BloGiza

A few harsh words about the local Internet

Let’s talk about our local, homegrown Internet scene.

For those of you who might not know, Israel has over the last decade and a half developed its own Hebrew-speaking Internet industry complete with Hebrew-language portals, news sites, social networks, blogs, e-commerce, and marketplaces.

By and large, everyone in Israeli high tech (the main, overseas-facing high tech industry anyway) ignores the local Israeli Internet. The world of .il seems uninteresting and irrelevant. I have often attempted to buck the trend and gone off spelunking into the Hebrew Internet looking for undiscovered gems. Just as often, I have come back disappointed and I think I am now about to give up altogether.

The latest impetus came a few weeks ago at the Comvention. As with every year, it was a two-day event. The first day featured talks held in English with numerous guests from overseas. The second was conducted in Hebrew and focused on the local Israel-centered industry.

Very few of my colleagues showed up on the second day. In fact, very few people I knew showed up on the second day, even though the convention center was packed. I would estimate that the overlap in the crows between the two days was less than 10 percent. And this is but one indication of the problem at hand. Simply put, the local Israel-facing Internet is small, provincial, disconnected from the outside world, and two or three years behind everybody else.

One of the panels on the second day of the Comvention was entitled “The Israeli Internet – Sleeping Beauty?” To which Gadi Shimshon, a prominent local Internet pioneer, snorted, “Sleeping Beauty? More like a fuggo in a coma.”

He’s right I think. There are a number of dispiriting issues at play in .il:

• Attack of the Blinky Ads –The average American web site has 14 ads on it. In Israel, the average is closer to 100 (I’m not making this up). Click on any major Israeli Internet site. Now shield your eyes. You are immediately assailed by a wide variety of intrusive Flash ads, popups, video clips that start playing automatically, and every other manner of annoyance you can imagine.
  
  While annoying in and of themselves, blinky ads represent a deeper problem: the immaturity of online advertising in Israel. At the Comvention, Kfir Pravda gave an interesting talk about new trends in online video monetization. He talked about viral campaigns and interesting product placement technologies, among other things.
  
  The crowd – which was comprised mainly of ad agency employees – lapped it up. At the end of the presentation, however, a number of people stood up and said that while they would love to introduce more clever and effective advertising online, their clients the advertisers won’t hear of it. Local advertisers don’t want something new and subtle. They want the same old annoying hard-sell with the same old easily measured parameters.

• Firefox? Not here – I challenge my readers to come up with one major Hebrew-language website that renders properly in Firefox. YNet is about the only one that comes close and even then gets tripped up with embedded video. Hebrew sites don’t do Firefox. And I won’t even mention Safari or Opera, heaven forbid.
  
  To some degree, this represents very successful missionary work on the part of Microsoft which for years has actively nurtured generations of local .Net programmers. But it also indicates a real disconnect with the outside world. The main non-IE browsers now account for nearly 25% market share. But you’d never know that here. Local developers ignore alternative browsers because they never encounter anyone who uses them. It’s a closed loop.
  
  The same goes for all them fancy new Web 2.0 services such as Twitter or Digg or De.licio.us. If there isn’t a homegrown version, then nobody knows what you’re talking about nor sees the need.
• Lack of Internet culture - In general, Israel does not have a civilized Internet culture. On the one hand you have the often-hateful “talkback” environment wherein portals and content sites are shot through with ugly user-generated slander. On the other hand, you have Knesset members constantly coming up with new laws whose main purpose is to censor the Internet. Either that or demonstrate that the people in charge of the Internet in this country don’t understand how it actually works.

In short, situation not so good. Somehow, the same country that can produce Internet successes like Yedda and FoxyTunes craps out when it comes to producing homegrown fare.

So, why do I care? I focus on companies which are by definition outward-facing. So, why waste 1000 words on the irrelevancy of the local scene? Because as long as Israel cannot produce local Internet sites that are connected to the world at large, we limit the pool of talented local developers and entrepreneurs who could build the next great outward-facing Internet property.

Does anyone have any ideas what can be done?

The online year that was

As today is the last day of 2007, it’s a little hard to resist looking back at the past year and trying to sum it up. So, I won’t resist. Unlike last year, 2007 is hard to summarize with one handy tag such as “the year of online video” or “the year of social networks”. There was a lot of activity in a number of different areas, the rise of a major player in the social networking space, and the rise of a new form of communication.

So, herewith a few highlights IMHO of the online industry in 2007

Story of the year: The consolidation of the advertising industry
Y’all thought I was going to say Facebook, right? Now, while the rise of Facebook is certainly the most hyped story of the year, my vote for the most significant development  (not to mention the biggest source of M&A activity) is the rapid consolidation of the online advertising space.

During the last 12 months, Google bought out Doubleclick for $3B. Shortly thereafter, Microsoft acquired aQuantive for a staggering $6B. AOL bought out targeted ad firm Tacoda, as well as Quigo which. Yahoo acquired Blue Lithium, as well as a majority stake in Right Media. WPP bought 24/7 Real Media. And the list actually goes on.

The M&A hyperactivity in this sector is an indication of the fact that online advertising has reached a certain stage of maturity. Beyond that, the consolidation is likely to have long-term ramifications, especially in regards to the rise of Google as the behemoth of the information age as well as the development of new business models online. And that’s what makes this, at least for me, the biggest development of the year.

Phenomenon of the year: Facebook
Obviously, I couldn’t not mention Facebook which gained momentum extremely rapidly this year and became the go-to social network for those of us who aren’t musicians, 14-year-olds, or skeevy perverts. Facebook only opened itself up to the world outside the university sphere towards the end of 2006. I joined up early this year. Before long, almost every high tech-ist I knew (and many I didn’t) was on it. Lately, the sphere has expanded further and everyone, their parents, and their parents’ friends are connected. Clearly we’re on to something.

Of course, it will be interesting to see whether Facebook will be an ongoing concern for most people or just a passing fad. I like it for business purposes, as a tool for microblogging, and as the communications platform of choice for a number of my friends. On the other hand, I have a hard time answering those who complain that there’s nothing to do there. We shall see.

New technology: Microblogging
The rise of Twitter and its clones provided us with probably the only real new media form we’ve had in a few years, viz. microblogging. At first, the concept seemed a bit stupid. After all, why would I want to blog in tiny, one- or two-sentence bursts? But then you start getting into it and discover that Twittering (or updating your Facebook status, which I tend to do more) is a nice complement to blogging for those times when you have something small and/or clever to say but which doesn’t warrant an entire post. Plus, it’s the first Internet app that makes perfect sense for the mobile. It’ll be interesting to see who snaps up Twitter and for how much.

