‘If Israel's High-tech Sector Is Hurt, We'll See an Exodus to Palo Alto’

Many in the Israeli high-tech industry fear that the country's leading business sector will be devastated by the effects of Netanyahu's coalition. Yoel Cheshin, chairman and founder of a venture capital firm, explains what could "spell the beginning of the end"

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Yoel Cheshin. 'Israeli high-tech is a kind of miracle.'Credit: Eyal Toueg

Days before Benjamin Netanyahu finished handing out cabinet positions, Haaretz spoke with Yoel Chesin, the founder and chairman of the venture capital firm 2B. A signatory to a letter by hundreds of high-tech workers warning Netanyahu that his coalition’s plans will endanger the sector, Chesin described anxiety in the industry about what the future will bring.

Yoel Cheshin, did you sign the high-tech sector’s letter to Prime Minister-designate Benjamin Netanyahu?

“Yes. It expresses our concern that there will be moves that will hurt Israeli high-tech and the Israeli business sector in general.”

Such as?

“Damaging the integration of Arabs and the ultra-Orthodox in the workforce.”

Haredim? What are you talking about? They run the country.

“Which is why it’s important they also be integrated into the workforce. Anything that those in charge might do that would hurt the commercial corporations – we need to fight against it.”

There is investment in China despite all of its human rights abuses, there was investment in Russia until the war, and there is even investment in Qatar. Why wouldn’t people invest in an Israel that is under a right-wing government?

“Israeli high-tech is a kind of miracle. It is the engine of the economy, it connects different populations in the workforce, it is one of the main catalysts for the Abraham Accords, and it will continue to serve this purpose in terms of Israel’s relations with Arab countries, and with the Palestinians. High-tech is a source of hope for Israelis, for a sane and good life filled with creativity and fulfillment for all of the groups that live here. It is the number one reason why Israel is the most fascinating place in the world.

Israeli-Bedouins who participate in the course train for a career in high-tech.Credit: Eliyahu Hershkovitz

“We don’t have oil reserves. Our national resource is entrepreneurial strength. Limiting the integration of different groups into the workforce and harming the rights of different communities, such as the LGBTQ community, will combine to weaken the delicate fabric of Israel and hurt Israeli corporations. Also, trial balloons are already being floated here. Yes, we need to wait and see what becomes of them, but the mere discussion of some of these things is adversely impacting the business sphere, rather than strengthening and empowering it.”

Are you [in the high-tech sector] bothered by the appointments of Arye Dery and Itamar Ben-Gvir as ministers?

“It’s not our job to get into personal questions. Our view is broader than that. We want Netanyahu to act responsibly, to look at Israel’s democracy and its challenges, to integrate Haredi men into the workforce, to promote entrepreneurship and productivity. As for Ben-Gvir, I want to believe that he will adapt and act with the dignity that his position will call for. There have been some positive changes here over the years. The Arab saleswoman at [a clothing store] today has much more self-confidence than her mother had. Ben-Gvir can’t change that.”

But what is the concern as far as business is concerned?

“If high-tech is negatively affected, we'll see an exodus of Israeli high-tech people leaving for Palo Alto and other places, and as Prof. Dan Ben-David has said, such a move could spell the beginning of the end. A small portion of the population in Israel pays a large portion of the taxes here. If just a few thousand leave, the economy changes. Also, corporations have a duty to defend themselves.”

Yoel Cheshin in his office.Credit: Eyal Toueg

Still, it looks like leftists who are unhappy with the situation.

“I am happy to be part of a group of people who serve as the gatekeepers of Israeli high-tech and the Israeli economy, people with hope for a saner life. I listened to the arguments of [managing partner of the Aleph venture capital fund] Michael Eisenberg, who declined to sign the letter, and I couldn’t find a single serious argument in what he said. And that’s curious, because Michael is a very intelligent and accomplished person. To me, it’s practically immoral not to speak about what is happening. As Martin Luther King said, ‘Our lives begin to end the day we become silent about things that matter.’”

Eisenberg says what’s needed is more action and less talking.

“All the signatories to the letter are people who get things done. To say that Erez Shachar, Chemi Peres, Zvi Stepak or Eyal Waldman aren’t focused on getting things done is not a serious argument. They are all about getting things done in both the social and business spheres.

"They are people who are anxious about their life’s work, and are warning of the damage that could happen. For example, I work to integrate Haredim and Arabs in high-tech in a number of ways, and it saddens me to see that there may be exclusion of Arabs, as well as a lowering of Haredi men’s motivation to go out and work.

“I have the privilege of being a leader in a new project that is designed to reduce socioeconomic disparities. We are about to launch a campaign together with the Israel Teachers’ Union to make sure that every child in Israel has a computer. The assertion that this is just a leftists’ letter misses the real point. Anyway, in order to avoid a leftist label, the letter emphasizes that we respect the election result, and it is worded very carefully.

"This led to the mistaken claim by some that the letter is devoid of content, but this argument only goes to show that the letter’s opponents are trying to have it both ways: To call it weightless because of the caution with which it was worded, and then to also insist on labeling it leftist – [this] eliminates any possibility of the business sector ever being able to say anything.”

