Israel 2.0

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,, Tradeum and Xacct.