Interesting development in local tech: The renaissance of the Israeli internet scene
Three or four years ago, it seemed that the Internet industry in Israel was close to dead. During the days of the ’99-’00 bubble, the high tech scene was awash in Internet startups looking to be the next ICQ. Then the bubble burst and most of the companies went under. Worse, the VC industry was burned on the subject and it subsequently became almost impossible to get a new Internet startup funded.

As recently as two years ago I regularly had colleagues in the VC world lecturing me that Israel was incapable of producing Internet companies and, besides, these types of investments weren’t suited for VC anyway. What a difference a few years and a YouTube (and a Facebook) later make.

Once again, we are seeing dozens of new Internet companies each month. What’s more, there is a real feeling of an Internet scene here, helped along in no small part by Facebook, the work of groups like the Co.ils and the Geek Garage, and of course Jeff Pulver’s social activities. Let’s hope this continues to develop and mature.

Case of possible overhype: Online video
I’ll catch some crap from friends about this, but the online video space has become somewhat overhyped in the last year. Actually, that’s kind of unfair. What has happened is that in the post-YouTube age, online video has become ubiquitous. This has led to a lot of noise and a sense of, “Ok, what do we do now?”

Towards the end of last year, it looked like the field of mid-tail, independently produced video content (e.g. Ask a Ninja, Rocketboom, Ze Frank) would be the next big thing. As of now, that has failed to happen. There haven’t been any real breakthroughs this year. Even projects as big and as hyped as Joost have yet to take off as a mass-market application.

I still have big hopes for this sector, but it may have to wait until sometime in mid-2008.

Predictions for 2008
You’ve got to be kidding me. Only fools make predictions in this online age where what you write will forever haunt you. Still, I’ll make some safe and predictable ones for the upcoming 12 months:

• There will be a number of huge-size Internet exits that will have people scratching their heads
• The whole notion of privacy will continue to erode as Google finds out more and more about you
• Mobile internet will remain where it has for the last three or four years, i.e. tantalizingly around the corner as the Next Big Thing
• Some technology or company that you’re not thinking about will be the big story of 2008

So, for all my celebrating friends and colleagues out there, I want to extend best wishes for the new year and hope that 2008 brings health, happiness and success to us all.

Congratulations to Yedda

A little bit late, I tip my hat to the good guys over at Yedda who recently sold the company to AOL for an undisclosed sum.

The Yedda exit is another indication that Israel's Internet scene is developing nicely, and begins to answer those who contend that Israelis are incapable of creating consumer-facing applications that appeal to an English-speaking audience.

In Yedda's case, founders Avichay Nissenbaum and Yaniv Golan and their team did an excellent job both with the UI of the site as well as with the clever and far-ranging business development. They leveraged the use of widgets and embeds to get Yedda out on as many sites as possible.

So, congratulations Avichay and Yaniv on a job well done.

Introducing: Blogiza on Tumblr

As promised last week, we here at the BloGiza labs have been toiling on a new, fun feature. Over the past year, we have been running a feature called "The List", which collects interesting articles on the high-tech/VC world and presents them in a hand list format.

Having recently discovered Tumblr (which inhabits the space between blogging and Twittering), I've decided to spin off The List as a standalone property.

The new The List can be found at: http://blogiza.tumblr.com

It will be updated on a regular, ongoing basis instead of once a week like the old The List. You can also choose to get the new List by RSS using this feed.

Check it out and let me know what y'all think

The art of picking winners

Guy Grimland wrote a piece (Hebrew link) in The Marker the other day about highly promising Israeli startups not backed by Israeli VCs. The piece came after reports that targeted ad serving company Quigo has been bought by AOL for around $300M. (Quigo founder Yaron Galai, it should be mentioned, strongly emphasizes that this is still a rumor).

Alongside Quigo, the piece looks at a couple of other high-flying Israeli startups like Oberon Media, Mobileye Vision Technologies, and SuperDerivatives. These have variously raised extremely large financing rounds and/or have significant revenues. And, like Quigo, each managed to make something of itself initially without VC financing.

The question is whether there we can learn a lesson about the structure of the Israeli high-tech market -- and specifically about the way VCs work within this market -- from the success of these companies. I'm not entirely sure.

First off, I think Ori Kirshner (my boss) gave the best answer in the article by pointing out that while Israeli VCs did miss the ball on Quigo,  there have been quite a few other success stories recently that were VC backed.

Beyond that, to say that VCs dropped the ball on Quigo, Oberon, et al. is oversimplifying the case. VCs look at many hundreds of companies a year. Each rejection is its own story. Sometimes, the companies themselves reject VCs, because they find they get what they need from angels or they have chosen to bootstrap it.

If there is a lesson to be learned here it might be one of broadening our horizons. Each of the companies mentioned above operates outside the "traditional" realms like communications technology or enterprise software that Israeli VCs historically invested in. Quigo and Oberon are Internet/gaming plays; Mobileye does technology for the auto industry; and SuperDerivatives provides a software solution for the financial world. The fact that most of them were set up in the post-bubble period (during which a lot of VCs became more conservative in their decision-making process, especially with regards to Internet companies) probably contributed as well.

At any rate, I hope the rumors surrounding Quigo are true. Not only because I wish the founders well (which I do), but also because it will help further establish new sectors in Israeli high tech as "interesting" from the financial perspective.

Early exits

A little while back, Aner Ravon wrote a heartfelt post about the state of Israeli high tech, specifically the fact that Israeli startups tend to exit too early (generally via acquisition) instead of developing into large, mature companies.

The Israeli high tech scene fails to produce sustainable, ongoingly growing, companies. The problem is not the Israeli landscape, the problem is probably with having a wrong dream.

When it’s all about the Exit, focus shifts from succeeding as a company to succeeding as investors, speculators. From creating to trading. Operational record is overlooked for dream weaving. This is why Boaz Eitan walks out with $100M for having successfully sold a multi billion dollar balloon to investors despite having no operational evidence at any point.

The question why this is so often comes up for discussion by people inside the country’s high-tech industry. (Daniel Cohen addressed it in a piece about “The Quest to Create an Israeli Nokia”). While Israel has shown itself capable of creating international category leaders – Teva, Check Point, and Amdocs spring to mind – the actual number of these is small, and none have really sprung up for nearly 15 years.

Aner lays most of the blame with the money guys:

Most Israeli startups are funded by VCs, Israeli and American, who in turn get most of their funding from out of Israel investors. This is good and bad. The VC model is based on selling their share for the highest amount in the shortest time. The fundamental focus of a “business” is to create a profit. Unfortunately, these two foci’s correlate less often then they do. An IPO may mean such correlation, as the VC can sell it’s share and the company can grow. However, very few companies fit the IPO model, and most companies are forced to think about their “business” in different terms. Terms such as “comparables”, “size of the (exit) opportunity”, “exit strategy” and “fitting the investment portfolio” take precedence and management attention away from real business decisions. Innovation becomes more important than operations because ideas can be sold earlier in the lifecycle. This means the company must be sold to a company who believes it can turn innovation to operations. Sold to, not become one.

