Israel Economics

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"Venture capital isn't hit and run"

Gemini's Tali Aben on being a woman VC in Israel and Silicon Valley, the importance of networking, changing trends in investment, and the difference between Americans and Israelis

Nir Nathan 16 Feb 06 14:02

“What is the status of women in the venture capital sector?” jokes Tali Aben, senior partner at Gemini Israel Funds. "Perhaps you mean the lack of status.”
Aben was the first female partner to join Israel's venture capital sector in 1994. Many more women have since followed in her footsteps to join Israeli and US funds, but they clearly remain a minority. You only have to look at the latest "Forbes" Midas List to see find that of the 100 investors in the venture capital sector, only four are women, with the top name ranked at only number 22 in the list. (The list also features two Israelis, Israel Seed Partners general partner Michael Eisenberg ranked 39th and Jerusalem Venture Partners managing partner Erel Margalit was number 88).

Aben has been operating out of Silicon Valley for six years, during which women have substantially improved their standing in the high tech industry. The industry now includes leading female personalities such as Carly Fiorina of Hewlett Packard (who has since been let go); Israeli-born Safra A. Catz , Oracle president and CFO, and heir apparent to Larry Ellison and even Aliza Peleg, US-based managing director of SAP Labs US, to name but a few.

”We are seeing more women in the US venture capital arena,” says Aben, “and this is a result of the sector growth. As the industry has expanded, more people have joined, women among them. But when you look at the sites of funds in the national league, you will notice that the only women listed hold financial or administrative roles. Very few are partners.”

Globes: ”Have you ever been treated differently, or have you been subjected to insulting comments?”

Aben: ”Definitely not. The industry is not against women, there simply aren't enough of them. It’s weird but it does have its advantages. At the end of a board meeting for example, there is a queue for the men’s room but women are spared this.”

Married with three children, Aben says she had two of her children while working at the fund.” I always say that my children spent more time in board rooms that most adults will ever do in their entire lives.”

”How do people respond when you bring your children with you to meetings?”

”I get a few raised eyebrows, but children have to eat. This is my approach; it’s part of life. I am woman with three children. In Israel, the children would have come to the Gemini offices. I brought them to the office in the US several times and they considered it highly irregular. It was sort of, do you actually have a life outside work?” Over here, hanging photos of the children on the wall is about as far as it goes. They are not a topic of conversation. Women play by the rules. If prompted, they cooperate, but they will not take the initiative.”

Don't visit, be part of the system

Aben’s motive for her extended stay in the valley can be summed up in one word: networking.

”You cannot compared the level of contacts and networks of someone who lives here and is part of the community with that of someone who pays the occasional visit. This is the difference between being a part of the system rather than a visitor. It’s a case of human interaction. You see them everywhere: in schools, coffee shops, elevators, stores, cocktail parties and at meetings. The American concept requires that you be ‘in their face.’

”What advantage do you have, in practical terms, over other Israeli venture capital firms that pay the periodic visit?”

”Israel is a long distance from here and we aim to enable our companies to grow and develop as efficiently as possible. They cannot do this without help from the locals. Companies also want someone whom they can call at two in the morning, local time. As a fund, we need to be able to refer our company boards to the people with the most contacts. It’s important that the people you call know you and have seen and heard about you.”

Aben talks about Business Events Solutions, which specializes in business intelligence. The company recently invited Yorgen Edholm founder of Brio Technology and board member at Hyperion Solutions, to join the board. Brio Technology has since been acquired by Hyperion. “This is an example of an Israeli start up which from the outset has a key figure from the industry on its board,” she says.

”How do Israeli funds manage to do good business, despite not having a permanent presence in Silicon Valley?”

”Pitango Venture Capital is here. As regards the others, you’ll have to ask them. Apparently, you can do it differently too.”

”Why not recruit local representatives?”

