Lot’s of Israeli VCs talk up the importance of early stage investing but how many first investments do they actually make in seed stage startups and which VCs lead the walk rather than the talk? The IVC Research Center has released the results (membership required) of their 2009 VC survey and we’ve got some good and bad news to share. What do you want to hear first?

Ok, the bad; 2009 saw an overall 50% drop in dollars raised by Israeli hi-tech companies and a 35% drop in the number first investments by Israeli VCs. Israeli VCs made 77 first investments in 2009 compared to 119 in 2008.

Now the good; 38% (the majority) of those 77 first investments where made in seed stage startups compared to 28% in 2008. Internet, Software and Life Sciences sectors took in the most checks. Each took 22% of the overall annual first investment pie. Internet? Nice.

Most Active Israeli VC Funds in 2009
So which VCs made the most new investments? Surprisingly Terra Venture Partners, a tiny $25M cleantech fund, leads the pack with 6 first investments. Tied for 2nd with 5 first time investments are Carmel, Giza, JVP, Magma, Pitango, Sequoia and TriVentures. Gemini and Genesis made 4 first investments. Check out who they invested in and the stage and sector breakdown below.

Early-stage startups should keep these numbers in mind when pitching Israeli VCs. The most active of the bunch make 2 to 3 early-stage investments per year after seeing hundreds pitch. We hope to see these numbers increase in 2010 and that more Israeli Angels and micro-funds will step up to fill the seed gap but rather than just hoping investors take more risk, let’s get out there and build more sustainable Israeli businesses that merit the early financial support.

Calling all TechAviv startups looking to raise up to $1.5M. Tevel.org, an NYC-based group of zionist angel investors, is looking to fund the next great early stage Israeli web & mobile startups. Our members are invited to submit an application to present at the upcoming  Tevel Angel Club event on July 28th in NYC. Only two web/mobile startups will be selected to present in front of over 60 power Angels.

As part of our affiliation, the application and presentation fees, normally $350, have been waived exclusively for TechAviv startups. Your only expense will be travel and accomodations. If you’re interested in presenting, email yael@tevel.org and let her know you’re a TechAviv member.

Disclosure: I’m an executive committee member of the Tevel.org Angel Group and along with fellow comittee member and TechAviv NY member Yaron Galai, will screen your application.

We all know that, to the external observer, “surfing the web” better resembles stumbling home at 3:30 AM than anything else. There is no majestic riding along the face of single breaking wave. That is a fairytale. We stumble across the Internet. One word, one concept, one random message can send us going in 100 different directions.

For instance, for the writing of this post, I wikipedia-ed “surfing”, checked out Scott McCloud’s TED speech, followed @ScottMcCloud on Twitter, searched for last week’s 30 Rock episode (but found it inaccessible from Israel), opened up www.Mahalo.com for a moment (OK, it was a bit longer than a moment), went to www.stumbledupon.com, after seeing weird quotations realized that I was looking for www.stumbleupon.com, and then I stopped because I was getting too sidetracked.

Firefox doesn’t help the situation. We open scores of tabs, to the point where it would require both a forensic investigator and a psychologist to try and ascertain what you did last night and why.

My mother would ask “why do we care?” A valid question, everywhere but on the  Social Web. Sites like Digg and Stumbleupon have millions of visitors a month, solely because we do care what other people think about interesting content on the web. We click on links on Twitter and Facebook, because we enjoy having someone else choose our content for us.

While every piece of information that I looked at fits into the puzzle of this blog post in some way, the same articles would have an extremely different effect on anyone else.

The site that I am talking about is called qwiji.com. I know, it seems that the cofounders, CEO Erez Shemesh and CTO Yaniv Hakim simply threw Scrabble letters onto the table and chose a name that way. (Hence the 30 Rock reference.)

To describe it succinctly, qwiji allows a user to create a “web show” comprised of other sites, pages, and videos located on the Web, arrange them in whatever order you want, and to affix an explanation or an ongoing commentary on the bottom.

In math, we learn that a single point cannot teach us anything, we need multiple points to teach directionality or anything else. When we only share a single link, devoid of anything else, the receiver lacks our context.

qwiji enables us to share both content and context. To paint a picture with multiple points, as opposed to just one.

The co-founders consciously did not raise money for qwiji, showing that bootstrapping, especially in the environment, is the way to go.

The result is a tool that can allow people, who may not have the patience or abilities to write blogs or record video, to still inform people about their worldview.

Yaron Galai is a lot of things to a lot of people. If you didn’t already know that he’s one of the most successful Israeli hi-tech entrepreneurs of all time, the soft spoken family man would strike you as more comfortable on a kibbutz than in a board room. What sets Yaron apart from the digerati of Israeli hi-tech is his selfless work helping fellow Israeli entrepreneurs. 

