bug, they fixed it—or so they thought—and then he found a bug in the “repaired” code. Not to worry Facebook users of the world, Nir let Facebook know about the second bug as well and they have since fixed the problem.
This guy is no rookie, my friends.
It turns out this isn’t the first time Mr. Goldshlager has helped out the social networking giant, nor is Facebook the only web-based organization that he has helped. For the second year in a row, he can claim the top spot on the Facebook security hall of fame and in 2011 Nir ranked second. In addition to helping Facebook find bugs in its code, Nir and the “white hat” hacker community has also helped out the likes of Google, Amazon and Paypal. In fact, Nir also finds himself ranked fifth on Google’s 0x0A List of best bug reporters.
Come again? What is a “white hat” hacker exactly?
Nir is a member of the hacking world demographic known as “white hat” hackers. White hat hackers are members of the hacking world that test organizations’ security systems with the intention of notifying companies when they find gaps in their security systems and they are making their mark. While perhaps hesitant at first, a number of big name companies like Facebook, Google and Paypal now have rewards programs designed to incentivize the hacking community to help find bugs in their security systems.
Programs such as these are proving to be a good way of crowdsourcing security testing and ultimately result in better security systems to protect important information that people around the world entrust with these companies. As Michael Barrett, Paypal’s chief information security officer admitted to ZDNet: “I originally had reservation about the idea of paying researchers for bug reports,…but I am happy to admit the data has shown me to be wrong – it’s clearly an effective way to increase researchers’ attention on internet-based services and therefore find more potential issues.”
This is cute, but is it indicative of something larger?
In a word: yes. While this lovely symbiotic relationship between a certain segment of the hacking world and organizations with an internet presence is a touching story, it also highlights the continued, and growing, importance of security solutions in a world that is becoming increasingly web-based. Furthermore, Israelis such as Nir Goldshlager continue to highlight a global need for improved security systems and is a prime example of the prominence Israel is achieving in the cyber security world.
Government efforts such as the KIDMA program and the Israel National Cyber Bureau, in addition to private efforts such as the new cyber security incubator slated to be located in Beersheba and affiliated with Ben Gurion University (Jpost), are helping finance and develop the next wave of cyber defense companies. According to a Jerusalem Post article, “About 25 Israeli information security companies have been acquired by multinational organizations, and Israeli companies are counted among the world’s leading information-technology security providers.”
Israel, on all levels, is serious about being a prominent world player in the global cyber-security and information technology markets and individual Israelis such as Mr. Goldshlager are leading the way. Public and private Israel is investing a lot of attention and money in the cyber defense and information security sectors. That means there are a lot of exciting investment opportunities coming out of Israel and it most definitely is worth taking a look into how you can get a finger or two in some of these pies. While you’re at it you might also help make the internet a more secure place. Not such a bad deal, if you ask me.
|Sam is a business analyst and received a Master of Science degree in Applied Mathematics from Brown University.|
We recently posted about incredible opportunities we’re seeing to invest in Israeli startups, and it got us wondering what angel groups in other parts of the world have been seeing.
To get some more color on the Boston tech scene, we went directly to the source. We had the chance to talk to Richard Lucash, a Boston-based attorney for emerging tech companies, about deal flow in Boston and Cambridge, Massachusetts. Richard co-founded the LaunchPad angel group and, with Jeff Stoler, recently launched a new angel group called SideCar Angels
What’s deal flow like in Boston?
In Boston, most angel group deals are syndicated. The area is the national leader in doing angel syndications. As part of this syndication effort, members of multiple groups may take part in due diligence. SideCar is focusing on facilitating deals by filling out syndicated rounds.
How do you generate deal flow?
A large percentage of our deal flow comes from Boston area angel groups and micro VCs, however, often the companies approach us directly.
What types of deals have you been seeing?
We see a lot of e-commerce, medical device, web tech and clean energy. When asked about the frequency of opportunities in the life sciences sector, Lucash noted not seeing too many deals of that sort, hypothesizing that it is due to the requirement of a large amount of startup capital.
In your opinion, how is angel investing different today in comparison to when you first started?
Since I became involved with angel investing, there has been a very large increase in the number of organized groups, and a trend towards greater organization on matters such as screening, review and negotiation of deal terms. Many groups have added funds associated with the group, and more groups have full time managers.
Lucash’s perspective on investing in startups is not too different from OurCrowd’s. We’re also seeing a lot of Internet-powered deals because they’re typically easier and cheaper than say, a life sciences startup, to get a minimum viable product shipped. Anyway, thanks Richard for answering our questions.
|Jeremy Pressman is a Business Analyst at OurCrowd and plays semi-professional basketball for Hapoel Pisgat Ze’ev.|
After opening our doors last fall, we’ve gotten to know so many of you: thousands of investors, entrepreneurs, and partners.
Particularly, we’re seeing an incredible number of really high-quality startups. A huge percentage of these are companies founded by serial entrepreneurs with differentiated technologies and real tractions (with serious users, customers, revenues, etc.). An incredibly high number fit our investment methodology and criteria.
