Good morning, I'm Stuart Lander. I'm delighted to have on stage with us Michael Eisenberg, who many of you will know as the co-founder of Aleph, one of Israel's most successful venture capital firms. As you all know, Israel's had a massive impact on global innovation over the last few decades, and few people have had a front row seat on it as Michael has. We're going to talk about that evolution, and we're going to talk a little bit about the changing landscape in the Middle East. So welcome, Michael. To get going, I'd love you to give some background on Aleph. You were a partner at Benchmark at a transformative time in Israeli tech, with an incredible amount of capital coming to the country from overseas. You co-founded it in 2013. Why was that the right time to start Aleph? What was the strategy, and how's that evolved over time?
First of all, thank you for having me. Thanks to you and to Mark. Venod is a tough act to follow, to say the least. Why did we start Aleph in 2013? Well, I was a partner at Benchmark before that, and actually, Horley Bridge came to me and said, 'You know, nobody's raised a Series A fund in Israel for a very long time. You can go raise one. Why don't you do it?' And the basic strategy was to create a firm that would service the hell out of entrepreneurs. It was modeled on Benchmark. It's an equal partner, only funds. They'd be small funds that would focus on DPI and carry rather than these very large funds that focus on management fee. But what we saw in Israel at the time was people had stopped wanting to sell their companies early to the likes of Intel and Cisco and Microsoft and were kind of ready for bear. When I was involved in Wix, I was one of the early investors in Wix. You saw this ambition that, other than for example Gil at Checkpoint before that, you hadn't seen. And all these people were spinning out of Wix and Scota and Checkpoint and many other places and saying, 'Okay, I'm ready for bear now. I'm willing to build a generational company.' And the venture infrastructure didn't exist to do that. And so that's what we built Aleph, again modeled on Benchmark, to really service these Israeli entrepreneurs to build very large and meaningful global companies and brands out of Israel.
Maybe talk about some of the companies that you've invested in that have been successful. So yesterday, Lemonade reported earnings. Stock didn't perform terribly well, but the company is on a clip. It's the fastest growing insurance company in the world. Melio, which is the leader in B2B payments right now. A company called Next Silicon, which probably most people have not heard of, but is one of the leaders in the future of semiconductors right now. Nexar, which has the largest data set in the world for road and driving data after Tesla. I could keep going. Empathy.com, which is... Maybe let's focus a little bit on the success that the Israeli ecosystem has had. I think there are more startups per capita in Israel than anywhere else in the world. Yeah, all that shows that nobody wants to work for another boss in Israel. There are, I think I have this right, after the US and China and maybe Canada, there are more Israeli companies on the NASDAQ than any other country in the world. This is a country of 10 million people. They've had an outsized impact on global tech. I think there are many people in this room right now that are from communities and countries that really look to replicate the success that Israel's had. What is the secret source? Why are Israeli startups so successful?
Some number of years ago, I gave a talk at Harvard, and some woman from New Zealand got up and said, 'How do we replicate Startup Nation in New Zealand?' To which I responded to her, 'Well, I actually don't think you can,' and I'll try to explain why. If you are a parent at a kindergarten in Israel, and the kindergarten is supposed to open at 7:30, you turn up at 7:30, there's nobody there. And then the parents start to kind of arrange on the spot who's responsible for this. And you know, there may have been supposed to be a bus there, and the bus doesn't come on time. And they're supposed to be computers, and they're not there, and people are donating their computers. The secret to Israel is that a lot of things that you think work normally in most other places actually don't work in Israel. And we've been way ahead of the rest of the world on government incompetence. And yeah, it turns out to be catchy around the world. But what Israel does have is civilians who take responsibility. And civilians are the most, I'll argue, the most capable civilians and civil society on the planet. Because when you get to that kindergarten, the parents are in charge. And by the way, the six-year-olds are in charge. And because kids go to the army at age 18, they have responsibility both for weapons and for fellow soldiers at a super young age, and that develops a large amount of agency. Many of you probably saw Bret Weinstein said the most important thing today is not intelligence but agency. Israelis have agency in spades. And so I don't think it's terribly replicable. In addition to which, the army, because it entrusts these kids at age 18, 19, and 20 both with budgets and with super advanced technology, is this kind of cauldron that forces these kids to be super innovative. And this kind of combination of agency, things not working so civilians have to take responsibility, and this kind of battle testing where, by the way, your technology matters for life and death, not for money, pushes kids to the edge and enables them to become, I think, super entrepreneurs at a relatively young age. The government got involved at the beginning of my career, 1991, 1992, by jumpstarting the startup industry, but then they made the most enlightened decision ever of any government: they got out of the way. And that's been super helpful too.
So the IDF is obviously a really critical component of the society and the psyche of entrepreneurs. How important is immigration as well? Because immigration is hotly debated around the world. Israel is an example, I think, of immigration really being successful and helping the business world. So maybe talk a little bit about that without getting into the politics of immigration here or in the UK or in Germany or in France or anywhere else you want to pick.
