A dozen and a half young Israelis in their 20s and 30s live together in a big house in Menlo Park. They go grocery shopping and cook dinner together. The bathrooms are shared. This might sound like a bunch of college students trying to save on rent, or the cast of a new season of the “Big Brother” reality TV show. But it’s neither.
These young people are some of Israel’s top young entrepreneurs, and they are in Silicon Valley to take part in a program run by UpWest Labs.
Begun in January 2012 by a group of seasoned Israeli-American high-tech leaders, UpWest Labs is an accelerator that brings teams from early-stage Israeli startups to Palo Alto for an intensive, three-month experience meant to expose them to the U.S. market and help them move their companies to the next level.
“It’s about accelerating the time to market for these companies’ products, and about leveling the playing field for Israeli startups,” said Shuly Galili, who used to lead the California Israel Chamber of Commerce, and now runs UpWest Labs with partners Gil Ben-Artzy, a former Yahoo vice president, angel investor Liron Petrushka and operations expert Yael Winer.
“Israelis are strong on technological research and development,” Galili added, “but they don’t usually have good access to the main market for their products — the U.S. — nor do they have the required connections to U.S. funders.”
Whereas young Israelis a generation ago went to Los Angeles in search of entry-level jobs in the entertainment business, or to New York to work for moving companies or in electronics stores, now they flock to the Bay Area’s Silicon Valley and Manhattan’s Silicon Alley as founders of high-tech startups.
Thanks to the excellent computer coding skills young Israelis gain in the army and in top-notch engineering programs at the country’s universities, as well as a can-do Israeli attitude, it is not surprising that Tel Aviv is often tabbed the No. 2 high-tech area in the world; with some 700 startups, it is second only to Silicon Valley in startups per capita.
But operating in Tel Aviv’s Silicon Wadi is not enough.
Better-known Israeli Internet companies have shifted some if not all of their operations to the United States. Waze, a mobile mapping company that uses crowdsourcing (contributions from a large group of people, especially an online community) to supply real-time traffic information, is now headquartered in Palo Alto. Waze has been all over the tech news in recent days, after being courted by Google, Apple and Facebook. Google beat out the others and acquired the company this week for a reported $1.1 billion.
Smaller startups are following suit, realizing that while the Israeli labor market can provide skilled coders and technicians, only the U.S. market can provide the kind of financing and customer base required for companies to succeed.
“The ability for them to have a connection to the U.S. market is critical,” noted Dan Scheinman, an angel investor who mentors UpWest Labs program participants. “It helps increase the scope of their ambition.”
While in the past, Israelis might have been conflicted about coming to the United States, reluctant to admit that they were putting down roots outside of their homeland, now young Israeli entrepreneurs consider setting up permanent shop here not only a necessity, but also a triumph.
But getting a new company to the point where it has raised enough capital and gained enough market share — thus necessitating the setting up of business operations in the U.S. — is a difficult process. Not every startup has what it takes, or the connections, or even the opportunities to make those connections.
That’s where UpWest Labs comes in.
Three times a year, UpWest Labs hosts a cohort, usually composed of teams from five startups. The current group arrived at the Menlo Park house in April and will return to Israel in early July. They meet at UpWest’s offices in Palo Alto.
Startups gain acceptance to the program through a highly competitive process, which includes face-to-face meetings with members of the UpWest Labs team, who visit Israel several times a year in search of the best and the brightest. Between 130 and 150 startups apply for each cohort, but only five are chosen.
Ben-Artzy spends a full month in Israel conducting interviews with applicants, and he looks at each company from several angles: technology, business and marketing. He recognizes that these startups are in very early stages, with some lacking a final product, customers or funding. Still, he looks for companies with unique, strong technology, strong entrepreneurship, and a big idea for a big market.
So far, UpWest Labs has focused on companies in the fields of consumer Internet, mobile, enterprise software, e-commerce and cloud computing — always mindful not to place companies that compete with one another in the same cohort.
“We are looking for good people,” Galili said. “But at the same time, we are aiming for diversity and always have one female CEO per cohort. We have about 25 percent women overall, and we hope that will increase.”
One such woman is Limor Goldhaber, the 28-year-old CEO of Dscovered.com, who made the hard decision to leave her partner and 21⁄2-year-old child at home in Ra’anana to bunk with a bunch of strangers for three months. She recognized the boost UpWest Labs would provide.
“You have to take the opportunity,” she said. “Our market is in the U.S., and we need to be near our market. It’s a chance to get into the heart of the startup world and to meet great, influential people who we otherwise would not.”
Goldhaber, an architect and graphic designer, began her company a year ago as a way to match designers with clients. She noticed that it was easy for clients to say whether or not they liked a design, but that it was difficult for them to explain exactly why.
Although they say there is no accounting for taste, Goldhaber and her team devised a way to analyze it, and to match client taste with specific designers. Right now the company is focusing on graphic and visual design for websites and mobile applications, as well as on full branding packages. Later, it hopes to branch out to interior design and product design.
The most important thing she’s learned while at UpWest Labs is “that there’s a big difference in culture in the way people engage with our product here in the U.S.” Her team has come to realize that their communication needs to be more tailored to American consumers.
