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Summary:

By Michael Eisenberg The telecom downturn following the bursting of the late 1990s bubble is finally becoming a distant memory. While US telecom and broadband markets are only now emerging from the slump, broadband networks have been growing at a breakneck speed. The growth of telecom […]

By Michael Eisenberg

The telecom downturn following the bursting of the late 1990s bubble is finally becoming a distant memory. While US telecom and broadband markets are only now emerging from the slump, broadband networks have been growing at a breakneck speed. The growth of telecom and broadband networks worldwide has created big opportunities for Israel.

Israel 2.0 is all about broadband, and broadband driven innovation.


Despite being a tiny country, Israel ranks ninth in terms of broadband penetration. Although speeds are limited to 2 Mbps, Israel is obsessed with news and connectivity to the outside world, Israelis spend more time online than any other country on a per capita basis (link to Ynet article in Hebrew).

This Broadband penetration is critical to Israel’s continued success in the web infrastructure and content world. Because if you can touch it and experience it, then you can build it. If you can sense what users want as a user then you can develop it. Without realizing it, Israeli technology touches lives of users world wide. There is a good chance, you phone bill is processed by Amdocs, the world’s leader in billing systems. Your voicemail is likely based on a system from Comverse Technology and many of your networks are protected by different Israel-based security companies.

The broadband experience has also resulted in Israel becoming a hot house of development for key broadband technologies. It also means good times for telecom/broadband companies such as ECI Telecom and Metalink, both seeing substantial growth for their products. In a 2004 report, Lehman Brothers remarked “All of China’s major operators rely on Israel telco equipment and software…Hong Kong/China has now become Israel’s fifth largest export market…growing 30% annually…Telcom equipment represents as much as 50% of this trade-grew at a 40% rate last year.”

Israel is also beginning to contribute breakthroughs and leaders in the broadband internet world. Bigband is a $100M revenue leader in video, voice and data transmission (triple play) on the brink of an IPO according to reports in local Israeli press. Passave, the leader in EPON was just scooped up by PMC Sierra in a $300M acquisition.

While many of these companies are unlikely to become verbs (like To Google, for example), a new crop of Israeli start-ups are building compelling experiences for broadband users and have become part of the Internet life.

Many of you have heard of YouTube in the online video sharing space but fewer of you know about Metacafe (Disclosure: Benchmark investment), an Israeli company that ranks #2 in the online video ( alexaholic graph here.) Similarly, Myheritage is pioneering a web 2.0 approach both to genealogy and face recognition. Kassamba is a leader in expert advice, while Jajah (backed by Sequoia) is taking on the VoIP giants such as Skype.

Michael Eisenberg is a general partner with Benchmark Capital and is based in Tel Aviv, Israel. He is a veteran of Israeli VC community and his past investments include Finjan, Gurunet, Picturevison, Shopping.com, Tradeum and Xacct.

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  1. Thanks for this inspiring post Michael. Israel’s global impact on technology is testament to its brainpower, entrepreneurial culture and the profound ability of the Internet to break down geographic and bureaucratic barriers. It’s an exciting time for young entrepreneurs all over the globe.

    Another noteworthy point is the impact of Israeli technologists and entrepreneurs on non-Israeli companies. Is it just me or does it seem like most Web 2.0 companies have an Israeli somewhere in their midst causing trouble. Disclosure: I’m the Israeli co-founder of Pando Networks (www.pando.com), an NYC-based startup that employs 4 Israeli’s.

  2. Jahjah isn’t the same as Jajah, right? Jajah is backed by Sequoia too. But I thought both Daniel Mattes and Roman Scharf were European.

  3. Kasamba is really good. I find it a lot better than Google Answers because you can actually view the past reviews on the ‘expert’ and his credentials.

  4. Israel is a fantastic place for high tech and entrepreneurs. This country has a fantastic track record in many vertical industries like security or enterprise software. Curiously internet was not so explored (ICQ and Shopping.com aside). We feel it is changing now. Israeli entrepreneurs understand internet (call it web 2 if you want) is a fantastic playground to make business. We (Israeli) still have to prove as a country we can produce consistently world class winners in consumer internet in terms of usage and revenues. This will happen soon hopefully.

    Israel is driven by broadband for sure but there is a huge gap between the level of usage and the limit of the access to maximum 5MB unlike most european countries or korea. Let s hope the bezeq (national historic operator) monopoly will fall soon.

  5. This is a great article… I never realized that Israel is so advanced in IT.
    I have been debating the idea of relocating to Israel, but I was so worried about being able to find a job. But, after reading this article, I think my decision is going to be a lot easier.
    I wonder, if you know of other successful companies in Israel that specialize in application software development? I am a JAVA/Swing developer, and wonder if I will find a job in Israel?

  6. Israel is a fantastic place for tech and investment. To Michael’s point it has sophisticated users and developers. And the current environment is all abuzz. After speaking at a recent internet conference in Tel-Aviv that gathered around 2,000 people, I am very excited and looking forward to some of the great companies I see coming out of Israel.

    I love metacafe – definitely check it out if you are a youtube (or the like) fan.

    yaron – yup, lots of Israelis in Web2.0 (or should I say “Veb2″). My theory is it is the integrated, social nature of these companies and the low barrier to entry.

    emre – It is indeed the same Jajah by Sequoia – with R&D in Israel.

  7. Israel is also hot in mobile stuff, like Mobile IM (followap.com)

  8. I am quite suprised still that Israel was able to build such a track record of great companies and is still doing so. I recently went through the Redherring Top 200 Europe list (before the event) and literally every company I found interesting came from Israel. I think I also found the secret of their success. They start companies in areas that are just on the rise and do that at an early but not too early stage. The Europeans on the other hand spend (waste?) still lots of efforts with pure R&D efforts and lack market/business development activities. Israel on the other hand has no choice but to focus on marketable R&D projects due to lack of resources.

  9. Honor Gunday Thursday, June 8, 2006

    I have been considering launching a social network geared towards Israeli youth a la myspace. I was wondering if there are any existing sites out there, and if there are any companies to partner with. Please contact me, if you are interested: honors@gmail.com Thx:)

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