I don’t want to argue that he is wrong, because a lot of these points have merit. The venture capital model does present certain problems (mainly the time horizon) when it comes to growing a big company. There have certainly been cases where investors have pressured companies to exit when they had the potential to become much larger. And yet, at the risk of being an apologist for the VC industry, the situation is a lot more complicated.

Other factors contributing to the relative paucity in the development of large-scale tech companies in Israel include:

• The entrepreneurs themselves – In some cases, as mentioned, investors will push entrepreneurs into exiting too early. But in many other cases it can be argued that VCs try to keep entrepreneurs from going for exits in the mid- ten million range that might be good for the entrepreneurs but lousy for the investors.
  
  To put another way, it is the rare entrepreneur (especially in Israel) who won’t give in to the temptations of a $200M exit. Very, very few people have the cojones of a Mark Zuckerberg.

• The lack of a local market – The fact that Israel has managed to grow a tech industry at all is impressive given its basic situation. We are a tiny little country, whose inhabitants speak a native tongue that nobody else does, cut off geographically from all of its potential markets. All this means that Israeli companies need by definition to be oriented towards overseas markets. As a result, a lot of non-technological functions end up being shipped off overseas instead of staying in Israel. This leads to…

• Management issues – Israel has traditionally had problems growing management capable of making the jump from a $100 million-level company to a $1 billion level company. The situation has improved in recent years, ironically as more Israeli executives have served time in international companies. But there are still way too few international-grade managers to go around.

• The financial environment – You should also remember not to discount the general financial environment. The wild IPO environment in the late ‘90s and beginning of this decade has been dampened for years. And while the TASE is growing continuously, it is still considered a backwater financial market. Meanwhile, investment banking and other financial services are still relatively primitive. All this has led to greater M&A (well, A) activity rather than IPOs.

It should also be pointed out that Israel doesn’t necessarily want a Nokia, in the sense that Nokia completely dominates Finland’s technology industry.

The question is whether this is all leading in one direction – as Aner suggests – that direction being downwards. But that is a question for another day.

On the Changing Web Investment Landscape

A recent blog post by Y Combinator’s Paul Graham has caused a fair deal of buzz around the VC end of the blogosphere. In his essay, Graham points to a number of trends that he sees in the software/internet startup world and makes a number of predictions as to where the industry is headed.

In Graham’s view, we can expect to see a lot more startups founded by younger entrepreneurs needing a lot less funding; a standardized process on the part of investors to streamline the investment process; a more sophisticated attitude towards acquisition by major players; as well as a decrease in the importance of a college degree compared to technical skills and experience.

On the heels of the piece, we’ve seen numerous blog posts analyzing Graham’s points, focusing on the changing landscape (when it comes to Internet companies), and openly suggesting that the traditional VC model is broken and that we need to adapt ourselves to the new world order.

Graham, I believe, is spot-on with a lot of his analysis even though I don’t fully accept his conclusions. Here at Giza we’ve seen the local Internet scene develop greatly over the last couple of years. Our deal flow is filled with the types of companies Graham describes: young guys (and gals) with great ideas who don’t need a lot of funding to get started.

Our Ofek seed-stage program is designed for this environment: provide the relatively small initial sums for a company to reach pre-defined milestones and then decide whether to continue on to a major Round A. So far, we have made four investments this year under the auspices of the program, with Koolanoo Group having already graduated into a full portfolio company.

Like I said, I have a couple of caveats about Graham’s piece and the Y Combinator approach in general. A big part of it is the model and the potential scale. Y Combinator’s business model (also shared by investors such as First Round Capital) is predicated on making small investments in each particular company, then enjoying potentially good returns even on small-scale exits.

In theory, this should work fine. In practice, it runs up against issues of scale. Again in theory if you fund enough startups like this, one or two of them might be classic VC-grade home runs (say $100M plus exits). The question is how many you have to fund.

Graham talks about what happens when Y Combinator has to deal with 10,000 companies. Obviously, they’ll never be able to deal with 10,000 companies, let alone 1,000. Unless you’re planning on being a source of capital c’est tout, you need to provide some management attention to each of your portfolio companies. This is feasible for 20 or 30 companies at a time, depending on your staff size and the amount of streamlining you are able to do. It becomes increasingly hairy after that.

So you have to then wonder what types of returns – not multiples, but actual objective money – you can get from a strategy based on a few dozen companies with relatively small exit avenues.

And then there is the matter of follow-on funding: few are the companies that grow into significant Web properties without some degree of marketing. Which means that you go from investing a few hundreds of thousands of dollars to investing two or three million.

In short, big questions indeed. As a rule, I think that seed-stage investment approaches like Ofek are the right way to go for many of the Internet companies that we see. (And even then, I should point out that since the model is relatively new we have little data on the actual outcomes). Whether it will completely take over the VC biz, count me skeptical. 

Giza's Ofek Program

I've been having quite a lot of face time with entrepreneurs at various networking events recently. While talking to people in the biz, a number of questions about Giza seem to pop up repeatedly. One is "you guys do Internet?" and the other is "you guys do seed investing?"

The fact that people are surprised that the answer to both questions is "yes" means that we're not getting our message out strongly enough.

Which brings me to the Ofek Program.

Giza has a special program which we call Ofek devoted to very early stage investments. Giza makes relatively small investments (generally up to $500K in the form of a convertible loan) in startups at the seed or even pre-seed stage. The initial investment is usually milestone-based and is intended to bring the company to a significant stage of development.

Assuming that the milestone goals have been met and the company still seems like a good investment, Giza will then look to lead the first institutional round.

We generally look at companies in the Internet/New Media/Gaming space as the best candidates for Ofek investments, given that their initial funding needs tend to be lower than those in other sectors of high tech. In the last 18 months, Giza has made 6 such investments. Two of these Ofek projects -- YaData and Koolanoo have already graduated to the status of portfolio companies.

With Ofek investments, we try to move as quickly as possible in order to make the decision-making process as simple as possible. In short, Ofek is our way of acting like Angel investors.

So spread the word: Giza does pre-seed and seed investing, and Giza does Internet investments. We'll be delighted to hear your ideas.

The Great Vertical Social Network Shootout

I don't know about the rest of youse guys, but I'm beginning to feel slightly awash in a sea of social networks. Don't get me wrong, I'm all for vertical social networking and I see it as one of the logical developments of the MySpace revolution.

Lately, us Israeli Internet aficionados have found ourselves spoiled for choice when it comes to choosing a social network of our very own.
First into the fray was The Marker Cafe, an online spot where tech-savvy Israeli business types could get together. A couple of months after that, the iDrink guys rolled out their site, which serves as an online complement to the real-world Internet drinking club.

