Friday, May 26, 2000 | return to: business, professional, and real estate


Silicon Wadi not that far from Silicon Valley, prof says

by BUZZY GORDON, Jerusalem Post Service

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JERUSALEM -- Charles Holloway is that rare breed of academic who has an impact on the real business world.

Besides being a professor at Stanford University's Graduate School of Business, he is co-director of the Center for Entrepreneurial Studies and sits on the boards of several high-tech companies.

As an innovator who invites CEOs of such companies as Cisco and Intel to join him in the classroom, he is training the upcoming generation of American entrepreneurs.

His advice and counsel are sought because of his unique perspective into the culture and education of Silicon Valley's high-tech environment.

Recently in Israel as a guest of DS Polaris Venture Capital, he observed that many similarities, specifically relating to problems and challenges, exist between startups in Israel and the United States.

According to Holloway, the respective breeding grounds for these startups is similar.

In both Silicon Valley and the so-dubbed Silicon Wadi, he says, there exist opportunities, resources and the type of structure and organizational style conducive to success in the competitive high-tech arena.

In the area of venture capital, Holloway notes that Israel scores very high with nearly $300 of venture capital per capita -- greater than the ratio in the United States and "on a par with the intensity of Silicon Valley."

The professor also notes the parallel tensions that exist between entrepreneurs and their venture-capital backers. In both countries, "there are those who call the latter not venture capitalists but vulture capitalists."

Nonetheless, Holloway maintains, entrepreneurs need good venture-capital firms behind them, for reasons that go beyond just money.

"Venture firms can bring the ability to open doors leading to valuable strategic partnerships, a reputation for 'delivering' and fair dealing, and a close relationship with principals that results in trust."

This confidence becomes especially important, insists Holloway, when it comes time to recruit professional management to run a company.

A founding entrepreneur is often fearful -- and suffers a bruised ego -- at the prospect of losing much of the day-to-day control over her or his "baby."

Some venture-capital companies begin calling the entrepreneur the "interim CEO" from the start, Holloway notes, to get them used to the idea.

Another vital perspective that these companies bring is the "big picture" view of the marketplace while the startup may narrowly focus on its particular product.

Holloway is a firm believer in the need for startups to employ experienced CEOs if they wish to have a chance at success. Holloway maintains that it may be more beneficial to hire an American to head a company due to different perceptions of the global marketplace.

For example, Holloway disagrees with the latest conventional wisdom among many venture-capital companies -- especially in Israel -- that "business-to consumer" Internet companies are already passe, and the hot new area of focus is "business-to-business" interaction.

"The experience and continued growth of eBay belies this presumption," Holloway says. "This auction site has seen exploding sales in every quarter over the last three years. "

In 1999, for example, gross merchandising sales shot up from $541 million in the first quarter to $901 million in the fourth quarter, he says.

"Not only are there no signs of this slowing down, but they are planning to add used cars to the mix. And this segment alone can account for an increase of activity worth $370 billion."

One ingredient that Holloway notes is missing in Israel is the kind of synergy between the worlds of academia and startups, such as the role that Stanford University plays in Silicon Valley.

And while Holloway is aware of the contributions of top-notch Israeli universities toward providing skilled professionals for local startups, in his opinion the ongoing relationship falls short.

"There is a need here for Israeli universities to become more integrated with resource providers," he advises.

In the final analysis, however, Holloway concludes that the critical ingredient for success may well still lie in the perseverance of the company founder, saying the distinguishing factor between an excellent startup and a mediocre one is the enthusiasm of the entrepreneur.

"This enthusiasm can propel a company forward for quite a long time."

Holloway then points to a statistic that Israel has twice the rate of "entrepreneurial events" as the United States. In other words, says Holloway, twice as many Israeli university graduates are likely to form their own companies or join startups as their American counterparts, who are also attracted to traditional corporate executive positions.

The expert from Silicon Valley may have put his finger on a positive development in this so-called post-Zionist era: The pioneer spirit is not dead in Israel. It has just migrated from agriculture to high-tech.


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