It looks to us like it’s not easy to lose an election by a knockout.

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“I’m in the tribe that was defeated. In that sense, I feel a loss. Like with Hapoel Jerusalem in soccer: After a good start this year in the Premier League, they started losing. It hurts and it’s frustrating. But in my role as a high-tech guy, I can also find many advantages in a right-wing government.”

How so?

“I hope that at some point, the religious Zionists and the Haredim feel what we the ‘ahusalim’ [Ashkenazim, the Israelis, seniors, socialists, and national Zionists], as Prof. Baruch Kimmerling put it, were born into, ‘stewardship’ of the country, and at last their zeal for going into politics will fade and they will join us in building the real second stage of the Zionist vision.

"It’s not to be found in the political sphere, but rather in the business sphere, in high-tech and entrepreneurship. When they join business productivity in proportion with their part of the population, it will be a win-win for everyone, on a magnitude that we can’t even grasp yet.

“If they only understood the power of self-fulfillment, of professional and economic fulfillment, many talented people who are not cut out to be brilliant Torah scholars would discover that they can be brilliant at programming. And many youths who now only want to ‘promote initiatives’ on the hilltops [in the West Bank] would discover the satisfaction of business initiatives. I still say that we need to wait and see how this government will really be put together and what it will do. Bibi has had all sorts of incarnations. There was also Bibi the finance minister.”

That was almost 20 years ago.

“Nowadays, the actions of the government are a lot less relevant than you think, and there are other forces that determine everything. More than in the past, power is now in the hands of the media, of academia, of social media, of multichannel media. The mechanism of government is not capable of solving all of the challenges we face. And that is exactly what led me to sign the letter. In future letters, we’ll need to make sure we don’t cause antagonism and come off as condescending, which troubles me the most – but organizing in this way is the important step.

An employee at a high-tech company in Jerusalem.Credit: Emil Salman

Why?

“It’s a step that expresses the spirit of the time, which says that power is decentralized, and it mainly emphasizes that the loads of talent and passion that exist in the business sphere here, and its contribution to overcoming the country’s challenges, cannot be ignored. It is further corroborated that the dialectic today is not between right and left, but between the government apparatus on the one hand, and the business sector and civil society on the other. In this sense, I have no doubt that in the future similar moves will be taken in regard to left-wing governments, whenever they harm our ability to advance things.”

Likud lawmaker Galit Distal Atbaryan scoffed at you and said that it’s the children of “the other Israel” who are funding the public sector.

“Like I said, I was concerned that we might come off as condescending, and the wording could be improved, but if anyone is helping to reduce the socioeconomic disparities, it’s Israeli high-tech. I believe the government won’t kill itself and cut off the branch on which we are all sitting.

“We make wonderful partners. We focus on solving core issues, look for cooperation and aren’t too concerned with garnering media praise. Here, I agree with Eisenberg: We are people who get things done. I still believe and hope that the prime minister and his cabinet will act wisely, that they’ll be creative and give the business sector and civil society the necessary tools to benefit our society.”

What are those tools?

“Besides what we’ve talked about already, things like mechanisms for cooperative banks that can provide loans to nonprofits, organizations and individuals; to democratize the capital market and high-tech. My dream is to be the champion of the ordinary man, to be able to bring him into my fund – not through the traditional and archaic tools, but directly.”

How can the government help you in the high-tech industry?

“With legislation. There are all kinds of groups, some of which I’m flirting with and I hope to be able to progress in these directions. It also depends on the press, which is overlooking the tectonic shift that is leading to massive changes. The government needs to give us the freedom to help people participate in high-tech.”

A Haredi man in Bnei Brak.Credit: Hadas Parush

Do others in your milieu feel the same way?

“Since I left academia 13 years ago for the world of entrepreneurship and action and creativity, my life has become better. I work with young, smart, creative people who want to change the world. We look at problems from a totally different angle, a much more interesting angle, a much cooler and much more fruitful angle. It’s much healthier for body and soul.”

There has been some talk about a tax rebellion. Do you think that’s realistic?

“There won’t be a tax rebellion. That’s the sort of whining, victimhood-type talk that won’t actually take shape. The main problem in Israel is the wealth gap. Rather than get caught up in an endless discussion about the tax on disposable plasticware, I say, let’s take money and invest it in biodegradable plastic technology. I’m convinced that the Haredim’s eagerness to join the workforce and get out of the poverty they’re in is stronger than any issue of core curriculum studies, which has turned into an arm-wrestling competition with the Haredim.

“Market forces are much stronger. There are Haredi yeshivas where core subjects are taught. The tectonic forces under the ground are more powerful than any of us. Politics and the discourse we get caught up in are just flotsam. Market forces are stronger than Dery and Bibi – and if they want to prove themselves as leaders, they’ll have to work in coordination with the business sector and with civil society.”

Suddenly you sound like someone who thinks your children will have a brighter future here than you did.