Now, our friends from The Coils have brought out the.co.ils Zone, which also provides an online space for Israeli Internet entrepreneurs (as well as us investor types) to meet, talk, do business, put up photos, share links, and all that other fun social networking stuff.

Hovering above this all, of course, is Facebook which has seen an incredibly quick uptake of Israeli Internet scenesters, and which already contains an iDrink group, a co.ils group, and numerous other groups related to the Israeli Internet.

So, the question now becomes what to do with all this activity. And frankly, I'm kind of stumped. iDrink is nice, but is limited in its functionality. The Marker Cafe has plenty of functionality. It is, however, in Hebrew only which cuts it off from the rest of the world.

The co.ils Zone looks like it has a lot of potential (assuming that Ning, the platform on which the Zone is built, gets their act together and deals with its recent outages). But it will be a challenge for them to get a critical mass of people actually using the site, what with all the competition from the other sites.

What do you think?

Meet me at the Blogference

Next week, the Interdisciplinary Center in Herzliya is hosting an international conference on the subject of blogging. The conference will be held on July 1-2 (that's next Sunday-Monday) at the IDC campus. It will cover a wide range of topics both academic and practical.

The program features an impressive list of guests from abroad. Participating will be the great Om Malik, as well as the guys from Ask a Ninja, Jessica Ann Coen (late of Gawker), and Andrew Baron and Joanne Colan from Rocketboom.

I will be hosting a workshop/panel on the second day of the conference (Monday July 2). The subject of the workship os how VCs and startups can use blogging among other things to communicate between them. Joining me will be Aner Ravon (co-blogger of De Gardener), as well as Etay Naor and Tzvika Bessor who, among their various pursuits, are also in charge of the Internet.

The entry fee for the conference is quite low, so I invite everyone out there to come and see.

Guest post: China's Internet Scene

Note: earlier this year, Giza invested in Koolanoo Group, a Web startup which creates vertical social networks. The company maintains two sites: Koolanoo.com – the first social network for young Jewish professionals; and 360Quan – a Chinese-language site which offers Chinese Internet users a wide range of social and entertainment-related features (e.g. blogging, video sharing, music downloads, and many more).

In the few months since it launched, 360Quan has become one of the fastest-growing Internet properties in China. I asked O.D. Kobo, co-founder, Chairman and CEO of Koolanoo, to write his impressions of the Chinese Internet scene. O.D. grew up in Asia, and currently oversees the company’s operations from its Beijing office.

I am completely fascinated by China’s Internet scene.

The melding of the economic magnitude of China and the powerhouse that is the Internet, what a combination! I greatly believe in the Internet industry in China and how important it is to be there.

Einstein said, “Logic will get you from A to B, but imagination will get you everywhere”. Well, if he were alive today, he would re-phrase the ending with, “imagination will take you to China”.

China has approximately 150 million surfers online and by 2009 it will be the largest online community in the world. But here is the rub: CNNIC reports 142 million online as of January 2007, Morgan Stanley reported 152 million in their assessment, and Deutsche Bank analysts have said 160 million.

Why the confusion? Internet cafes and multiple IP’s. There are over 135,000 Internet cafes in China, and as a result around 40% of the traffic comes from multiple users using a single reported IP (i.e., 1 Internet cafe has multiple users but one IP for all of them). During public holidays when Internet cafes are closed the online traffic drops by 35%. Even reputable Web statistical companies such as ComScore do not have good enough monitoring mechanisms for China yet. However, with a 26% annual computer growth rate compared to USA’s 2.2%, things will definitely change in the coming years. It is very difficult to assess the traffic and the usage of users from foreign companies with outposts in China, I prefer the local companies and my experience comes from “being local”.

The Internet will change with the awakening of China’s Internet industry. Online advertising will never be the same. Traffic will be referred to differently when discussing China. It is the last online frontier and the greatest place in the world to run an Internet start-up.

The industry in China is still very much at its infancy though. Think 1996 all over again, but with bigger numbers. There are a few giants like QQ, Baidu, Sohu, Sina, and 163, but even they have not reached their maturity yet. Netease’s 163, a leader in Web mail, only adapted a full blown marketing team this year. Baidu is constantly expanding. Sohu are doing some really interesting things with news broadcasting. And QQ, wow QQ, I love QQ, my favorite site on the Web. It’s China’s largest messaging service, and boy do they know how to operate a website.

I have had meetings with many of the senior level executives of the large Internet companies, some I call close friends. I am a big fan of the websites in China and the way they conduct business conduct. China operates Internet the way it should be run: strong, passionate and aggressive.  Any other method is simply incorrect.

The users/surfers are the most fun. In the West, Internet users are spoiled with the vast variety of features and applications, everyone fighting over everything like advertising costs to bring traffic and sell space.

In China the issue is different. Sustainability is key -- staying in the game, because as the users grow so will you. If you operate a website in China and do not have heavy traffic within one year, you might as well go home. As most of the users online are between the ages of 18-25 (82%) most of the online activities entertainment-related as opposed to the West, which is information-related (Google, Wikipedia).

Viral marketing is still very fresh here, and the big sites do not make it easy for new ones to enter. But one of the biggest motivations for working so hard is to make a good product that you would want to use yourself. We thought we could contribute to the market. We at Koolanoo Group love great products, at our core we’re just a bunch of Internet junkies who want to create the best Social Network and offer it to our users.

360Quan recently became the official partner and sole Internet broadcaster of FTV (Fashion TV) for China. We believe it to be a landmark deal and a cool entertainment feature for our platform. This is a big thing, since cable TV is scarce in China. We are also implementing the mobile mapping feature this coming month. We are always looking to improve and add to our user experience. We’re a product company. We love great products, that’s what we hope to do.

As for the industry, well, it speaks for itself doesn’t it? China Internet, the sexiest two words in tech today.

What Facebook gets right (and what it gets right less)

Those of you who know me probably know that I've become a pretty big Facebook addict of late. I've actually never been that much of a social networking guy. I've played around with MySpace, but never really got into it. The closest I've come to being active in a social network is LinkedIn, but that has limited functionality and a narrowly defined purpose.

However, when Facebook CEO Mark Zuckerberg announced the company's new strategy to become an open platform for third-party web developers, I decided to give it a try. And I've been coming back ever since. Often several times a day.

Simply put, Facebook rocks. It has a robust set of features with user retention fairly built in. And now you can use your Facebook account as a single organizing site for all those other addictive applications -- Twitter, Flickr, de.licio.us, etc.

