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1. Chemi Peres, Yoram Oron, Matty Karp, Zeev Holtzman, and Avi Zeevi, the managers of five major Israeli venture capital funds, had plenty to say last week about the impact of Israel's security situation on the nation's high-tech industry.

The five, who joined a special Haaretz panel, talked about security developments, the reawakening of the Asian markets, the need for government intervention, and the great opportunities facing high-tech.

There was only one thing we didn't hear from that distinguished quintet, which has more than $2 billion under management: numbers. How well they're doing. Data. How much they've raised in the last seven years, and how much they returned to investors.

Over the years, Israel's venture capital industry somehow managed to usurp title to the Israeli high-tech industry. Its spokespeople became the voice of high-tech in general, gaining the name of commentators, forecasters and prophets of the high-tech scene.

Not party to the real success stories

There is no doubt Israel's venture capital community plays a tremendously important role. The billions they manage were collected mostly from foreign investors, and constitute a key source of funding for hundreds of startups employing tens of thousands of people.

However, Israel's venture capital industry must seriously rethink its substance, given its own poor performance in the last decade.

No, that isn't a reference to that eternally sexy subject of their management fees, which has been over-reported. They didn't invent the method of management fees, anyway, they imported it straight from the United States.

This refers to the thought-provoking fact that venture capital funds have hardly been involved at all in the greatest high-tech successes Israel can boast.

Avi Zeevi said at the panel that what is needed is the establishment of "real companies," not to rely on short life cycles. But talk is cheap. A look at the funds' portfolios shows that most of their exits were in the form of selling young startups, courtesy of the bubble. After the bubble burst, a lot of these startups were closed down by their buyers.

And if we start from the other end, looking at the 10 most successful, profitable high-tech companies operating in Israel today - companies like Check Point Software Technologies (Nasdaq: CHKP), Comverse Technologies (Nasdaq: CMVT) and Amdocs (NYSE: DOX) - we find they have had no venture backing at all.

Shackling the management

And there's more. Some high-tech players admit, behind closed doors, that there were cases where venture capital involvement detracted from the management and culture of the companies, hindering their potential to take off.

The biggest challenge the venture capital funds face today isn't raising money for a sequel fund, obtaining government support, or standing firm in the face of investors' pressure to lower their management fees.

The real challenge is to prove they can cultivate successful high-tech companies. Their history over the last 10 years isn't encouraging, to put it mildly.

2. Where has BATM manager Zvi Marom gone? Does anybody remember that high-tech superstar of 2000 and 2001, who made headlines by virtue of the marketing consultant he hired, Benjamin Netanyahu?

Well, Marom, who had been highly active in the PR sphere, is still around. The $300 million he raised for his company during the bubble days will suffice to keep it alive and kicking for years to come.

When BATM released its financials for 2003, it transpired that, as always, Marom managed to distinguish himself from the madding high-tech crowd.

While most high-tech companies managed to claw their way to the black by changing their business models and slashing costs, BATM posted a $20 million loss for 2003.

That loss is quite an achievement, if you consider that the company had $300 million raised from the public at its disposal. One might think that with $300 million one could build a company that makes money, if not from operations, then at least from financing income.

But Marom used $250 million of that $300 million to buy an American company, on which he hoped to build an actual business for his Israeli company. His acquisition turned out to be a particularly miserable one, as the company he bought rapidly deteriorated since BATM took the reins. Today what it's producing is mainly losses.

You can't blame Finance Minister Benjamin Netanyahu, BATM's marketing consultant during the bubble days, for Marom's debacle. Bibi did excellent work financing for Marom, and lifted the company's profile sky-high at the start of its road, which certainly must have helped it heap up that pile of money.

But if out of pure curiosity the finance minister is keeping track of BATM after it raised that $300 million, he might extract a moral relevant to the entire economy. Namely, even well-connected companies that manage to raise tremendous sums when the sun is shining won't make it unless they change their ways and manage their business well.