The Next Big Thing

Yossi Vardi, godfather of Israel's hi-tech boom, has high hopes for China

PUBLISHED : Tuesday, 07 April, 2015, 8:01am
UPDATED : Wednesday, 08 April, 2015, 2:06pm

Yossi Vardi, widely seen as the godfather of Israel’s hi-tech industry, thinks some cultures are better at running businesses than others – and from his first visit to China 20 years ago, he knew it was one of the best at it.

The veteran investor recalled how, while browsing a store, a young Chinese saleslady – through sheer pluck and persistence – convinced him to buy an item of clothing he didn’t want in the first place.

“I was looking at a shirt at a shop and the saleswoman was a very young girl who was about 18 and [was] about one-third of my weight. She opened her arms like a basketball player in front of me and said I must get the shirt,” Vardi recalled during a more recent trip to Beijing and Hainan province.

“Actually I didn’t really want to buy it, but she ran behind me, pulled and scratched my arms and was almost begging, so in the end I bought it,” he said. “After that, I knew something very special was to come in China. It was only a shirt in a small shop, and she was trying so hard. How could a nation like this not succeed?”

The 73-year-old Israeli has had a strong track record of spotting talents. In the past few decades he has invested in 85 start-ups – ranging from software or clean technology firms to mobile phones. Many of those finds he has sold to global tech giants, including Microsoft and Yahoo.

In my career as an angel investor, I have had to turn down many talented young people, and the last thing you want to do to them is to make them feel defeated
Yossi Vardi, entrepreneur

One of his most famous investments was in a company, co-founded by his son, which developed ICQ, a 1990s-era forerunner of instant messaging applications. It was acquired by AOL in 1998 for US$400 million.

Vardi was invited to the mainland in the past week to take part in discussions on entrepreneurship and artificial intelligence in Boao, Hainan island. He also met businessmen and reporters in Beijing.

He is upbeat about the Chinese government’s plan to spur technological innovation and encourage entrepreneurship because for the people’s strong entrepreneurial culture, even though he admits he does not know much about its policies.

“I don’t know much about China, and so I haven’t invested in any Chinese company before, but I have invested heavily in Chinese food. I love Chinese food,” he told reporters at the Israeli embassy in Beijing this week.

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“In order to inspire or facilitate innovation, there are a number of things needed. You need technology, you need to invest in education and you need government policy. Some people also say the Israeli army plays a role. All of these are true, and all of them exist in Israel. We have a very effective government – never mind the political orientation of it,” he said.

In the case of Israel, the Office of the Chief Scientist takes charge of fostering research and development in technology. Even though it is a relatively small nation of 8.2 million people, the country has made itself globally known for its start-ups. Its tech sector is a major driver in Israel’s economy, accounting for more than 50 per cent of industrial exports.

Many Chinese tech companies have invested in Israeli companies, and thanks to an agreement which Tel Aviv announced this week, more collaboration would be seen especially in the hi-tech sector between the two nations.

Chinese e-commerce giant Alibaba invested in the funds of Jerusalem Venture Partners, one of Israel’s leading VC groups, last month. In January, Alibaba also invested in Visualead, which specialises in barcode technology for mobile phones – its first investment in an Israeli company.

“It’s wonderful to see the Chinese government strongly encouraging its hi-tech innovation sector. I see enormous potential in us working together,” he said of the two countries which he thinks have a strong culture in commerce.

“The culture begins at home, right from what your mother tells the kid at home and what she wants you to become. I often say the secret sauce of the Jewish hi-tech is the Jewish mother who tells her son after the age of six, ‘After what we’ve done for you, is bringing home one Nobel prize really asking too much?’” he said.

“My mother told me since I was young, ‘Why are all your relatives smart and you are an idiot? Since you are an idiot, I am a mother of an idiot’,” he said. “That’s how I was pushed to show her I wasn’t an idiot.”

It is also key for society to have a strong team spirit in order to be a great nation producing hi-tech innovation, he said. “Israel is a small society and there’s a strong feeling of joint destiny. The social structure of society where people work together in order to make great achievements is also important,” he said.

He also advised young people in mainland China not to be discouraged by failures, and that he hoped society would be to treat fledgling entrepreneurs gently if they do fail.

“In my career as an angel investor, I have had to turn down many talented young people, and the last thing you want to do to them is to make them feel defeated. “I have had to come up with strategies to bring the bad news to them, because these people are very precious,” he said.

“Failing is part of the game, so the last thing you want is to crush these young men’s aspirations.”