I thought it would be interesting to break down what our deal flow looks like (thanks to our resident geniuses, David S, David C, and Jeremy for pulling this data).
What Israeli entrepreneurs are working on now
So far, OurCrowd has seen:
- 175 deals since Jan 1, 2013 (100+ deals per month)
- 350 deals (received actual materials) since Nov 1, 2012
Maturity of deal flow
- deal flow has ranged from seed investments to Series C, with sweetspot in the Series A range
Internationality of deals
- while the vast majority of our deal flow comes from Israel, we have looked at deals from 9 countries
Sector breakdown of deals
- We’re seeing the most activity in medtech, mobile, and Internet
What are you working on? What are you investing in?
Head of Investor Community
|Zack Miller is a General Partner and Head of the Investor Community at OurCrowd.|
We read a heck of a lot of material during a work week. From deal flow to industry research, it’s important for us to stay on top of our game.
Here’s a smattering of what crossed our desks (monitors) this past week. Hopefully, you can find a smattering of usefulness in these links.
Tel Aviv: 1 of the 10 cheapest stock markets in the world (Globes): “In 2011, in line with the global trend, the Israeli market fell. But internal and external forces last year resulted in only a partial correction in Israel, while all other markets enjoyed rising prices.”
The n0-effort email to convert free users to paying customers (Unbounce): Sometimes it pays to have a senior leader reach out to prospects.
Wading into dark pools (Barron’s): NYSE’s dark pool for small investors hasn’t been as disruptive as many feared.
The new way we make web headlines now (The Awl): “Our actions are increasingly passive online, and we really are just looking for something to watch, click, share and receive.”
How to view the entire free Kindle lending library from your browser (Lifehacker): Amazon doesn’t make it easy to find but here’s how.
Multiplayer mobile gaming network Nextpeer adds 100k users a day (TechCrunch): An OurCrowd portfolio company sees massive interest in its SDK to take uniplayer games and make them social.
The most interesting online video trend (Mark Suster): What the interest in the Harlem Shake says about the future of video and TV.
A tale of 2 chemists turned winemakers (NoCamels): A story about wine but also about Israeli technology.
How to perform an SEO audit (Neil Patel): SEO guru provides a great template to measure and improve how search engines see a website.
Top email tools for salespeople (SalesLoft): More and more technology is making its way into salespeople’s email clients.
4 Israeli apps nominated for Global Mobile Awards (Israel21c): Waze, MyCheck, uTest, and recently sold, Intucell are all nominees up for top prize at the contest during the Mobile World Congress in Barcelona.
How to develop an agile and integrated marketing team with Google Reader (BlueGlass): Interesting approach to using Google Reader to help spread and share knowledge across an organization.
What are you reading?
Over the past few weeks on the blog, we’ve been exploring how to identify successful startup founders (obviously, this matters A LOT to investors in early stage companies).
Are entrepreneurs born or made?
I remember a few years back, there were some (credible) studies that seemed to point to the existence of the entrepreneurship gene.
In the book, Born Entrepreneur, Born Leaders: How Your Genes Affect Your Work Life, author Scott Shane looked at identical and fraternal twins and their inclinations to be entrepreneurs. The siblings who shared 100% of their genes demonstrated higher rates of entrepreneurship — leading Shane to estimate that 30-40% of successful startup skills are innate.
Successful entrepreneurs are more tribal
This startup gene theory is being challenged by some more recent work at MIT’s Sloan School of Management (admittedly, the existence of the startup gene would be b-a-d for the MBA program business).
In The Power of Alumni Networks — Success of Startup Companies Correlates with Online Social Network Structure of Its Founders, researchers found that university networks whose alumni have a stronger “old-boys-network” (larger share of links between alumni) are more successful as founders of startups.
Researchers studied German universities, founders, and online social networks to see if they could identify a link between social/alumni networks and successful entrepreneurs.
Key findings in the study:
- Strong alumni networks: Universities whose alumni prefer friends from the same university seem to be more successful in creating new businesses and generating higher economic contribution per startup founder.
- Organized as tribes: University alumni networks that were successful in founding startups – measured by their average economic contribution – are organized as tribes.
- Founders are tribal leaders: Results on the individual founder level show that the more founders are embedded in their own tribe, the more successful will the business be.
How this relates to investing in Israeli startups
We’ve written at length about how Israel is one of the world’s best places to start up a company.
As a cluster of investment capital, highly educated entrepreneurs, and strong military/university ties, Israel has been outstanding in launching, building, and selling startups over the past 20 years.
I wonder if this study was done in Israel if the military tribalness would supplant the university’s role in the German ecosystem. Regardless, at a senior level, Israel’s academic institutions probably mirror those in the rest of the world.
So, determining how embedded a startup’s founders are in the military/university network and support apparatus may be a good signal to their future success.