So, IMHO what sets Facebook apart from the competition? A couple of things:

1. Layout - In a word: clean. One of my biggest beefs with MySpace that it's such a friggin' mess. I know the kids (allegedly) like it, but I could never find my way around the place. With Facebook, everything is laid out in a nice, clear, navigatable manner.
2. Seeing what your friends are up to - Facebook's "news feed" updates you about everything your friends are doing on facebook: changes in profile, items posted, groups joined, etc etc. Among other things, it hips you to applications and groups that you might not have found. Also, it's addictive like nobody's business, and subtly encourages you to go back and check the site a couple of times a day.
3. Easily added applications - What can I say, between Facebook and Netvibes you almost never have to go anywhere else on the Internet anymore. It all comes to you
4. That "poke" feature - Useless but cute, an example of how to keep things light and fun
5. Positioning - Not really a feature per se, but Facebook seems a bit more serious (or real) a place than MySpace. Or, as my friend Chris commented, "it's about 900 percent less skeevy than MySpace."

Now, don't get me wrong, there are still plenty of things that need fixing. To wit:

1. Control over layout sucks. Unlike Netvibes, where you can move around any item anywhere, open up your own tabs, and define the number of columns you want, with Facebook the columns are fixed and there are many elements that can't be moved at all or can only be moved up and down in their respective columns. I would expect a lot more control over my customization.
2. While I love the fact that I can access applications directly from my Facebook page, I would love it even more if I could access them on my Facebook page. As it is, all third party apps open up in their own page. Which isn't so bad for some apps. But it sure would be nice to be able to Twitter without having to jump to a different screen.
3. No built-in chat feature. Yes, you can choose from about a dozen third-party apps. But come on, isn't IM a must-have these days if you want to speak to Generation Y users?
4. Other small quibbles, such as the "How do you know this person" function when trying to verify contacts. The list of options is pretty limited and reflects Facebook's past as a social network for college kids (one of the options is "We hooked up"). At the very least, give an "other" option.

In short, Facebook is progressing in the right direction but isn't quite there yet. My feeling, however, is that when they do get there they will become the social network of choice for a lot of people who don't play around with social networks yet. The kids and the indie bands will always have MySpace; the rest of us may likely be found here.

The Online Advertising Chowdown

With all the recent focus on new media and the future of television, it seems that the real story as far as Internet exits (at least for the first half of  2007) is online advertising. Over the last month or so, we've seen a real feeding frenzy in the sector. Almost all the big Internet players --Google, Microsoft, Yahoo, AOL -- have rushed to snap up online advertising agencies.

Thus, just when you think Goog's $3.1B acquisition of Doubleclick was a biggie, along comes the $6B Microsoft/aQuantive deal (at an 80% premium, no less). Not to mention a raft of smaller but still very substantial exits (WPP/24/7Real Media, Yahoo/Right Media) in both online and mobile advertising.

From the Internet-oriented VC perspective this brings up two thoughts:

1. Just a year or two ago, DoubleClick and its ilk were seen as boring Web 1.0 companies (albeit lucrative ones). And yet, despite the hoo-ha over Web 2.0 and online video, these subsectors haven't shown anywhere near the potential for mega-exits that we are now seeing with online advertising. Perhaps I should say "the potential for mega-exits yet," since I am a hopeful fellow. Still, it goes to show that while hype has its place in our biz, there is still no substitute for the old-school basics like revenues and a logical business model.
2. This does, however, bring up the obvious caveat: are these companies actually worth the money Goog & co. are willing to pour into them, or are we talking about another Internet bubble? IMHO these companies are worth the price tag, even though the aQuantive deal seems excessive. We are, after all, talking about the companies which drive most of the revenues on the Internet. Until the Web comes up with better business models, online advertising will continue to be a most lucrative field. And will likely get more lucrative as the big Internet players start using the mountains of information they have about us and our browsing and shopping habits to start targeting better and better ads at us.

Google Eats Feedburner

It's funny to think now, but just a few short months ago we labored under the conventional wisdom that "Google doesn't do major purchases." Which was correct up to a point. If you look at Goob's M&A activity over the last five years you see a string of (by VC standards) nickel and dime acquisitions: lots of startups doing nice features (maps, spreadsheets, etc) plus a few deals where Google wanted to buy a company for the R&D team.

In fact, even the YouTube deal seemed like an outlier. But no more.

Google just announced that it was buying Feedburner for about $100M. This of course comes on the heels of the Doubleclick acquisition that was announced last month. So now Google's acquisition activity is becoming a bit clearer.

What seems obvious is that Goobe has gone from making small tactical purchases (in order to boost products that it wanted to develop) to making much larger strategic purchases in its drive to become the undisputed Master of Your Online Life. The Feedburner acquisition means that Google will now have access to millions of RSS feeds, the new life blood of the Web. It's all in service of finding out more about you the user and serving up better and more targeted advertising.

I has seen the future and it is looking increasingly multi-colored.

Joost!

Holy crap! Joost has just announced that it has raised a whopping $45M in its first institutional round. Investors include Sequoia and Index, as well as CBS, Viacom, and a Chinese billionaire.

Also, they are going into open beta very soon.

My thoughts:

1. If I hadn't mentioned it before, holy crap!
2. This answers my question of how CBS plans to compete with the NBC-News Corp Internet venture.
3. It will be really interesting to see how these projects deal with scaling effectively once millions of users tune in. P2P works more or less fine when it comes to transmitting audio (i.e. Skype); let's see how the architecture handles video.
4. I'm so jealous that Sequoia always gets in on these projects

Behold the future of television, folks. You can tell your kids you were there in the early days.

A Digg for startups

I recently discovered an interesting Web site called Killer Startups. Their basic idea is to function as a social community for the startup space. Or, in other words, they are like Digg but totally focused on startups.

Entrepreneurs can submit their startups to the site. You submit a link to your site and your elevator pitch. The Killer Startups guys posit some questions and analyze why the startup might be a killer. And the users of the sites give votes to the startups.

Interestingly, there are four Israeli-based companies in the list of Top 10 Killers: SuTree, 5Min, MatchMyPet.com, and G.ho.st.

This could possibly be a good source of deal flow.

The revolution will be televised

Gil over at De Gardener has posted videos of a talk that Jeff Pulver gave about two weeks ago at the last Garage Geeks event.  Pulver talked about his vision for the future of television. And that future resides on the Internet.

Much of Jeff's speech revolves around the idea of using RSS as a delivery platform. Which isn't too surprising, since he is currently very involved with Network2, a new Internet venture that seeks to aggregate all the independently produced episodic content on the Web and create a kind of uber-television network for it.

In the last couple of months I've been immersed in the New Media world. It seems that after years and years of hype about TV and the Internet coming together, it's starting to happen. Joost is the highest-profile example, but there are literally dozens of companies working on becoming the NBC (or Fox, or Comedy Central, or whatever) of the Internet.

