"I had the good fortune to enter the Israeli high-tech world among the first generation of entrepreneurs. In 1969, I founded a software company, Tekem, which today is part of Ness Technologies, together with two partners, Meir Burstein and the late Yoran Rosenfeld. In the same year, Efi Arazi founded Scitex. We had the feeling that we'd jumped on the train at the last moment before it left the station," recalls high-tech entrepreneur Dr. Yossi Vardi in a special interview with "Globes" to mark his winning of the Manufacturers Association 2007 Industry prize.
"In 1969, when there were six software companies in the market, we sat, Meir, Yoram and I, and said, 'It's a good job we started now.' We thought we couldn't have set up the company two years later because the market would be saturated and there'd be no room to do anything.' Today, 38 years later, after I've helped found dozens of companies, it looks to me we're only just at the beginning of the road and of the opportunities that are happening here.
"There are some amazing young people here in Israel. They have ideas, talent motivation, a glint in their eyes, ability, and a capacity to learn, they're industrious and dedicated. They won't admit it. They try to be cynical, until you provoke them, but they are loyal to the cause, whether it's the founding of a company, or the completion of a product. I don't know if they learn the dedication and passion in the army, at home, from friends, or from their grandparents, but I can say with the utmost honesty that there's a kind of magic here, some sort of fairy dust that you don't see elsewhere. You see people sitting in restaurants in Herzliya Pituah, and upstairs the lights are on in the offices. The problem and the trouble is that those lights are on in offices from Rehovot to Ranana, and none of us are doing enough to expand that light to outlying regions."
Globes: How will Israel look 10 years hence, as high-tech continues to grow, if no solutions are found to the problems in outlying regions and the social gaps?
Vardi "It won't look good. We're creating two countries. The figures for GDP are the average for both countries, therefore they're misleading. If this goes on without a solution, the frustration will only grow even further. All told, deep down, high-tech leaders are not comfortable with this reality. Everyone knows that it's unjust and that he's not doing enough.
"The development of a 'high-tech state' between Gedera and Hadera has led to a situation where we're living in two countries, of which only one has a high GDP, with high income, and few children. High-tech is a great solution, but only for the 7% of the population that are employed in it."
Vardi, who works with school pupils in disadvantaged regions and with new immigrants, alongside his public activity within the high-tech industry and his membership of numerous public committees, is convinced that the solution to the two-country problem lies in "boosting the economic activity and strength in outlying regions, so that they are on a par with Tel Aviv. The government needs to understand that you can't say that the Negev, Galilee, and Jerusalem regions are a problem, without appointing deputy ministers in each of the relevant ministries. The bottom line is that none of us have done enough, including me."
The Manufacturers Association Panel of Judges, chaired by Dov Lautman, and which includes Manufacturers Association president Shraga Brosh, Discount Investment Corporation president Ami Erel, CTS Ltd. managing director Sigal First, Central Bottling Company Ltd. (Coca Cola Israel) managing director Ron Kobrovsky, and Prof. Itamar Rabinovich of Tel Aviv University, said the prize was awarded to Vardi "for his activity and outstanding achievement in the economy, technology, industry, and R&D in Israel; his advocacy on behalf of Israeli high-tech throughout the world, and his promotion of entrepreneurship in industry. Vardi is a first-rate visionary, and Zionist, with a developed sense of social awareness."
Vardi, who will be 65 next week, has held many senior positions over the years. At the age of 27, he was appointed director general of the Ministry of Development, and then went on to serve in a similar role at the Ministry of Energy. In the 1970s, he was a founder and then chairman of Israel Chemicals (TASE: CHIM). In the 1990s he helped found Alon Israel Oil Company Ltd., ITL Optronics Ltd., and others. Vardi, said the judges, manages all his activity from an office in the basement of his home, without secretaries or assistants, in keeping with his "modesty and humanity, which are driven by extraordinary values."
Vardi himself says he attributes the success of Israeli high-tech to the Jewish-Israeli heritage that has produced a generation of creative, determined visionaries. "I claim that you can find technology, mathematic, physics, and scientific training in countries no less highly thought of than us. Yet the situation is Israel is still unique. We're right at the start of the high-tech food chain, at the most risky stage that requires more courage than at any other stage, and the most risky investment. This is not just the result of technology and education, which are important in their own right, but rather, it is a social-cultural phenomenon in Israel and a select group of other countries, in which there is a consensus and widespread national agreement that high-tech is an important and a key issue.
"In Israel, someone who tries his hand at high-tech and fails, doesn't retire, but instead, like a good mountain climber, he goes back to camp, does a bit of reorganizing, and sets off again for the mountain. It's part of the culture that allows for the taking of risks. It's part of the culture of striving for excellence, and the desire to be independent, which are part of the cultural ethos in Israel."
Slightly hesitantly, Vardi adds, "I think that the Zionist ethos has played its part here. "We hear about the pioneering element in high-tech, and to be a pioneer means going somewhere new and starting from scratch. In the past it was setting up kibbutzim by the Sea of Galilee, and then it was the development towns. Each time, people in Israel looked for somewhere to go where there was nothing."
Vardi's pioneering work in Internet started in 1994, through his son, Arik Vardi, who together with Yair Goldfinger, Sefi Visiger, and Amnon Amir, developed the messaging software ICQ. Vardi, the first investor in the company itself, Mirabilis, raised $3.2 million (from Abraham Bigger, Eitan Raff, Yair Shamir, Harvey Krueger, Ami Erel, and Dan Propper), and then, after it had reached 12.6 million users, he sold it in 1998 to AOL for $407 million. According to media reports, at the time of the sale, Vardi owned 22% of Mirabilis, worth $89 million.
The success earned him the title of "Internet guru," following which he became adviser to Amazon.com Inc. (Nasdaq: AMZN) CEO Jeff Bezos, AOL CEO Jonathan Miller, and a popular lecturer worldwide. He subsequently became a serial entrepreneur, investing in dozens of start-ups in Israel, including RichFX, Scopus Video Networks, Gteko, SpeedBit Ltd, Answers Corporation (formerly Gurunet), Mix Me Networks, Browzwear International, and others. Vardi usually invests in companies at the seed stage, providing sums ranging from hundreds of thousands to a few million dollars per company.
"If you want to invest in high-tech I think that you need to: 1. have a passion for new experiences and working with young people, otherwise it can be nerve wracking; 2. take some of the returns on your investment and reinvest them; 3. realize, if it's not going well, that it's part of the game, and that it's not meant to make you despondent; 4. choose your partners carefully, as you would in any investment," Vardi advises.
May I ask how much you have made over the years, given the estimates that it amounts to hundreds of millions of dollars?
"You may, but that's a matter for me and the tax authorities."
What are you most proud of today?
"The thing that gives me the most pride has nothing to do at all with high-tech," Vardi replies hesitantly, but then relents, "I hope that I have made my contribution in public service, within my family circle, and in non-business areas."
Where will Israeli high-tech be ten years from now?
"I believe it will be even larger, more amazing, and more prosperous than it is today. I see young Israelis in disciplines unrelated to high-tech also becoming involved in it. People from the worlds of the arts, literature, music, and philosophy are entering high-tech because the Internet provides a stage or all disciplines. Behind all these is the culture embodied by the Jewish mother who says to her son, "Aunt Leah's son has got his own company, and you?"
Also receiving the Manufacturers Association Industry Award together with Vardi on September are Strauss Group president and CEO Erez Vigodman; Readymix Industries chairman Amnon Dotan; and Mul-T-Lock CEO Shimon Shekel.
Published by Globes [online], Israel business news - www.globes.co.il - on August 29, 2007
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