From $1 million to $100 million – a conference sponsored by “The Marker” - Israel’s leading financial publication, and Pelephone – one of Israel’s mobile communications providers.
I attended this conference, held yesterday (15 Nov 2009), and thought I’d share some of the more interesting snippets and insights from the opening and first panel session. The main focus of the conference was on what it takes to grow a startup company from its initial revenue-generating stages to a substantial player, making more than $100 million in annual revenues.
How many Israeli startups are there, and how many of them become big players? Why?
Gil Sharon, the CEO of Pelephone quoted the following interesting figures:
- Of 1,600 startups that were created in Israel during the last 15 years, only 9 grew to become independent players making $150 million or more in annual revenues;
- Of 900 startups created in Israel during the preceding 15 years, 17 grew to become such large players.
According to Gil Sharon, the top three critical aspects for becoming a large player (and the reason so many Israeli startups don’t) are:
- Marketing, marketing, marketing;
- A production process, organization and infrastructure that is planned and built for growth; and
- A funding / capital structure that supports long-term growth over (smaller) short-term gain.
What’s THE key learning offered by Sir Ronald Cohen about the most important factor in the ability to lead a company to significant growth?
It’s the “ability to anticipate the second bounce of the ball.” The capability to make money out of uncertainty by anticipating the changes that will happen – more than just one step ahead.
Sir Ronald also mentioned the importance of recognizing that the role of the startup’s leader changes with the growth of the firm, requiring the CEO to empower his/her team to take decisions autonomously.
My Take: This ability to relinquish some of the leader’s control is a requirement for leaders at all levels of the organization. Too many companies I know suffer from an over-reliance on key individuals, including industry / functional / technical domain experts.
What attitudes are inhibiting Israeli startups from growing to become large companies?
Zohar Zisapel: “Israeli entrepreneurs have a tendency to exit relatively early, when they can make a few millions of dollars, rather than aiming for much greater levels of success.”
Dr. Orna Berry: “Venture capital firms will have to change their investment mix. Things cannot continue this way.” (referring to the reluctance of VCs to invest in late growth stages)
Dr. Yossi Vardi: “I recently participated in an un-conference of 200 young game developers… Maintaining the energy and entrepreneurial spirit I’ve witnessed there is much better for all of us than striving to get all of them into one massive company“; and “We shouldn’t strive to have an Israeli Nokia!“
My take:
- I think all of the abovementioned panelists are right, but I’m with Dr. Vardi – we ought to leverage our strengths rather than trying to force ourselves to wear someone else’s shoes…
- Notwithstanding the above, I think startups do need to cross the chasm between the $1 million revenue level and the $100 million revenue level. Only those who are able to move from a focus on “innovator” and “early adopter” customers to “early majority” customers will really have a major impact on their industry.
- By now, there’s a lot of experience from which startups can learn. There are pragmatic ways to cross this chasm without losing the spirit of innovation and without drowning in beurocracy!
