The following guest post was contributed by entrepreneur-turned-VC Eden Shochat. It originally appeared in the discussion board of the Dec 22nd TechAviv IL meetup.

The we-do-2-seed-investments-alone-a-year-because-we-need-to-support-them model doesn’t work.

There, I said it. I’m a recent recruit to the VC world, most recently co-founder of Aternity (user experience monitoring) and face.com (massive face recognition platform). Being at the most recent TechAviv meetup, at some points I found myself glad not to be on the panel of VCs, and others where I felt I wanted to shout.

In my mind, seed investing is very different than round-A, B, C and beyond. It’s much more of a numbers and sweat game. The amount of support required is higher than subsequent rounds and too many companies fail at that stage; actually, one should assume more than 2/3 of the companies won’t raise an A round. So, the net effect is that if you only plan to do 2 seed deals per year, the odds are you will fail that year, reducing your incentive to make more seed investments the next year. It’s a catch-22.

When you are the founder of a seed stage company, there are three major issues you care about:

1. Product/Market fit discovery: You must find what’s the minimum viable product that serves your customer. Your customers need to be joyous. You need to delight them. We don’t have enough product talent in Israel – anyone that is involved with the company must be able to help, and not with pattern-based advice. Mockups, brainstorms, pushbacks, the works.

2. Hiring the right team: Roi will need to excuse me, but we do have hackers in Israel. We actually have quite a lot of them, but Yaron is also totally right – most of them want to start their own thing. Most seed stage startups need help to find teams that worked well together before, and in making these teams comfortable they should be working with them on this next big thing.

3. As little money-raising overhead as possible: It’s the time for you to be iterating on your product, to get customers to use it and find what works best. At this stage, there isn’t much due diligence to do: it boils down to team, scale of target market and competitive situation. Also, negotiating what will be the rights of preferred shares isn’t really what you should be doing.

The issues/risk/work (whatever you want to call it) don’t end there. Once you finally have a product with traction, most Israeli companies lack the network in silicon valley to promote it and make it front and center. It’s not a press thing, it’s a group of people who are extremely welcoming… if they know you.

The flipside is that one cannot escape that the burden of proof on a first timer is on the entrepreneur. More so, second timers will already know that they can get to traction pretty quickly. When you look at valley deal flow, you see that companies raising their first round of financing are already making money. It’s a small amount, it’s usually not repeatable, they still haven’t proven scale, but they are out there in the market.

Yes, costs are lower. There is the cloud and open source software that make capex and engineering expenses to a level where a 3 person team can create a real product. Yes, a major part of being an entrepreneur is the ability to convince your team (and many times their significant other) that the equity you are getting is worth fighting for in the day-to-day life, but my primary feedback to you is: “build a smaller product”. Understand where you want to get to, but go for product/market fit that is less certain and pivot from there. Really figure out what is it that would drive people to talk about you, come back and refer others. Yes, it’s risky. Yes, there will be competition – but at least you will have customers to compete on.

With all these hurdles, it manifests itself with an entrepreneur vs. VCs session at TechAviv. It’s startups from mars and VCs from venus.

So, what am I offering? Syndicate early stage deals. Collaborating with US-based angels on companies that are committed to developing killer products. Any.DO was raised in the meetup (thanks Ishay – I was the one clapping vigorously), and it’s a great blueprint of an early stage investment – awesome first time founders that bootstapped their company into 350,000 installs. I am proud to be part of that company, and for Genesis to have led the financing round.

There is a huge opportunity around consumer focused companies in Israel, be it mobile or Internet. Would love to work together to make it happen.

You can always reach me at eden@genesispartners.com.

We’ve officially got ourselves a trend, or in NBA terms, a dynasty. Israeli’s are dominating tech’s brightest global stage; TechCrunch.  Adding to a prestigious list of past winners (below), Soluto, the anti-frustration service for your PC, has won the first ever TechCrunch Disrupt Cup. This is arguably the most coveted “Top Startup” prize in our industry, and it was won decisively by the Tel Aviv based team of 23 that recently secured additional $6.2M Series A financing led by BVP Israel. You can now add $50K to that total. Here’s BVP Israel partner and Soluto board member Adam Fisher’s post about them.