”This is difficult and simply doesn’t work. I have been with Gemini for twelve years, six years here and six years in Israel, so I am not an outsider that has been brought in but part of the group. It’s absolutely critical that you have someone on the inside. We are located in the heart of the business zone in Silicon Valley, everyone is here. Matrix, Sequoia, LightSpeed and Kleiner Perkins. When you go to lunch, you see the people you work with regularly.”

”In other words, networking.”

”Exactly. I don’t play golf but I go to more cocktail parties than the average person does in his whole life. It is part of the way business is done here. The fact that I am based here does not exempt the other Gemini partners from coming here but things a lot easier when you have an anchor and a permanent representation.”

”Gemini is a well known brand. You probably had a tough time at the beginning, when you first set up the Silicon Valley branch.”

”When I first arrived, no one returned my emails or calls. It was terribly frustrating, but we were persistent enough not to give in. Today I can even send an email at eleven at night and get a response.”

”What has changed since then?”

”History. We’ve had success and people simply know us now. The Gemini brand is one that leading funds are now familiar with. This is important since they simply disregard anyone who is unimportant or whom they don’t know. They don’t have time to waste.”

”Have you noticed any signs of openness among funds that do not invest in Israel?”

”There has been a marked change. I have seen this reflected in the willingness of groups such as Kleiner Perkins, who were not always willing to look outside Silicon Valley and consider us. Such is the effect of globalization; the changes taking place globally have left them with no choice. They have looked at opportunities in India and China and leading on from this, they are now willing to look at possibilities in Israel.”

”Do the American venture capital firms see you as rivals?”

”No. As far as they’re concerned, we’re a fantastic partner. We don’t compete with them over the same deals but rather, we constitute a dealflow source. Gemini makes seed investments in Israel and then hands over the next investment stage to them. We have some very interesting companies and the firms love to see how we are progressing. We have an advantage thanks to our work with Israeli entrepreneurs and companies.”

”How you would respond to someone other than an Israeli who pitches you with a brilliant idea?”

”I would want to know what his reason was for approaching me. I am not going to compete with Kleiner Perkins for deals in the Valley. The Americans haven't had a bad word to say to me.”

Tali Aben grew up in Chicago to Israeli parents. She moved to Silicon Valley at the beginning of the 1990s, when she founded the US branch of Mercury Interactive (OTC: MERQ). She then worked at Sun Microsystems (Nasdaq: SUNV), following which she returned to Israel. She joined Gemini in 1994, returning to Silicon Valley in 2000 as the firm’s local representative. “I know the American culture and the organizational culture of Gemini, so it comes naturally to me but I do not necessarily plan to be here for the rest of my life.”

”Do you find yourself having to continually adjust to the different business mentalities in Israel and in the valley?”

”I can act like both an American and an Israeli but you need to be able to adjust as conditions require, in matters such as the interviewing and vetting process. Americans will never say a bad word about anyone for fear of being sued, and this makes it very hard to get the truth from them. You have to phrase your questions in the appropriate manner. Americans are also extremely facile and you have to understand the rules of the game to get what you want. One such example that comes to mind is the Israeli entrepreneur who approaches an American investor who replies that he is interested when in fact he is not interested at all.”

”So what is the venture capital industry interested in at present?”

”It changes constantly. Back in 1999, the big hit was technologies for powering the Internet and that soon faded. Then we had wider interest in software and security products for organizations and now Internet is back albeit with the emphasis on consumer-related services. Israeli companies are also now turning their attentions to the domestic consumer sector.”

”What effect has the hype generated by the trade press or analysts had on investment options?”

”We don’t deal in hype. We do need to be aware of it, however, and adjust accordingly. Some fields are popular and the local community is more willing to consider them. Relations with analysts are an important factor when it comes to sales and financing rounds. If I want to invest in software I need to know which industry players would be interested and which are not.”