As I see it now, no one group will emerge as the 800-lb gorilla of the space. There is too much content out there and -- at least in the realm of top-tier content -- a lot of gorillas already competing with each other. What I think we will see are a number of different classes of television broadcast online:

• The Big Kahunas -- These guys will be serving up professionally produced, premium content to the widest available audience. This includes not only episodes of Lost and Desperate Housewives, but also the latest Shakira videos, as well as re-runs of Happy Days. As mentioned, Joost looks like it will be a major player in this category as doubtlessly will the still-unnamed NBC-NewsCorp project
• The Middle-of-the-Tail Guys -- Here you will find episodes of independently produced shows like Ask a Ninja, Chad Vader and Jeff's favorite, Feed Me Bubbe. Not to mention thousands of other examples of people doing their own series. The content will likely be shorter-form and not quite as slickly produced, but my feeling is it will manage to find an enthusiastic audience. Network2 is looking to dominate this category.
• One-offs and amateurs -- The traditional realm of YouTube, Metacafe, and their ilk. You want videos of cats playing the piano? This is the place for you.

Of course, these categories are far from fixed and rigid. I expect we will see a lot of overlap between the players, not to mention various other broadcast models such as live vlogging. However it plays out, it's going to start playing out soon. And as soon as it does, the ad dollars are going to start rolling in that direction.

Flickr ascendant

Yahoo! has announced that it will close Yahoo! Photos in favor of Flickr. On the one hand, the move looks a bit funny considering that Y!P has consistently been a much more trafficked site than Flickr. On the other hand, Yahoo! Photos' traffic has been flat while Flickr's has been growing steadily. Plus, in the wake of Yahoo!'s persistent struggles it makes sense to consolidate properties and not run two competing photo-sharing sites.

All of which makes the news not entirely unexpected.

Still, this raises (at least in my eyes) a couple of issues that I hope Yahoo! has thought through:

1. The interface thing - I love Flickr, but I think it has one of the most problematic interfaces out there. After more than two years of using the service (and having paid up as a member twice now) I still find myself hesitating and being forced to read the help material when trying to do relatively simple tasks. Yahoo! Photos made things a lot more simple. Which leads me to wonder how my non-computer savvy mother-in-law who might have been able to handle Y!P's interface will get along with Flickr's.
   
   Granted Flickr has been improving things over time, but IMHO it's still not quite ready for prime time and I wonder what effect this will have on old-time Y!P users.
    
2. Flickr's snob factor - Flickr managed to acquire the mind share that it has in part because it is positioned as a quality photo site. As some people have pointed out, Flikr's message (think of the "Interestingness" feature) creates a kind of subtle pressure only to upload your best photos. Compare and contrast with the message you get from sites like Photobucket. Yahoo! Photos leans more in the direction of the latter than the former, so again it will be interesting to see how Y!P users adapt and how longtime Flickr users will react to the waves of hillbillies who are now moving into their neighborhood, as it were.
    
3. New services - If Yahoo! wants the new Flickr to really take off it will need to enhance a couple of features, especially photo printing. Yahoo! Photos was pretty good with this, Flickr not so much. Also, IMHO they need to improve features for regulating access to photo albums.

Joost Update

I've been playing around with the beta of Joost (nee The Venice Project) for a couple of months now. Or should I say playing around as time permits and otherwise smugly enjoying being an early adopter.

At any rate, it seems that the general public will soon have a chance to experience it for themselves. The company has announced that it will be moving to open beta at the end of the month. In addition, Joost has signed some major advertisers and will be adding some new premium content from Sony and Turner.

My thoughts at the moment:

• Everyone expects Joost will be a huge success. In fact, it's almost taken as a given. Which, if you take a step back and look at the situation objectively seems a little bit odd. After all, we're talking about a paradigm shift in the world of televised media which brings with it tremendous risks both technological and business. But I guess after Kazaa and Skype, Zennstrom & co have enough magic pixie dust to allay all fears.
  
• There is some decent content on Joost right now, but the majority of their programming doesn't speak to me. There's a lot of music content, some independent films, and some documentaries. Perhaps I'm older than the target demographic and that's why I don't connect.
  
• IMHO Joost will need to get a lot more popular mainstream entertainment before it can really take off. There's a lot of good independent content out there, but I don't need a dedicated application to access it. (I would go to Network2 or other competitors). The newly announced deal (which includes programming from CNN and Adult Swim, as well as old episodes of "Charlie's Angels") is a step in the right direction.
  
• Having said that, it will be interesting to see what kind of premium content they manage to get. Will it end up being a repository for old TV from the '70s and '80s? Would that be a bad thing if it happened?
  
• Joost also needs to work on its UI before it becomes ready for prime time. After three months I still find it awkward to get things done, including fairly simple operations like finding the list of all available channels and exiting the application. And if I have a problem with it, I can only imagine how frustrating it would be to my mother-in-law if she tried to use it.

Internet Radio Takes a Hit

For the past several weeks, a lot of Internet radio broadcasters have lived in fear of new copyright regulations which will effectively multiply the royalties they have to pay to the RIAA's royalty collection agency.

The exact change in the regulations is more complicated than I want to go into (but you can read a good explanation here). But basically, under the old regulations Internet broadcasters would pay a small licensing fee plus a percentage of their revenues to the RIAA. Under the new rules, they will have to pay a larger licensing fee plus a fee each time a song is played.

A number of Web broadcasters appealed to the Library of Congress's Copyright Royalty Board against the new ruling. Unfortunately, the CRB has denied their appeal. Subsequently, we are now beginning to hear dire predictions from a lot of small-medium Internet radio broadcasters that the new regulations will drive them out of business.

Ay yay yay. This certainly doesn't look like good news for Pandora, Last.FM and their ilk.

Gil Rosen argues that this ruling will eventually lead to the demise of the CRB and other government 
involvement in the copyright wars. While this may or may not be true, the real problem here is less the government than the RIAA.

Granted, the music industry is the first major business to be shaken to the core by the Internet. But instead of trying to adapt to the new reality, the RIAA has desperately tried to cling onto its old business model by any means possible from strict DRM to suing individual users. The change in the copyright regulations can be seen as the latest battle in this war.

I thought EMI's recent announcement that they would start selling DRM-free tunes over the Internet represented a real change in the music industry's attitude towards the online world. Now, I'm not entirely convinced. Sad news indeed.

TWS 2007 wrap-up

And so, the big event was a success, I would say.

More than 500 people showed up at Gan Oranim Tuesday night, including just about everyone who is everyone in Israel's Internet industry. Ten companies showed off their wares, generally quite well. Shimon Peres made a slightly controversial (and in my opinion slightly rambling) speech about how the Internet means we shouldn't have to study history. And Yossi Vardi did his patented Vardi schtick. (Pictures from the event can be found here).