To Tomer, Ishay, Roee and the 20 other rock stars at Team Soluto, on behalf of all your fellow TechAviv founders, MABRUK. You’ve done Israel proud. Enjoy the much deserved attention and thanks for keeping the spotlight on the startup nation. It does all the young startups behind you a great service on many levels.

Israeli startups should particularly take note of the non-techie positioning; “anti-frustration software” and Roee’s polished presentation skills, always a major factor in these types of competitions:

Finally, a hat tip to the other Israeli startups and founders that have blazed the path at TechCrunch’s annual events, taking a top prize every year since its inception:

TechCrunch40 2007:

• Kaltura - Audience Choice Award (DemoPit Winner). Founders: Ron Yekutiel, Shay David, Michal Tsur, Eran Etam

TechCrunch50 2008:

• iamnews – Audience Choice Award (DemoPit Winner). Founder: Nir Ofir

TechCrunch50 2009:

• RedBeacon - Best in Show. Founder: Yaron Binur
• Threadsy – Runner-up. Founder: Udi Nir
• AnyClip - Audience Choice Award. Founder: Aaron Cohen
• Trollim - Best International Startup. Founders: Raz Alon, Arik Filstein

TechCrunch Disrupt 2010:

• Soluto – Best in Show. Founders: Tomer Dvir, Ishay Green

You always have to take these competitions with a grain of salt, and remember that success lies in building a great company, but its good to take a moment to appreciate the recognition of Israel’s brightest innovators. Great job guys.

Who among us will shine in the years to come?

Back to work.

It’s been said Israel is the Start-Up Nation, but who’s the top Israeli startup? Here at TechAviv we’re big fans of crowdsourcing most of our decisions and continuing in that spirit of community we’ve just launched the first annual TechAviv Peer Awards. Starting today we’re inviting all 2,000+ TechAviv Founders Club members worldwide and TechAviv.com readers to vote for their favorite Israeli startup (4 years or younger). Online voting deadline is Dec 21st.

CAST YOUR VOTE FOR TOP ISRAELI STARTUP OF 2009

On Dec 30th at the IDC Herzliya the Top 5 vote-getters will compete live, not in front of a panel of so-called experts, but rather in front of hundreds of fellow founders and investors who will crown this year’s winner via live sms vote. This is going to be good.

If you haven’t heard about the new book, Start-up Nation: The Story of Israel’s Economic Miracle get ready for a treat. This book is already making waves in the Israeli hi-tech community and well beyond, and promises to be an instant and lasting classic. An Amazon bestseller its first week out, Start-up Nation is perhaps the best insight yet into the phenomena that is the entrepreneurship-driven Israeli economy.

Written by Dan Senor, senior fellow for Middle East studies at the Council on Foreign Relations, and Jerusalem Post columnist Saul Singer, the book asks and answers the question; How is it that a nation only 60 years old, 7 million people strong (smaller than New Jersey), literally surrounded by enemies, in a constant state of war since its founding and with no natural resources, has:

• Highest concentration of startups in the world
• Most VC investments per capita in the world
• More NASDAQ listed companies than any country besides the US, more than all of Europe, India, China and Japan combined
• Economy barely hit by global economic crisis

In short, how do we kick ass with such little feet? The book and its answers are particularly timely for a world struggling out of a global economic crisis. Most agree that there’s only one way out; Innovation, and Israel is its hotbed.

What Drives the Innovation?

Without stealing the thunder from this uniquely well written book, here are a few of the observations Dan and Saul present from detailed case studies and interviews with Israel’s top innovators:

• Israeli immigration and assimilation policies bring and support a highly motivated, diversified pool of talent into the country.
• Israel spends more as a percentage of our economy on R&D than any other country in the world and knows how to make that money relevant to startups.
• Israel actively cultivates a culture of entrepreneurship and leadership in the military. Teenagers are not only given the responsibility to make life-saving decisions, typically with little data, but to question authority regularly in doing so.
• The Israeli economy respects and knows how to integrate the unique talents and “chutzpah” developed by soldiers in the military.

The reason this book is so important is that it puts a spotlight on a side of Israel that most people never think about and surely don’t see on national news in the US. See Dan on NBC’s Squawk Box, Morning Joe and Meet the Press. If that doesn’t swell your chest up with pride, you’ve got a cold. Go get this book and spread the word.

