Google Inc. (Nasdaq: GOOG), eBay Inc. (Nasdaq: EBAY), and Conduit Ltd. have invested more than $100 million in acquiring start ups founded by graduates of the Zell Entrepreneurship Program at the Interdisciplinary Center Herzliya. Even so, program director Liat Aaronson is quick to say, "The students' experience is the success for us, not whether a company raises capital or is sold."
Five exits totaling $120 million is an impressive achievement that any venture capital fund would welcome, but neither funds nor private investors are behind it. Instead, it is an academic program sponsored by American-Jewish billionaire Sam Zell, who made his fortune in real estate.
Several years ago, Interdisciplinary Center Herzliya President Prof. Uriel Reichman asked Zell to join Shari Arison, Sammy Ofer, and other billionaires to establish a new building bearing his name at the college. Zell politely refused, saying, "I don’t donate money for buildings but to invest in people."
The result was the Zell Entrepreneurship Program, founded in 2001, and which marked its 12th anniversary last October. It offers its graduates a springboard to found ventures and companies with the close assistance of industry mentors. "The program combines academic courses and content, which give entrepreneurs tools for the future, with practical work in building a company. The result is a program that is different from other programs by emphasizing practical work, while also different from accelerators because of its academic aspect," says Aaronson.
Pitango Venture Capital partner Eyal Gura, a graduate of the program's second class, has chalked up three exits, and now teaches the next generation of students. He emphasizes the difference between the program and others in the market. "In contrast to all kinds of accelerators, where entrepreneurs come for three months, and are then sent on their way, here, entrepreneurs work intensively for a full year on their ventures under close supervision," he says.
"We hold board of directors meeting for them just like in real companies, we work with them on targets for the next time, budget management, how to present the venture, and how to sell its products globally. This is in addition to the academic education that they receive."
"Learning all these things at another program takes a lot more time, especially with regard to trial and error," says another graduate, Zohar Dayan, the CEO of text-to-video company Wibbitz Ltd. "The program provides support all along the way, including creating ties and networking through its graduates network."
Aaronson (42) joined the program at the end of its fourth year, after previously working for six years as a mergers and acquisitions lawyer at Nashitz Brandes & Co., where she represented venture capital firms and gained an intimate knowledge of Israeli high tech. "We believe that the best way to acquire entrepreneurial thinking is through practical experience. Entrepreneurship isn't something that can be learned just by opening a book and reading."
60% of graduates are not entrepreneurs
With all due respect to low tech, the program's big successes, the ones which created its reputation, were in Internet. In April 2010, program graduate Oded Poncz sold LabPixies, which developed small personalized apps for $25 million to Google, its first acquisition of an Israeli company.
A year later, in April 2011, program graduates made two more exits. Social toolbar applications developer Wibiya, founded by three graduates - Dror Ceder, Daniel Tal and Avi Smila - was sold to ConduIT for $45 million. At the same time, Gura sold widget developer PicApp Technologies to Ybrant Digital Ltd. for $10 million.
A month later, Gura and another graduate, Offir Gutelzon, sold PicScout to Getty Images Inc. for $20 million. In September 2011, the fifth, and so far final exit, by Zell Entrepreneurship Program graduates was made, when Eyal Gura's brother, Ron Gura, sold his venture, The Gifts Project to eBay for $20 million.
Staff of the Interdisciplinary Center Herlziya and Zell Entrepreneurship Program do not invest in the ventures and make no money from them.
Notwithstanding the respectable exits, Aaronson unexpectedly says that this is not what the programs wants to achieve. "The culture of exits has an influence, but the program existed before this trend. Here, success is the students' experience and not whether a company succeeds in raising capital or being sold at the end of the process," she says, adding, "In contrast to an accelerator or venture capital fund, the objective isn't necessarily to create ventures, but to train experienced entrepreneurs who underwent the experience, even if we're talking about a failure, so that the next time, they found something, they will be more mature."
Proof of this, says Aaronson, is that 60% of the program's graduates are not entrepreneurs at all. "They take the entrepreneurial thinking to all kinds of other fields, and do what Sam Zell is seeking - to influence Israel's future business leadership, not necessary high tech ventures," she says.
No expectation of immediate reward
Gura also tries to explain that the sale of a company is not the hoped-for objective. "I look at the graduates' impact, and less at the exits. Although exits are very popular in Israel, if the program has 220 graduates, then their aggregate contribution to the country and economy is far greater than an exit," he says. "It's not just creating a log and setting up an office. It's people who are employers, the companies' income and the income tax they pay to the State of Israel."
For Gura, it is obvious that not every graduate is going to found a start up the moment he completes the program. "Eyal Toledano and Natan Linder, who were in class with me, did not found their own company, but opened Samsung's R&D center in Israel, which now has 100 employees. Oded Puncz worked at other companies before founding LabPixies, which he later sold to Google."
Gura adds, "There is no expectation here for immediate rewards. That's what we're trying to impart to the students. We want the students to experience the process of creating a company, not necessarily immediate satisfaction of a company worth tens of millions of dollars."
The successes of the Zell Entrepreneurship Program have given it prestige and made it a sought-after destination for people dreaming of becoming entrepreneurs. Hundreds of students apply for the program every year, of whom 20 are chosen to join it in the last year of their studies at the college. Aaronson says, "Some students attend the Interdisciplinary Center Herzliya just because they want to join the program." In the program, the students are divided into eight companies or groups. The students can break up and recombine the groups. The tough conditions and reality do not give an especially high chance of survival.
"Of the eight ventures, four usually survive outside the classroom, and after a year, only two continue outside," says Aaronson. It is no wonder that Dayan says, "There's a lot of unit pride in the Zell Program. The selection is rigorous, like at an elite military unit, so there is a pride which distinguishes the people accepted from the others."
Published by Globes [online], Israel business news - www.globes-online.com - on January 8, 2013
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