Israel's unique in this way for a few reasons. One is it's mostly, but not all, Jewish immigration. There is a not small number, by the way, of Eritreans and Sudanese who have immigrated as well. But it tends to bring a high level of talent. But most importantly, I think what's gone wrong in many countries with immigration is that the immigrants have not been inculcated with the values of the country. And what mandatory military service does is it ensures that people go through a socialization with the core values of the country, and that creates a more unified society. There is diversity in where people come from, which is what makes it super interesting. We had a large amount of French immigration recently. The food has gotten better, and the technology has gotten better at the same time. But there's a socialization that people go through that introduces them to Israeli society. And by generation five, people are well socialized. And I think that's an important thing. I mean, I've said this openly, written it publicly: I think mandatory military service is a good thing, not a bad thing. And I've encouraged a number of American politicians to do it also. I think it matters.
So with all the success of Israeli startups, I feel like the country still hasn't produced a homegrown winner to the scale of a Google and Amazon or a Stripe. Why is that, and what's needed to take that next step?
So when I got started in venture, Israeli companies were selling for $100 to $200 million. When I started Aleph, we had our first multi-billion dollar companies. At the beginning of my career, they said, 'Why is there no Nokia?' Nokia sneezed and Finland had a cold. And what happens is the goalposts keep moving. And so we have not had a Stripe or an OpenAI, but now we're at the level they used to ask me a decade ago when I started Aleph, 'Why are you not there?' I think there's two reasons. The technology industry started in Silicon Valley in the United States in the '50s and '60s. It got started in Israel in the '90s, 30 years behind. I think these cycles matter actually in order to build talent. I think that's one reason. Reason two: it's only 10 million people. It's actually hard to scale people. One of my great hopes about AI is it makes our population disadvantage become a population advantage over time. And you can build a $100 billion company with a lot fewer people than you needed before. But I think we're actually happening. We're just 30 years behind the United States. And I think we're lapping Europe. You know, we don't talk about this a lot because Israel often gets lumped in with Europe. Europe's in real trouble. I was in the UAE a few times last year, and the statistic I keep hearing is 9,000. I know you're from London. 9,000 British multimillionaires have moved to the UAE. And when I was there three weeks ago meeting with senior political people, they say that entrepreneurs are leaving London in spades. It helps when there's no tax. It matters. There's a lot of tax in Israel, but people come. And so I think we're getting there, and we will lap Europe, and we'll have a $100 billion company. My guess is within a decade.
So I want to shift slightly. I can't speak to you without talking about the tough neighborhood that you live in. For the last 16 or 17 months, Israel's been fighting not a one-front war but a seven-front war. October 7th and the hostage crisis has had a devastating impact on the country, as it would any country. What did you think the impact was going to be in those days after October 7th on startups, on capital, and what's the reality been 16 months later?
So the first thing is, this is a very hard day. For those of you who didn't see, the Bibas family was buried today after coming out of 500 plus days of captivity. These two young boys were mutilated in captivity, and Shiri Bibas, the mother, was taken. And I watched the eulogy that her husband and the father of these two children gave today. It was just beyond heartbreaking. And so it has been a rough 15 months, and it's not over. And it's not over on two fronts. It's not over because many of the hostages are still being held by Hamas, and Hamas is still fundamentally in power in Gaza, and that needs to end. And Iran still is surging forward to a nuclear weapon, which President Biden and now President Trump have both correctly said is not okay. I spent nights in a safe room when there were 300 missiles coming over from Iran, ballistic missiles that take 12 minutes or 8 minutes to arrive. No other country's gone through that. And so it's been rough. And at the same time, it's been incredibly inspiring. The level of resilience in the country is stunning. Our startups lost almost across the board 15 to 20% of their employees to reserve duty in the military. Nobody missed a beat. People hit numbers, people hit delivery deadlines. I heard from Alex Karp and Jensen. Nobody missed a beat. Everyone delivered on time what they were supposed to deliver. In my own family, I had four kids in Gaza for months, many, many months. And so everybody's family was disrupted. But what did I think? So in November, I wrote a piece that went fairly viral on Twitter that this is the defining generation, not just for Israel but for the world. These kids went out to fight for what mattered, and they would come back and build defining companies. 15 months later, we see these kids starting companies. These young people starting companies, and they are unbelievable in their ambition. Something happened to them in this cauldron of the last 15 months that has raised their ambition level and their innovation level beyond anything we've seen before. The second thing is, I think everyone wrote these kids off. It was the TikTok generation, it was the Instagram generation. It turns out to be the instant hero generation. And they got from behind their screens, they went to battle, but they didn't miss a beat. They came back and innovated. I remember about a month and a half into the war, I turned up at 8200 for something, and there were mattresses everywhere. It was the greatest hackathon in history. People of all ages had come back, and there's this multigenerational hackathon doing things to save lives, find hostages, and help out. And so we are seeing just incredible innovation. And by the way, had I told you on October 8th that I would argue that the portfolio called Israel was notionally down 80%, that we'd have a record year in M&A, $10 billion, right? Nvidia bought two companies, Salesforce bought two companies, and many others. A record year on investment. You would have laughed. But that's what happened. And by the way, Accel opened an office this year, Sequoia opened an office this year, Index opened an office this year. We invested more money in startups this year than we did in the two and a half previous years. In the last 15 months, people are standing up. And I think patriotism matters, rallying around the flag matters. And people just want to build for the betterment of society and the world. And it has been absolutely inspiring. This is the greatest, the most defining generation of kids I think there has been in the world in 80 years.