Whether mentoring students, matchmaking for Angels, defending friends or voluntarily helping young startups with priceless insight, direction and introductions, Yaron is always nudging and inspiring others towards success. It’s for this reason that I’m particularly happy to announce that Yaron’s current startup, Outbrain, a content rating and recommendation engine for blogs, has secured a recession-busting $12M second round of financing. The round, which brings Outbrain’s total funding to just over $18M, was led by new investor Carmel Ventures, with Zohar Gilon and Rhodium also joining previous investors Gemini,  Lightspeed and GlenRock Israel in filling out the round. Shlomo Dovrat, co-founder and general partner of Carmel Ventures will be joining Outbrain’s board of directors. Nice.

$12M for a blog plugin you say? I have to admit that if it wasn’t for Yaron at the helm, I’d be scratching my head on this one as well. At first glance (see yellow stars at the bottom of this post) Outbrain is a chimp-simple plugin for blogs that lets readers rate posts on a 5 star scale and get recommendations for other posts they might like. Seems trivial and there are many similar plug-ins out there. Outbrain however gets interesting when you consider the massive amounts of aggregate data it collects about reader tastes and blog content. Combine that with some nifty semantic web recommendation algorithms, perhaps contextual ad targeting in the future, a CEO who sold his last user-preference-targeted ad network for $363M and a co-founding CTO who ran tech for a little shopping site that sold for $634M and you start getting the bigger picture that has investors clamoring to write Outbrain a check. With no short-term goals for revenue the bet here is that Outbrain’s exceptional management will figure it out. My personal bias aside (Yaron is a good friend), its a dam good bet. These guys are in it to build a big business over the long haul and having a ton of fun at it.

Most techfluentials didn’t get Outbrain when the quiet startup first launched in 2006 as just a rating plugin for blogs. The introduction of recommendations got people talking and the contextual content aggregation space has been heating up ever since. The torrid pace of content creation and fragmentation on countless publishing platforms makes the need for a common, intelligent content aggregration and recommendation platform vital for organizing the noise on the web. Outbrain’s early start and extra layer of user-supplied content rating data positions them nicely for defacto status. The service has grown 11X over the last year and makes millions of recommendations daily across thousands of blogs and sites.

Check out the smarter Yaron presenting Outbrain and some tips for entreprenuers at the Jan 5th TechAviv Founders Club Meetup:

Jump to 4th white dot on the timeline (1:06:20) 

Mazal tov Yaron, Ori and team on this impressive milestone, and kudos to the stellar group of investors that continue to support Israeli hi-tech in the midst of a shaky economy. Onward and upward.

Get the Outbrain plugin for your blog, follow Outbrain on Twitter and get wise and inspired at Yaron’s Blog.

Our friend Eze Vidra of VC Cafe reports that TechAviv IL member startup TVinci, a video management platform with arguably some of the most advanced and engaging video user experience technology and UI design has secured their first official round of financing of $1.6M from fellow TechAviv IL member and seed investor Ron Tamir of Kaedan Investments.

TVinci founder Ofer Shayo (blue shirt) seated behind investor Ron Tamir (green shirt) at first-ever TechAviv Founders Club, September 2008.

I liked founders Ido Wiesenberg, Ofer Shayo and Guy Barkan the first time I met them over a year ago. They’re uniquely professional for their age (mid twenties) and most importantly have a knack for relentlessly focusing and flexing their core competency; user experience design. I often say that in web video content is king but content experience is queen. TVinci is definately a startup to watch because of their mastery of user experience design. Congrats guys on the raise. We’re looking forward to big things from you.

We’ve been chomping at the bit to announce that stealth startup and TechAviv IL member SundaySky has completed an $8 million Series A round of funding led by Carmel Ventures and Globespan Capital Partners. Avi Zeevi, General Partner of Carmel and Jonathan Seelig, Managing Director of Globespan have joined the Company’s board of directors. This is great news for a great company and Israel hi-tech as a whole. SundaySky will be demo’ing at our February TechAviv Founders Club meetup and hopefully sharing some tips and insight on the funding process in today’s market.

SundaySky develops an innovative video authoring engine that automatically generates videos from content; text, graphics, photos, music and videos, on any web site. Even more impressive, videos can update in realtime as the content on the web site updates.

Sounds crazy but imagine signing in to Facebook and getting a realtime digest of what all your friends are doing, narrated status updates, photos, videos and all, in a professionally produced video. Imagine watching a detailed video about a hotel on Expedia, only the video has been automatically created from the metadata and photos on the site. Or comparing products on Amazon by watching a video rather than reading text. No work is done on the part of the site.

The company is targeting social, media and ecommerce sites, enabling them to generate compelling video on the fly from their websites dynamic content. The company also provides video streaming and analytics for the auto-generated videos but the real value in enabling sites to great quality+quantity videos is to increase viral traffic, time-on-site, and conversion rates of their content.

Seldomly do I see products that are truly novel. Sundaysky is one of them. Mazal tov Shmulik and Yaniv on the impressive raise and to Rami, Gilad and Jonathan on the forsight to see the long term potential of this groundbreaking technology regardless of current market conditions. We’re looking forward to seeing what you make of this opportunity.