”To help us learn the market map and focus our efforts on the really important targets, Gemini has made use of a local program, The Forbes CIO Forum . This is a form of advisory committee comprising former and current senior managers who are well connected within the high-tech industry. The list of members includes the CIOs of ti.comTexas Instruments (NYSE:TXN), att.com AT&T (NYSE:T) and the CTO at ebay.comeBay (Nasdaq: EBAY).”

”How did you recruit them?”

”By networking. These are people who really love technology but are constrained by their full time jobs and thereby unable to innovate. I am certainly not looking for a one day wonder or a hit that will be all the rage for two to three years. For them, the relationship with me constitutes an efficient use of their time as it helps them get a perspective of the technology world and the changes that have taken place. If they don’t work with start-ups, they won’t be at the cutting edge of technology.”

Such contacts have enabled Gemini’s portfolio companies to contact other CIOs and gain first hand information about target markets and how to locate target customers. Aben mentions another forum member, the former vice president for technology at Charles Schwab Inc. who has since moved to supermarket chain safeway.comSafeway (NYSE: SWY), and helped one of Gemini’s companies that operated in the online supermarket sector.

”She helped me arrange a meeting for our company with the person that built Safeway’s entire online system. A company wanting to work in this field could not ask for a better contact.”

”Is it sometimes wise to sell?”

”If there’s one element that I hate about venture capital work, it’s raising finance.”

”Why?”

”It’s a long process during which you field questions from every direction. I love investing in companies and working with entrepreneurs and startups. Obviously we can’t do any investing if we don’t have the money, and this is something that is handled by our CEO Yossi Sela, although we are all involved at one level or another.”

”Firms and entrepreneurs are sometimes criticized for rushing to make their exit before the company has had a chance to grow and establish itself.”

”Sometimes selling is the right thing to do. The industry is changing, the players are changing and those changes affect the ability to compete with the leading players. If a sector undergoes consolidation, it is not always wise to remain a small player. There are many people today who claim that the enterprise software sector will not see any more share issues. You have Oracle, SAP, and IBM, while all the others will merge. Notwithstanding this, people are still investing in enterprise software.”

Aben, as mentioned earlier, previously spent her time traveling the length and breadth of Silicon Valley in her role as Mercury’s first marketing manager, long before the company become one of Israel’s most successful high tech companies. Ranked at no. 16 within the company hierarchy, she assumed responsibility for preliminary product launches as well as the opening of the company’s US branch.

”How do you feel about the highly publicized crisis at Mercury?”

”I’m a long way from all of this but I can say that the press did not treat them kindly. It has a short memory and that irritates me. The attacks on the company’s senior management were simply unfair.”

”You are obviously referring to Amnon Landan. There was talk of him possibly moving, eventually to the venture capital sector.”

”Amnon is a phenomenally talented person. I think people are jealous of his achievements. He is an amazing man and I would be very happy to work with him in the future.”

Aben is also full of praise for Boaz Eitan, founder and CEO of Saifun Technologies , a Gemini portfolio company which made waves during its IPO at the end of last year and whose market cap is now approaching the $1 billion mark. “Boaz is one of Israel’s outstanding entrepreneurs. The whole story was amazing. Along comes an entrepreneur and sells you a dream about an unproven technology. You trust the man’s integrity and background but it was still a big risk. Saifun is how an Israeli company should be and I hope there will be many more. All we want is to invest, make money, create jobs, and inject a bit of Zionism in the process.”

”How many more companies like Saifun do you have in your portfolio?”

”We invested in Saifun in 1998; the process takes several years. Our philosophy requires us to support a company so that it has a chance of growing and becoming a success, but the journey is long and the work immense.”

”So is there such a concept as the Midas Touch?”

”The venture capital sector does not work on a hit and run basis. Anyone who has the idea that this is a case of having a Midas Touch, or to put it differently, stumping the cash and waiting for the quick exist, will find it doesn't work that way.”

Published by Globes [online], Israel business news - www.globes.co.il - on February 16, 2006

http://www.globes.co.il/serveen/globes/docView.asp?did=1000062284&fid=1724

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