“There is a great deal for America to learn from the very impressive Israeli entrepreneurial model – beginning with a culture of leadership and risk management. Start-Up Nation is a playbook for every CEO who wants to develop the next generation of corporate leaders.” – Tom Brokaw, NBC

Dan and Saul’s TechAviv World Tour

Want to meet the authors? So do we so we’ve invited them to speak at all of our TechAviv events worldwide (IL, CA, MA, NY) starting with New York on Nov 12th. Got a question or comment for Dan or Saul, leave them in the comments section or tweet them here and here.

It seems our friends over at TechCrunch are having a “who can get the most comments” competition because their posts keep getting more provocative by the day. Today’s winner, Sarah Lacy with her post: Now that China Is the New Israel…What’s Israel? As of this post, she’s tallied up over 100 great and as usual racist comments. I’ll bet she’ll break 200 with this doozy. That said, there’s an important conversation to be had here.

In the post Sarah writes:

By 2004, an executive from Silicon Valley Bank was quoted in the San Francisco Chronicle after leading a contingent of VCs back to the Holy Land saying Israel was poised to explode again. He crowed that the crash and violence aside, Israel was getting more venture money than anywhere other than Silicon Valley and Boston and it was only ramping up.

But it turned out, he was wrong. Money continued to invest along the same $1.2 billion-to-$1.4 billion a year range, and returns fell off a cliff. Israeli companies have raised just over $10 billion since the beginning 2001, but acquisitions and IPOs have returned just over $860 million over that almost eight-and-a-half-year period. 

And continues … 

Ten years after the peak of the last bubble, it’s clear that when foreign investment fell in Israel from about $4 billion a year to $1 billion a year, the country wasn’t just weathering a recession. Somewhere along the way, the entrepreneur scene here lost its mojo.

So I don’t say this to trash Israel, but facts are facts. In sheer numbers, Israel’s place on the global scale of investing has been dwarfed by China, and matched by the United Kingdom. And after three days of talking to dozens of entrepreneurs and investors in Tel Aviv, this seems like a country wandering in the desert, looking for a new tech movement to own and dominate.

Was a booming Israel just a relic of the 1990s boom like Webvan and the Pets.com sock puppet? I don’t believe so. But I’m in Tel Aviv for the next two weeks looking for the company and the tech movement that will prove me right. If you find it, drop me a note.

Here’s my note Sarah:

Sarah,

It’s a shame you jumped to post this misguided conclusion before spending your two weeks in Israel, but thanks for igniting the important conversation. The companies you need to meet are here and I’m happy to introduce you to any of the 300 founders you see in our startups tab. The tech movement you’re completely missing is the new generation of new media/web/mobile startups that are bursting onto the global scene from Israel. Yes, we’ve been historically strong in deep technology, but the kids graduating from the elite programming units of the IDF are building killer Internet-powered startups, not semiconductors. The seeds being planted now … Boxee, Kaltura, Outbrain, fring, Face.com, plaYce, Gigya, Innovid, Dapper to name a few are ushering in a new era of Israeli hi-tech — light companies focused relentlessly on user experience, not technology.

I’m a little confused, as perhaps you are, about your stance on the matter. Why would you ask if we’re a relic of the 90’s if you don’t believe so? As for your stats on M&A/IPO returns, why didn’t you mention their source? Please do. BTW, they’re wrong. Happy to send official data if interested.

Most importantly, have a great time in Tel Aviv.

UPDATE: Since many of you have asked, here is official data from the Israeli Venture Capital (IVC) Research Center:

From 2000 to 2008, the 8 year period Sarah is refering to, Israeli hi-tech companies have returned over $40B in M&A transactions alone, far outpacing any country besides the US. I can post the IPO data as well, but its really not the point here. Sarah’s data is wrong, and that happens in the blogosphere (not usually by 40X) but her qualitative point about us “losing our mojo” based on conversations with Israeli’s in her trip to Israel should be considered. Its the perspective of one person in the first days of visiting our country. Fair enough. It’s unfortunate that pre-judged perspective took the stage on the most widely read tech blog in the universe backed by false data. It created a lot of confusion. As for mojo Sarah, spend an evening with the founders at any of the monthly TechAviv meetups worldwide and maybe you’ll consider a second TC post. Inperfect and challenged by a global economic meltdown we are. Mojo we most certainly do not lack.