Instead of sending the founder’s DNA to 23andMe for genetic testing, simply turn to LinkedIn and drill-down on her network: how large it is, how tribal it looks, and how ultimately embedded she is.
>>Interested in identifying, researching, and investing in some of Israel’s top entrepreneurs and the companies they build? Apply to join OurCrowd.
Should startup investors bet heavily on one sexy startup? Or, should you keep your investments in startups relatively small and spread them out over multiple early stage companies?
This question of how many startups an investor should invest in is one of the most frequently asked questions in the startup investing world. For people who invest in venture capital funds, it’s not really a question they need to address. They assign a representative — a venture capital fund — to make investment decisions on their behalf.
But with the rise in popularity of angel investing and crowdfunding, investors are becoming more active in the startup investment process. The issue of the right number of startup investments an investor should make becomes a more integral part of the investment process.
2 approaches to investing in startups
- Concentrated, large bets: This approach is all about zeroing in a single or small number of investments with a relatively large bet on their success. It’s like a sniper who is down to just a couple of bullets in his investment gun. When he pulls the trigger, it’s gotta count. Investors who take this approach believe that they’ve identified a large, winning idea and will massively profit if their startup investment makes it big.
- Diversified portfolio: This is a more defensive approach to startup investing. Instead of betting on just 1 or 2 startups, this approach admits that it’s hard to identify winning investments. Good ideas don’t always make for good investments, so instead of concentrating investment money, these types of startup investors invest in multiple (say, 6-9) investments. The idea is to make smaller bets and spread the risk around enough in the expectation that some of the investments will fail.
Like investing in the stock market, successful investing in startups is about risk management. Most of the members of the Investing Hall of Fame (doesn’t really exist, but it should) like Warren Buffett didn’t make their billions by making super-concentrated bets. They did so by making sure they didn’t lose money along the way. They were portfolio managers.
By the way, the same risk management approach is used by successful entrepreneurs. Just read Peter Sims’ Little Bets: How Breakthrough Ideas Emerge from Small Discoveries. According to the research Peter did, top innovators and entrepreneurs got to the Promised Lands of Startup Success by not risking too much on their ideas, taking small bets and iterating along the way until they found their product or market.
Diversification and startup investing
Successful investing isn’t about nullifying risk — that’s impossible. When you’re making a bet on a future outcome, there’s risk involved. History’s best investors have found the right mix of risk for a given expected future return.
The allure of riches sometimes clouds people’s thinking. Early on, when an investor begins looking seriously at making startup investments, it seems like almost every startup you meet is on the verge of becoming the next Google, the next Facebook. With time, though, and the experience of informally benchmarking every new startup you see against what you’ve seen previously, it gets easier to see that some startups are better positioned for success than others. Maybe their teams are stronger, experience greater, idea more baked, or aiming at a larger, bigger market.
Startup investing returns improve greatly when you begin to build a portfolio. According to Robert Wiltbank at Willamette University, while most angel investors lose money, when angel investor begin building portfolios of at least 6 startups, their returns go from negative to positive — in fact, the average startup investor with at least 6 startups in his or her portfolio, sees returns upwards of 2.5X on his/her money.
OurCrowd and the diversification benefits of investing in Israeli startups
OurCrowd employs a hybrid model that takes the best of angel investing (discretion, smaller minimums) with the professionalism of venture capital (we screen all our deals and invest our own capital alongside individual investors). Successful investing in Israeli startups requires a portfolio approach — Israeli M&A encompasses a smaller number of deals (there were about 50 Israeli exits in 2012) and a relatively small exit size (an average of $111M per deal).
Our platform is an easy way for investors in startups to build a portfolio of Israeli startups. With as little as $10k per deal, investors get a vetted, steady flow of startups in the medical, telecommunications, security, e-commerce, etc. fields.
If you’re an accredited investor, apply to OurCrowd and begin building your own startup portfolio.
M&A in the 2013 Israeli start-up realm begins with a bang as Network equipment giant, Cisco acquires Intucell
for a whopping $475M.
Intucell’s technology provides a solution for cellular networks to optimize their mobile traffic’s speed and keep disrupted calls to a minimum.
Founded in 2008 and located in Raanana, Intucell has grown at a rapid pace, evolving from an idea to a commercial success in less than a year, and has branched out on a global scale to the United Kingdom and Singapore.
US based Bessemer Venture Partners, one of the most successful VC funds in the world, will take close to half of the sales price, after funding Intucell’s $6M series a investment round in late 2011, entirely on their own.
Intucell’s Co-Founders, CEO Rani Wellingstein and VP products Ido Susan stand to make a nice chunk of cash as well estimated at around $80M each.
This is the 12th company and one of the largest deals made by Cisco in the Israeli technology market.
The Wall Street Journal summary of M&A in 2012 showed that even though fewer deals were made in comparison to its previous year the amount of money spent was higher, thus making this mega acquisition of Intucell by Cisco an encouraging sign of continuity in 2013.
|David is a Research Analyst, Customer Support Admiral and CRM Wizard at OurCrowd.|