“We were using too much ‘chutzpah.’ The messaging on our website needs to be more elegant and less in-your-face,” Goldhaber said, alluding to the direct style of typical Israeli communication.
Another huge lesson: When people had trouble pronouncing the original name of her company, Dezquare.com, it was decided to change it to Dscovered.com. The changeover will be complete by the end of June, she said.
UpWest didn’t have to build its program from scratch.
“This isn’t a new model,” Galili pointed out during an interview at the UpWest office, as startup teams huddled nearby in front of computer stations. “We didn’t want to reinvent the wheel, so we looked at other seed accelerators like Y Combinator and TechStars.”
“But what makes us different,” Petrushka added, “is how much more hands-on we are, and also how much contact the groups have with one another since they all live in the same house.”
The companies’ leadership teams are brought to Silicon for the three months, put up at the Menlo Park house and given a stipend of up to $20,000. They also benefit from mentorship from 60 leading Silicon Valley professionals, and from workshops on product development, marketing and how to work with investors.
The program culminates with Demo Days, during which the startups present themselves, their products and their visions to accredited investors. The current cohort will present in Palo Alto on Tuesday, June 18 and in San Francisco the next day.
In return the stipend and all the mentoring, UpWest Labs, structured like a venture capital firm, gets up to 8 percent equity in the startup companies. Of the 23 companies that have completed the program, more than half acquired seed funding from venture capitalists or other connections,
Noam Schwartz hopes his startup will be one of the ones to nab seed funding.
Schwartz, CEO of Moolta.com, who came to UpWest Labs with his company’s team, gained key insight into his startup that he is certain he would never have gotten in Tel Aviv.
Moolta.com started as a video-based fundraising site for nonprofits, but “within 10 days of arriving in Palo Alto, we decided to pivot 180 degrees,” Schwartz, 28, said. “We realized our perspective of the market, of our product and our user dynamic were all wrong.”
He said that coming to Silicon Valley was the best decision his company had ever made. “We were looking at the world as though through a straw. It turns out that people didn’t care about what we were doing. It was old news,” he said. “We’ve come up with a new idea with a big market of big clients with big pockets.”
Deciding to play to their strengths — notably their backgrounds in the army and in the business world — Schwartz and his seven-person team decided to shift into the field of business intelligence. Their company will help businesses track their competitors.
Though not everyone in the program has rethought things as dramatically as his company has, Schwartz has noticed huge changes among the participants.
“People are changing. They are using different words. Their thought processes are different, and they are giving feedback in a different way,” he said.
One of the ways the groups “think different,” as Steve Jobs would say, is in terms of potential growth.
Scheinman and other mentors work with the companies on how to scale up and how to go for bigger outcomes, as well on how to communicate effectively with potential investors. “They need to be clean and clear on their ideas,” Scheinman said.
Venture capitalist Jeff Tannenbaum likes working as a mentor to these talented, driven young Israeli entrepreneurs. “Israelis don’t hesitate,” he said. “They’ve got it in them to connect with people.”
Tannenbaum, who helps the teams polish their fundraising pitches for Demo Day, also likes that Israelis are not afraid of critique. “I can speak very directly to them, and they are receptive,” he said. “I’m not going to cover up what is lacking. They can take it.”
Mentor Jonathan Matus, a veteran of Google and Facebook and himself an Israeli, “fell in love with the program from the beginning.” His focus with the startups has been on product development and fundraising. In particular, he helps them craft their story so it does not focus on the product or the problem it addresses, but rather on the opportunity it creates. “It’s about finding the North Star, about grand ambition,” he said.
While Matus enjoys devoting a couple of hours a week to the emerging businesses, he equally likes getting to know the companies’ teams on a more personal level. For instance, last year he hosted a social event for them at his place in San Francisco.
The teams work round the clock while they are at UpWest Labs, and the intensity helps forge close, supportive bonds among the entrepreneurs. Some stay in touch once they return to Israel, and all maintain ties with UpWest Labs, especially since almost all successful Israeli startups eventually base their business and marketing operations in the U.S.
Lior Romano, wearing his black “Contacts+” T-shirt, is a familiar face at the accelerator’s offices. “I never take it off. I even sleep in it,” he quipped about the apparel with the logo of his company, which is growing quickly.
Romano and his team were in the first cohort at UpWest Labs back in January 2012, and now Contacts+ is the leading contacts application for Android. It will soon be available for Apple devices and comes in 22 languages. “We raised $1 million seed money after we were at UpWest Labs,” Romano said.
As an alumnus of the program, Romano has been able to continue to use the UpWest Labs facilities when he is in town, as well as the accelerator’s help in setting up meetings and other support services. Already spending three-quarters of the year in Silicon Valley, the CEO plans on moving here permanently later this year.
Galili said results like that make it all worthwhile.
“I love working with entrepreneurs,” she noted. “I was only touching the surface before [with the California Israel Chamber of Commerce]. I felt I could go deeper if I worked with fewer companies.”
For the founders and partners at UpWest Labs, who personally invest in the Israeli startups they bring over for the program, it is a business venture.
But ultimately, it’s more than that. It’s about building a bridge between the Bay Area and Israel in the way that they best know how.
“I’m now working here more than I am in Tel Aviv, thanks to the opportunities given my startup by UpWest Labs,” Romano said. “It gives the company Silicon Valley DNA.”