Today is the last day for startups in Israel to apply for Mini Seedcamp Tel Aviv. London’s popular week-long event is coming to Israel for one day on January 29th and could result in your startup getting seed funding immediately.

TechAviv IL member Yaron Orenstein is helping Seedcamp bring together 20 of Israel’s best seed stage tech start-ups with experienced entrepreneurs, investors, and developers from both Israel and all over Europe to participate in a day of intense mentoring, panel discussions and presentations at our home base, the IDC in Herzliya.

As a team in Mini Seedcamp Tel Aviv you will: a) Get access to a world-class network of advisors to help you with every aspect of your business and b) Open a direct route to seed and venture capital. Apply at http://seedcamp.com/pages/telaviv09. The deadline is midnight tonight, Jan 11th.

About 100 TechAviv founders and investors gathered at the IDC Herzeliya to watch TechAviv members 2Pad, Boxee and Outbrain demo their products live. You can read a blurb about each here. Thanks to Oren Todoros and our friends at LiveU, we’ve got a great lead-in video and an archive of LiveU’s live event broadcast below. You can also see some photos here.

The first 8:30 minutes of this video is dead air because it was a live broadcast and we were running a bit late. You can skip to the beginning of the event by clicking the first white dot on the timeline. You can also skip ahead to each of the startup’s presentations by clicking the subsequent dots. The audio is a bit weak in the beginning but gets better.

Our next TechAviv Founders Club event in Herzeliya is on Feb 25th. The event is exclusive to Israeli hi-tech startup founders and investors only.

This past Wednesday, 200 TechAviv NY members weathered a rainy New York night to come out and see member startups TurnTo and eHire demo their latest, and to hear Steve Barsh of DreamIt Ventures give an important and entertaining talk on De-Risking Your Business Venture. Thanks to Ronen Engler for the photos above and to member startup Flixwagon for the live mobile video broadcast:

We also discussed the war in #Gaza and the legions of Israeli hi-tech volunteers all over the world joining the torrid global conversation happening right now on social networks, blogs, twitter, newspaper sites etc. As promised, if you want to help spread the facts, articles, photos and videos about this tragic war, here are several excellent resource sites:

• http://www.helpuswin.org
• http://cli.gs/qassam
• http://www.israelpolitik.org/
• http://www.idfspokesperson.com
• http://www.standwithus.co.il
• http://il.youtube.com/user/idfnadesk

What sites am I missing? Please add them in the comments section.

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.

Last week, Better Place cut a $1bn dollar deal to bring electric car charging stations to the San Francisco area.  Better Place is without question, the most ambitious startup to ever come out of Israel and perhaps the company that has the best chance of restructuring the automobile industry in the next 5 years.

Better Place will replace fossil fuel burning cars with electricity consuming cars using a series of battery swapping stations around a given metropolitan area.  Nissan is the first company to build the cars.  Israel became the first country to commit to building the infrastructure and now Denmark and San Francisco are joining them.

Remember when everybody (Jobs/Bezos etc) hyped the Segue has an urban lifestyle changing device?   Well I’m hyping Better Place. To be sure, creating electricity can create CO2 emissions when we use coal, but there are many sustainable and renewable ways to create electricity. Denmark, for example, gets 20% of their electricity from wind.

There will be much more to say about Better Place going forward.  I am following the company closely.  But I wanted to introduce you for two reasons:

First, the wheels are really coming off the economy.  Everybody is terrified.  Shai Agassi gave us hope last week  announcing  that he will raise $1bn (in equity!) to change the Bay Area and help us out of global energy and environmental crises.  Second, to me Better Place symbolizes the rise of Israel as a first world economic power.  I don’t care how small the population is.  I don’t care about the geographic location.  The cooperation between universities, the military and the government coupled with a relentless entrepreneurial spirit among Israelis makes it the most undervalued population in the world.

Better Place is headquartered in Silicon Valley, but make no mistake, it’s an Israeli multinational company.