Long before the exit culture became widespread and the newspaper and web headlines about technology companies being sold became a regular part of business life in the Holy Land, there was a specific point in time when the exit and the Start-up Nation emerged on center stage. It was the summer of 1998, when US Internet giant AOL bought Israeli instant-messaging program ICQ. The media frenzy was tremendous, and the company’s founders, including serial-investor Yossi Vardi, became the men of the hour.
Many bits have flowed through AOL’s servers since then. The company has made a long journey, merging with Time Warner, and later spinning off, in order to rediscover itself in the world of video, and programmatic, technology-based advertising. While this was happening, the US company continued to show great interest in the local start-up market. AOL sold ICQ to Russia’s DST, but has nonetheless become a very dominant force in Start-up Nation. AOL acquisitions include include Avichay Nissenbaum and Yaniv Golan’s Yedda (the two currently own Lool Ventures) for tens of millions of dollars, and Yaron Galai’s Quigo for $363 million (Galai founded and is currently CEO of Outbrain). Another significant acquisition was 5 min Media for $65 million, which increased AOL’s technological involvement in video. Two years ago, for $405 million, it also acquired Adap.tv, which does not operate out of Israel, but was founded by Amir Ashkenazi - an Israeli. The company’s most recent Israeli acquisition was Converto, last year, for $100 million.
Though AOL has not slowed its Israeli shopping spree in recent years, and the company also operates two development centers in Israel, it seems that its true vote of confidence in Israel, which took things up a notch, was last year, when Nautilus was formally launched. Nautilus functions both as a program to advance and cultivate start-ups, and as AOL’s Israel scouting branch.
“Our job is to identify potential companies and talent in Israel. AOL has acquired many companies in Israel, and understands the great value of Israel as number two in the world in innovation, after Silicon Valley,” explains Nautilus CEO Merav Rotem Naaman. “As part of Nautilus, we established a program that assists entrepreneurs for a year, and also invests $100,000 in them at seed stages. We don’t set a valuation at fundraising, and it is a one-time investment,” she says, and emphasizes that AOL does not take anything from the start-ups in exchange for participation. “The only thing we get is a stake in the program’s companies, but that’s in exchange for the investment we make in them.”
The start-up mentorship program operates out of AOL’s gleaming offices on 22 Rothschild Boulevard in Tel Aviv, a building it shares with Facebook Israel, AutoDesk, Magma, and others. Spanning 340 square meters, with meticulous, outstanding decor, and glass windows offering a breathtaking view of Tel Aviv, the offices are home to six start-ups that receive constant, but not excessive, mentorship. As part of the mentorship package, Nautilus brought on Roni Burrell, who came from AOL’s video technology development center in Tel Aviv, in order to provide in-house support to Nautilus entrepreneurs. Burrell, who previously worked at Philips and Nokia, works with the start-ups on product and user experience (UX). “The idea is to solve problems for them, to connect to partners and clients, and to establish the right priorities to advance with the product,” says Burrell of her unique role in the program.
Nautilus’s double role plays in AOL’s favor. “Since the program was launched in May last year, we have seen 350 start-ups,” says Rotem-Naaman. “As far as we’re concerned, every start-up we see, we look at with two questions in mind: is it a fit for the Nautilus program, in terms of the stage the venture is at and whether we have value to add, and does it add value to AOL as a potential partner, investment, or acquisition?” Rotem-Naaman says, “We are in direct contact with AOL, so we know what the company needs, and what it is planning, so we can understand what it’s looking for, and which technologies and ventures will help it. We can also connect AOL with established Israeli companies that are interested in gaining access to AOL, even if they are not exactly start-ups. We have intimate knowledge of where the company is headed, strategic goals, and the goals for specific products. This is how we know with whom to connect a particular entrepreneur, in what way, and when.”
Rotem-Naaman, a lawyer by training, came to AOL after holding various management positions - she headed regulation at Cellcom more than a decade ago, spent a few years at the highly-regarded consulting firm Bain & Company, and also worked at Better Place, from its first days.
Rotem-Naaman was brought on board by former AOL Israel development center CEO Hanan Laschover, founder of 5 min Media, which was acquired by AOL. Nautilus was Laschover’s idea. He recently announced his intention to leave AOL. In so doing, he joins his two colleagues - who also announced their departures in recent months, each independently.
Asked to define the start-up program she heads, Rotem-Naaman describes it as a new beast, and not one that fits into the familiar molds: “We are not an accelerator, not an incubator, and not a hub. An incubator is the chief scientist, and an accelerator is something that generally works with cycles, demo day, etc. We give a start-up room to work and all the support it needs, whether in the area of business, planning, product, or user experience, with a pull, and not a push. We won’t arrange a lecture for everyone, because it won’t be a fit for everyone, in terms of the stages they are at. We might bring someone specific to one of the start-ups,” she explains.
The length of time that the start-ups spend in Nautilus’s offices, a full year, is different from the standard for incubators, where the duration is generally two years or more, and different from accelerators, which are concentrated in just a few months. “A start-up that joins us needs to raise seed funding within four months, and then has eight more months before it leaves,” she says, pointing out that there is room for two more companies in the complex, alongside the six that already operate there, one of which is expected to leave soon.
Although Nautilus seeks to distinguish itself apart from other programs for start-ups in Israel, the growing interest that international entities display in mentoring Israeli start-ups from up close is certainly noteworthy. In addition to AOL, companies such as marketing giant Nielsen and financial giant Citi are both supporting and fostering local ventures, and providing direct access to mega-companies, and their clients. For the local entrepreneur, these opportunities present significant shortcuts to business partnerships, investment, and altogether accelerated growth, beyond what they would be able to achieve independently.
Published by Globes [online], Israel business news - www.globes-online.com - on April 2, 2015
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