In all, an auspicious start to what hopefully will evolve into an institution.

I won't give my opinions of the individual companies (especially since I already did so). From reading other people's blogs, it seems that ClickTale, G.ho.st, and Double Trump made strong impressions. I would, however, like to address two issues.

A lot of the commentary notes that the companies didn't  dwell on things like their revenue model, competition, or market analysis in their presentation. This is true and it was done on purpose. The companies each had seven minutes for their presentations, and we instructed them to focus on presenting their product and their vision. The rest of the pitch they could then save for potential investors.

Also, I heard a bit of grumbling about the quality of the finalists. Which I think is unfair and may stem from the wrong expectations about the event. If you came to the event looking to see the top 10 Web 2.0 hopefuls in Israel you might have come out disappointed. The finalists represented a broad spectrum of business possibilities available on the Internet, from classic Web 2.0/social networking sites to diagnostic services to B2B applications and technologies.

Also, while I think all 10 finalists have the potential to be viable businesses, not all of them (and perhaps not even the majority of them) are VC-grade investments. One or two have the potential to be significant exits. The rest may be successful on a scale that would make the founders and angels happy, but aren't large enough to interest heavier institutional investors.

Sadly, that's just how the game is played.

If you ask me the best thing about TWS is that it showed that there is a real internet industry here in Israel (or, as Deb Schultz put it, we've developed a scene like the one they had in Silicon Valley back in the good old days).

You suddenly see a lot of entrepreneurs trying out new ideas: very passionate Internet fanatics and kids who grew up on the Web. We're seeing second-generation Internet companies founded by people who worked at Hotbar, ICQ, and Incredimail. And you are increasingly seeing investors <shameless plug>who understand the potential of the Internet and who live it from the inside.</shameless plug>

As Martha Stewart would say, it's a good thing.

With the TWS Finalists

On Thursday I had the pleasure of sitting with Yaron and Yami from the co.ils and most of the 10 companies selected to present at Tuesday's TWS 2007 event. TWS has now grown into a major industry event, with several hundred entrepreneurs, investors, and other internet afficionados are expected to show up.

Thursday's meeting was a kind of prep session to see the presentations and to provide the companies with some constructive advice to make them better. So, who are the lucky companies? In no particular order:

• Hingi (http://www.4144.co.il) - Hingi is the "Hear It 'n' Get It" music service. They allow you to find out what is playing on the radio or MTV at any given moment and download a ringtone/truetone/callback tone/MP3 of it to your cellphone. Their trick is enabling all this in two clicks, rather than seven or eight like you would expect. In other words, Hingi enables true impulse buying for music over cellular. Although I'm probably a bit older than the target demographic, I can see the value of a service like this in a multi-billion dollar ringtone market. They are definitely playing in the right playground.


• Telecut (http://telecut.co.il) - Telecut provides a SAAS that helps reduce communications costs for individuals and small businesses. Telecut analyzes your cellphone bills, checks for errors, and makes suggestions about other plans that might suit your needs better and more cheaply. While Telecut is not the "sexiest" presenter at TWS, the service looks useful and is probably relevant to the broadest swath of users.


• The Weebz Family (http://www.weebz.com) - Created by a company called Intuition, Weebz lets you set up online sites for family events such as weddings and Bar Mitzvahs, lets you edit these sites online easily, and allows family and friends to contribute their comments, photos, etc. Their branding revolves around a family of cute animated creatures called the Weebz family, which emphasizes their focus. I have to give props to the guys from Intuition for showing up wearing matching Weebz neckties. Nice to see a company that knows how to stay focused on its marketing message.


• iGiza (http://www.igiza.com) - iGiza creates tools and an online platform to help people in the Multilevel Marketing (MLM) industry manage their businesses online. (MLM for those unfamiliar with the term, is a business where products are sold by independent distributors. Think Herbalife or Tupperware). Again, this is not the sexiest Internet company you'll see this week. However, I am a big fan of offline-to-online business migration. And I think there is a lot of potential here. Also, with a name like iGiza, how could I not like them?


• Urban Seeder (http://www.urbanseeder.com) - This actually does qualify as one of the sexiest Internet companies you'll see. With Urban Seeder you can leverage the Web to "grow" a relationship whether for romance, business, or other purposes. You can go from sending anonymous notes to building up a connection. The process is much more involved than this, and I fear I am not doing it justice by trying to explain it in a few sentences. But the concept is intriguing and the design of the site is great.


• Match My Pet (http://www.matchmypet.com) - Two young entrepreneurs who have developed a combination social network/breeding site for pets. The social network aspect allows you to post pictures and videos of your pet, participate in forums, and get other information. The breeding service allows you to find potential mates for your pet in your area. While I'm not sure I'd currently invest in another vertical social network, people have a real emotional attachment to their pets so I can see the potential for something like this. After all, ask the guys from Dogster.


• G.ho.st (http://g.ho.st) - G.ho.st is the Global Hosted Operating SysTem, a web-based virtual desktop which allows you to collect all your online files (web mail, Flickr photos, Google spreadsheets and docs, etc) in one place. In addition, you can share local files on the desktop as well, and have them available on any browser. All in one seamless and nicely designed package. For my money, this is one of the most interesting and exciting of the local Internet companies, both for the product as well as for the company itself (a joint Israeli-Palestinian venture based in Jerusalem and Ramallah). Definitely one to watch.


• The Flat Planet Phone Company (http://www.flatplanetphone.com) - I have to apologize to Flat Planet Phone Company, since I was called away when they were presenting and so cannot vouch firsthand about them. The company allows small companies to become VoIP resellers, in effect letting them run their own virtual phone companies.

In addition to the eight aforementioned, there are two other companies participating who did not participate the other day:

• ClickTale (http://www.clicktale.com) - ClickTale has developed a suite of tools for website usability testing and diagnostics. The ClickTale application records every move a user makes on your site and presents diagnostic reports that can help you maximize usability on the site.


• Double Trump (http://www.doubletrump.com) - Double Trump have developed PlayOn, an encapsulation technology for software that enables a variety of new business models for usage. The company's first target market is casual games. Under the standard casual gaming model, you can play a game free for an hour (or a few levels) and then you have to pay $20 or so for the full version. With PlayOn, you can choose to play for 1 cent a minute and if you play $20 worth of any game, you get to keep it. The company operates a casual gaming site of its own (http://www.playonarcade.com) which demonstrates the technology. And is also responsible for me wasting hours playing Diner Dash and Mah Jongg. In the interests of full disclosure, I should note that Double Trump is a Giza portfolio company that I am involved with, and that the entrepreneurs are a pair of really great guys.