“Sure, of course. Most of the big problems will be solved by technology. Mobileye is more important than the Transportation Ministry has ever been or will be; everything that the Road Safety Authority has accomplished since 1948 doesn’t compare to one hour of Mobileye on the world’s roads. And we haven’t seen the best part yet.”

Benjamin Netanyahu at the Knesset.Credit: Emil Salman

Are you a little too optimistic, perhaps?

“The second chapter of Zionism that we are building now will be no less interesting than the Zionism of Berl Katznelson and Joseph Trumpeldor. And, inshallah, regional cooperation will expand. The patriarch Abraham was the first re-locator. ‘Go from your country and your kindred and your father’s house to the land that I will show you.’ That’s relocation. To Canaan, from Ur Kasdim. This is the legendary heritage at the basis of how we came here again. Abraham did a relocation. Herzl did a relocation. Millions before and after Herzl did a relocation.”

How are you managing with the plummeting high-tech shares?

“I prepared myself. I learned from [the biblical] Joseph, the first economic analyst in history, that in the good years you have to prepare yourself for the seven lean years.”

Will there be seven lean years?

“Not seven. Two or three. That’s what I prepared for. There will be a recession. It will be hard. There will be high interest rates. It won’t be easy. It might be worse than it is now. What’s certain is that it will take time until the valuations of the companies that really were inflated return to their previous valuations, if at all. Companies will shift more to profitability models. Startups will have to be turning a profit practically from the beginning, and the more the better. There will be fewer buyouts, too. Business activity will be reduced and there will be less investment in startups. I guess there will be less sales, too.”

What do you mean when you say you “prepared” for this?

“I fueled myself. I made sure to have buyouts. I sold some stock. I’m very pleased with the steps I took in order to get through these next couple of years with stability, with the ability to continue investing.”

What is there to invest in?

“The giant companies a decade from now are the companies that are worth investing in now. Mainly in the environmental field, because there is phenomenal opportunity there, and these are also investments that help everyone who, like me, believes in the idea that business is society and society is business. The next wave of Israeli startups is the one that will build the corporations of tomorrow, and many more large corporations will come out of Israel than was the case before this crisis. Which is why this is the most fascinating place in the world to live. I just ask of all those who are able to impact this not to hurt this miracle known as Israeli creativity.”

People march in Tel Aviv's pride parade.Credit: Tomer Appelbaum

You’re kind of ignoring how they misled people here with all the public offerings at these crazy valuations. The public invested and got burned.

“That’s part of the cyclicality of high-tech, and the economy in general. You have to do whatever you can to prevent the next cases like this, but it’s human nature.”

It’s becoming increasingly clear that some Israeli high-tech companies basically serve to exploit consumers – to raise prices, to target customers in order to push them toward products they don’t need. Maybe it’s time to start looking at high-tech a little differently? To also see the public angle, and not only that of the entrepreneurs and investors?

“There is good and bad in every area. There are bad things in entrepreneurship, too. I try to fight this with my companies. I’m an impact investor and my goal is to restore honor to the business sphere. We deserve to have businesses that aid humanity and not just make money. Trying to make a buck at the expense of our peace of mind is a very bad thing, and I am fighting against this.”

How do you decide to invest in someone?

“My philosophy is primarily to invest early on in young and hungry entrepreneurs who want to change the world for the better and who live and breathe their startup.”

How much money do you manage?

“Around $100 million.”

Whose money is it?

“It’s personal and family money. Our platform is called 2B.VC, which is short for Two Brothers, so it’s basically a memorial.”

To your brother, Shneor Cheshin, who was run over and killed in a hit-and-run when he was on his bicycle in 2010.

“Shneor was the businessman in the family, and I was going to be the academic. I planned to write a doctorate, and then that terrible tragedy happened. Shneor was killed, and I found myself shifting from intellectual activity into business activity. On the legal level, it was actually liberating for me, because I didn’t really like law, but I loved philosophy.

Credit: Studio Orchid

“But the void left by Shneor left no room for doubt. I loved him very much, and his death completely stunned me, which ultimately led me to found 2B. Even though Shneor preferred not to mix business and family and mostly did not involve me in his business affairs, after his death I set it up so that he’s doing business with me every day. Shneor was very kind and giving and had a highly developed social conscience – something we both inherited from our mother.”

A word about your father, the late Mishael Cheshin, who was vice president of the Supreme Court.

“I don’t short-change my father, either. Try to run from your fate, and your fate runs after you. I happened to invest in the largest workspace in Israel for lawyers. The sometimes misery-inducing drive for perfection as well as professional thoroughness are qualities I absorbed from him. Also his always humane treatment of workers, and the pursuit of justice, in investments and in one’s daily work.”

And how are you doing in business? Just because you manage $100 million doesn’t mean you didn’t have $200 million before.

“No, no, we’re in great shape. I’m very pleased. Coming from academia, it took a little while for me to find my killer instinct. And now I’m pleasantly surprised. Our average is well above the market. I think we have the best ability to identify promising startups. I’ve developed a good deal of expertise in identifying startups in the pre-seed round. Today I have the best investment team in Israel.”

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