Start-up Nation

Combining geothermal algae, fiber optics, and beta cells to treat diabetes is typical of Gross’s cross-technology approach. Another of his start-ups, TransPharma Medical, combines two different innovations: using radio frequency (RF) pulses to create temporary microchannels through the skin, and the first powder patch ever developed. “It’s a small device,” Gross explains, “like a cell phone, that you apply to the skin for one second. It creates RF cell ablation, hundreds of microchannels in the skin. Then we apply on top a powder patch, not a regular patch. Most patches out there are gel- or adhesive-based. We print the drug on the patch, and it’s dry. When we apply the patch to the skin, the interstitial fluid comes out slowly from the microchannels and pulls the lyophilized [freeze-dried] powder from the patch under the skin.”

Gross claims that this device solves one of the most intractable problems of drug delivery: how to get large molecules, such as proteins, through the outer layer of the skin without an injection. The first products will deliver human growth hormone and a drug for osteoporosis; patches to deliver insulin and other drugs, hormones, and molecules—most of them currently delivered by injections—are in the works.

The Israeli penchant for technological mashups is more than a curiosity; it is a cultural mark that lies at the heart of what makes Israel so innovative. It is a product of the multidisciplinary backgrounds that Israelis often obtain by combining their military and civilian experiences. But it is also a way of thinking that produces particularly creative solutions and potentially opens up new industries and “disruptive” advances in technology. It is a form of free thinking that is hard to imagine in less free or more culturally rigid societies, including some that superficially seem to be on the cutting edge of commercial development.

CHAPTER 13

The Sheikh’s Dilemma

The future of the region is going to depend on our teaching our young people how to go out and create companies.

—FADI GHANDOUR

EREL MARGALIT’S BACKGROUND would not normally predict a future in venture capital. He was born on a kibbutz, fought in Lebanon in 1982 as an IDF soldier, studied math and philosophy at the Hebrew University of Jerusalem, and then pursued a doctorate in philosophy at Columbia University. He wrote his dissertation on the attributes of historical leaders—he thinks of them as “entrepreneurial leaders”—who profoundly affected the development of their nations or even civilizations (he profiled Winston Churchill and David Ben-Gurion, among others, as exemplars).

Along the way, he went to work for Teddy Kollek, the mayor of Jerusalem from 1965 to 1993. Shortly before Kollek was defeated in the 1993 municipal election, Margalit pitched an idea to help encourage start-ups in Jerusalem, which, then as now, was struggling to keep young people from leaving for nearby Tel Aviv, Israel’s vibrant business capital. With Kollek gone, Margalit decided to implement his plan himself, but in the private sector. He called his new venture capital fund Jerusalem Venture Partners (JVP). It was seed-funded with capital from the Yozma program.

Since he founded JVP, in 1994, Margalit has raised hundreds of millions of dollars from France Telecom SA, Germany’s Infineon Technologies AG, as well as Reuters, Boeing, Columbia University, MIT, and the Singapore government, to name a few sources. He has backed dozens of companies, many of which have held public offerings (IPOs) or been sold to international players, producing windfall returns. JVP was behind PowerDsine, Fundtech, and Jacada, all currently listed on the NASDAQ. One of its big hits was Chromatis Networks, an optical networking company, which was sold to Lucent for $4.5 billion.

In 2007, Forbes ranked Margalit sixty-ninth on its Midas List of “the world’s best venture capitalists.” He is among three Israelis on this top one hundred list, which is populated mostly by Americans.

But Margalit’s contribution to Israel goes beyond business. He is investing huge sums of his personal fortune—and entrepreneurial know-how—to revitalize Jerusalem’s arts scene. He launched the Maabada, the Jerusalem Performing Arts Lab, which is leading in the exploration of the link between technology and art, and is colocating artists and technologists side by side in a way not done anywhere else in the world.