In 2007, a company called Jimalaya entered the spotlight on news that it was being sold to a major American firm for $217 million. Jimalaya’s founders, four young entrepreneurs, became celebrities thanks to their lavish lifestyle after they sold their company.
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They bought a mansion in upscale Tel Aviv suburb Savyon with 14 bedrooms, six bathrooms, two hot tubs and a swimming pool replete with goldfish. The home was complemented by flashy Ferraris, a successful soccer team that the former Jimalaya owners bought, and days of partying, video games and women.
The foursome attracted a following and got lots of Israelis thinking about how maybe they too could sell a company for sums that would make them for life.
The thing is, Jimalaya never existed. The four entrepreneurs were characters in the Channel 2 television series “Mesudarim,” roughly translated as “Financially Made.” The series got Israelis thinking that everybody who sells a high-tech company lives in luxury, even though reality is often a lot less glittery.
Less glittery, but still comfortable. The new funds may pay off a mortgage or buy a new car (and maybe a yacht), but most people who sell off a high-tech outfit end up continuing to work there, at least for a spell. In many cases, they also found new firms and pump their exit money into them.
So this reporter set out to see what the Israeli entrepreneur does after raking in $20 million in a successful exit.
Most Israeli high-techies who have made a bundle are less than open about their fortunes or how they’re managing them. At networking events or over dinner with a select group of people, it’s unusual to hear high-tech millionaires chattering about the money and luxury goods they’ve amassed.
“I still drive the same Peugeot 307 from nine years ago,” said one entrepreneur who made a killing about two years ago.
Over the past year, companies with names no less famous than Jimalaya have created a new cadre of wealthy Israelis. The firms include Waze, Trusteer, IntuCell and Viber, which although not formally based in Israel, is headed by an Israeli and has R&D facilities here. Although these were privately held companies whose ownership structure wasn’t a matter of public record, it’s clear some of the exits made some people tens of millions of dollars richer.
Alternating skiiing and Israel
Let’s look at a session in December sponsored by high-tech networking group Startup Stadium, which took stock of 2013. Partners from three high-profile exits broke with the norm and talked about life after they sold their stakes. Their comments seem to provide a good sampling of what one does when coming upon so much gelt.
For Uri Levine, a founder of Waze, the traffic navigation app that was sold to Google last year for $1 billion, it means devoting himself to “a week skiing, a week in Israel,” as he put it. In fact, when TheMarker tried to reach Levine for this article, he was out of the country skiing.
But that’s not his only pastime. Even before the Waze acquisition, Levine had begun giving back to the startup community by mentoring other companies.
Tamir Berliner, a founder of PrimeSense, a 3-D sensor technology company that was sold to Apple for about $350 million, talked about how he had already founded another startup. When asked why he went back to square one, he mentioned the same reason he started off the first time. “You see how the world works and say that it doesn’t have to be that way,” he said.
Tomer Dvir, the chief executive of Soluto, a company that developed a PC management product that was bought by Asurion for $130 million, also weighed in. “A lot of things have stayed the same,” he said, but “now we can have a much greater impact in an organization of 14,000 people.”
Sometimes you get an indication of the lifestyles of these newly rich on Instagram, the photo-sharing social network. For example, the chief executive of Mellanox Technologies, Eyal Waldman, has posted pictures from ski vacations and jaunts on a yacht. He has also bought luxury real estate in Tel Aviv.
Imperva Chief Executive Shlomo Kramer, a founder of Check Point Software Technologies and an investor in information security companies, posts pictures of his family on tour around the world. In recent months, in addition to his business trips, Kramer has vacationed in the Maldive Islands, Greece and Italy.
Even Goldfinger was cautious
These nouveaux riches are willing to volunteer a bit more about their friends than about themselves, but we’re not talking about terribly colorful accounts other than details on luxury homes, skiing and boating.
It’s said about Yair Goldfinger, one of the early figures at Mirabilis, where instant messaging was developed and which was bought by AOL, that for the year after his exit, he simply put his money in the bank to give himself a chance to get used to the new normal. He later invested it and took on more ventures.
A partner at an Israeli venture capital firm with contacts among entrepreneurs who have made fortunes by selling high-tech companies also notes the downside of the experience. “There are families that have broken up following the exit,” he said. “Such large sums of money can suddenly change a lot of things. They can be destructive.”
According to an Israeli angel investor who made his fortune through exits, “People don’t go wild. It’s not fashionable under those circumstances to buy airplanes. The ‘Mesudarim’ television series is a myth. The Israeli entrepreneur is very conservative. It’s also true when it comes to young singles who have no families of their own.”
Most people who come upon a cash pile from an exit invest it in a low-interest bank accounts, bonds, income-producing property, including their own home, the angel investor says. Sometimes these people also invest in other startups.
But a venture capital executive and former entrepreneur says that compared to their counterparts in Silicon Valley, Israel’s high-tech winners are in no hurry to plow their earnings back into the industry where they made their fortunes. In Silicon Valley, he says, at least 30% of that wealth gets reinvested relatively quickly, while in Israel the figure is no more than 10%.
“One could argue that it’s the impact of the Jewish mother,” who advises her children to keep their money in the bank, he said.
In any case, the people who often see how the fortunes are invested are the financial consultants.
“People tend to inject their emotions into their choice of securities. We’re the rational voice telling them: ‘You’ve made so much money. Now you need to switch gears and not make rash decisions,’ said Orly Cialic Feist, a senior executive at Pioneer Private Wealth Planning.
“You need to sit and think on a family level and build a plan. There are types who want to upgrade their home right away, pay off their mortgage or help their parents. On the other hand, there are clients who don’t want to ruin the kids and continue in the same lifestyle.”
And what distinguishes high-tech tycoons from people whose wealth comes from an inheritance, for example? Most of the high-tech wealthy, particularly the young, continue to work, Cialic Feist says.
“They love what they do. They are very ambitious and are looking for the next challenge,” she said. “Those who inherit a lot of money, who have lived with money for many years or who have come into money suddenly think less about continuing to work.”