And so we go. Ten very different companies attacking different markets with different approaches. I'm not sure if the goal of TWS was to get a seriously wide variety of companies, but if it was then mission accomplished.

Hope to see you all Tuesday night in Gan Oranim.

Koolanoo in The Marker

This month's The Marker magazine features an interview with Oded Kobo and Guy Grinberg from Koolanoo Group. (Read the first couple of paragraphs here, afterwards you have to buy a copy of the mag).

The guys talk about 360Quan, which is now one of the fastest-growing Internet sites in China, and about the Internet scene in China in general. I think the interview gives a taste of why we decided to invest in Koolanoo and why we believe they have a real chance of making it big.

A Heartwarming Passover Story

Tonight marks the beginning of Passover, as we all sit down with our families for the Seder. With your permission, dear readers, I will share with you a personal Passover anecdote.

10 years ago, in April 1997, I spent Seder night at my parents' house in Mountain View. At the time, I was running a fledgling Website design business. My dad (one of the gurus of data mining, among his other accomplishments) was guest lecturing a seminar for Masters students at Stanford.

One of the traditions of the Passover seder is that you make an effot to invite "waifs and strays," people who are far from home. And so, dad invited Sergey, one of his seminar students to the Seder. He was a bit taciturn, and spent most of the time talking to my dad. Here and there I tried to make conversation, talking about the Internet. He and his roomate were starting to play around with search engine technology. Other than that,  not much conversation.

Had I known where our respective paths were heading, I might have made more of an effort to get to know Sergey Brin a little better. But such is life. A decade later, I am a happy member of Israel's VC community. Sergey, meanwhile, co-owns a 767 and swims in a swimming pool full of cash. My dad, by the way, unsuccessfully tried to convince him to stay at Stanford and finish his degree.

A happy and wonderful Passover to you all.

At the Com.Vention

The Marker kicked off its second annual Internet Com.vention (a.k.a. "Vardi-gras") today. As it was last year, the convention was the local Internet event of the year, a decent mix of Israeli entrepreneurs, investors, and local and international figures from the Internet world.

So what was the story this year?

• Many, many entrepreneurs. At last year's conference, it seemed that the ratio between investors and startups was, if not exactly even, then not extremely lopsided. This year, the entrepreneurs definitely outnumbered the money people. There were easily several hundred internet entrepreneurs -- many of whom we have seen at Giza over the last few months -- which is the clearest sign of how the Internet has exploded here recently.
  
• The morning panel on "hot trends in 2007" turned up basically what you would expect: video, semantic web, convergence, and user-generated content.
  
  Two interesting comments: Dr. Nicolas Bussard made an interesting point about how changes in Web design make it easier for people in developing nations to build sites and start accessing the net. And Mike Marquez of CBS Interactive spoke of what he called the "open content ecosystem," which is the interplay of all the technologies -- from mobile video to trend analysis to vertical search -- that will allow people to consume content wherever/whenever they want.
  
• The most piquant panel was the afternoon discussion devoted to the question of "So, is it a bubble?". Here, the panelists -- Angels and VCs, including Giza's Eyal Niv -- were split. Some say it is, some say it isn't. Everyone agrees that valuations are climbing, and that the influx of money into the sector increases the danger of companies getting venture funding who really shouldn't be. (Thus siphoning off the talent and time of people who might be otherwise engaged in better companies).
  
  At any rate, the panelists basically agreed to disagree. We may be in bubble land, but at least it seems that everyone is a bit more reasonable than they were seven or eigh years ago.
  

TWS 2007

Giza is proud to be one of the sponsors of the.co.ils Web Startup 2007, one of the more exciting upcoming events in the world of the Israeli Internet. TWS is a competition to find the best and brightest young Internet (or mobile Internet) companies and allow them to pitch their idea to a panel of leading VCs, angels, and Internet industry experts.

TWS comes to us courtesy of Yaron Orenstein and Yami Glick (our friendly neighborhood Internet gurus responsible for the.co.ils) and is based in part on startup competitions such as Demo.

The rules of the competition are fairly simple. Participant companies need to be involved in the Internet, need to have a great team, and need to have a product that is at least partially ready to demonstrate at the event. Anyone who fits these criteria is invited to register for the competition.

Companies will be screened by a panel of experts, who will pick the top 10 finalists. These finalists will present their ideas at the TWS event which will be held on April 10. Companies who did not make it to the top 10 are nonetheless invited to the event to benefit from the networking opportunities there. (Full contest rules can be found here).

Registration ends March 20, so hurry up and sign up.

Snackertainment!

This month's Wired magazine has a large spread on what they are calling "snack culture". What is snack culture, you ask? It's the idea that a lot of the entertainment we now consume comes in small, metaphorically bite-sized, pieces.

You can see this all over the place. YouTube videos have become an entertainment form in their own right. "Webisodes" and "Cellisodes" (two- or five-minute episodes of popular TV shows specially produced for the Internet or mobile) have been increasing in frequency. And ITunes has contributed greatly to the demise of the long-playing record in favor of the single.

Wired also adds to this list of snacks things like ringtones, widgets (why take the whole program when you can just add a few features to your desktop?), and even the lowly blog -- snack reading at its finest.

Why is all this happening? You might argue that peoples' attention spans are getting shorter. Or else we now have the gadgets to allow us to kill five or ten minutes while waiting at the doctor's office.

Whatever the cause, we are clearly seeing some sort of cultural paradigm shift here. And being VCs, we soon ask ourselves, "How do we get in on this thing?" Sadly, YouTube has already been spoken for. But we are seeing other signs of activity in this space. Most recently (and locally) we can point to Evergreen's investment in Aniboom, the "YouTube of Animation". I presume we'll see some more in the future.

Google uses Israeli typesetters...

This story cracked me up. If it's true, then Eric Schmidt is walking around with business cards that name him as "Chariman" of Google's Executive Committee. (Theories as to  what the typo means can be found in the article and its comments).

Geez, a market cap of $137 billion and they get the same quality copy editing as your average Israeli restaurant menu.

Yedda raises

At the risk of getting into trouble for calling attention to other peoples' investments, Yedda have managed to raise a $2.5M round with one of our competitor funds (Genesis, BTW. I forgot to add their name when I initially uploaded this post. Nothing personal, my friends.)

Yedda, for those of you who might not know, is a useful community-based online question-asking-and-answering service. You can partake of their service by using the handy widget on the right-hand column here.

They have a really great team and a good product, and all I can do is wish them the best of luck.

Koolanoo - Giza's Latest Internet Investment

I am very proud to announce Giza's latest investment in the Internet field: Koolanoo Group.

Koolanoo has developed a platform for creating and running vertical social networks. Founders Oded Kobo and Guy Grinberg believe that the future of the social networking space lies in finding new, more defined communities and exploring new geographical areas in which to launch new social networks.