Tommy's Shinui Startup

From the moment it began to splinter the barriers, conquering the markets and the voters by storm - Tommy Lapid's party took on the attributes of a red-hot startup from the good old bubble days.

Remember the late nineties, when ideas in briefcases would turn overnight into multibillion-dollar companies? If you do, you can't help but see the parallels with Shinui. Like most lucky startups that raised megamillions from investors at lightning speed, here too the key factor is a dominant personality. Ultimately, what secures support for startups isn't its technology or market. It's the charisma and marketing acumen of its leader.

Shinui too can ascribe its electoral success mainly to television star Tommy Lapid, a consummate talker, marketer, salesman and packager.

Like most startups, Shinui's business is based on declaring a revolution. Almost all startups that hit the front pages were ones that promised to revolutionize something. Investors ignored the inconvenient fact that revolutions are few and far between, and that most successes were achieved by firms that advanced slowly and cautiously, over time.

Tommy promised a revolution in the government's priorities, a new secular agenda, a new budget. The chances of him succeeding in his quest are vanishingly remote. Like most startups, Tommy's marketing consisted of pushing "one big idea" - in his case versus the ultra-Orthodox. Investors love simple, easily grasped ideas. Confusing, complex concepts tend to leave them clammy.

Like most startups that raised huge sums in the boom, Shinui's startup had little substance behind its style. As they say in management, it had no track record. But investors opted for charisma over experience, a simple big idea over thorough examination of its ability to achieve its goals.

Like most startups hastily set up during the good `ol days, Tommy's startup was built on two or three founders bolstered by a shaky team of novices. And like all startups, the problem is that Shinui may boast leaders good at whipping up a frenzy, but who may not know how to manage, nurture and guide their team in a single direction.

It is perfectly symbolic that last week, Tommy's startup unexpectedly released a revolutionary new idea into the ether, with roots deep in high-tech. Shinui suddenly announced that one of its conditions for joining the government coalition is that $2.5 billion of the money Israel plans to borrow (backed by American guarantees) be directed to high-tech in general, and venture capital in particular.

It certainly is true that Israel's high-tech industry, with its magnetic allure for foreign investors, is one of the few positive things the marketplace has produced in the last decade, a decade in which the government blocked reforms, inflated its spending, and did nothing whatsoever to change the structure of the economy.

But Shinui's proposal is inherently flawed. It is based on the same economic injudiciousness characterizing the parties that Shinui so loathes. Namely, instead of considering economic fundamentals, Shinui is thinking narrowly about the sector that its voters support.

The proposal to stream money directly, or through American guarantees, to venture capital funds is an economic absurdity that attests to how poorly Shinui understands the reasons for the high-tech slowdown, and how to reverse them.

The crisis in Israeli high-tech is due to the global crisis, not government policy. Israeli high-tech is one of the few areas that really is global and almost entirely free. It is a sector that has been gradually untying itself from the government's apron-strings.

The reason for the high-tech crash in Israel and the world isn't a lack of money, quite the opposite. It's a surplus of money that paid for overcapacity, that inflated costs, and that created market conditions that could not be sustained.

Easy money paid for the establishment of tens of thousands of useless companies, for tremendous investment in immature ideas, for the rise and fall of fashions, for irrational decisions. It generated tremendous waste and, ultimately, engendered the current crisis.

Israel's high-tech industry, like that of the global high-tech sector, does not lack money in the long term. The current unwillingness to finance new firms is a natural and obvious development, until the market cleanses itself of over-supply.

High-tech may be the only sector in Israel in which the current crisis is cyclical, not chronic, in nature. It is the only sector in which the horizon is bright and shiny. It is the only sector whose recovery is not blocked by the government's foolish economic policies. It is, in short, the last sector that needs public money or American guarantees.

If Israel's venture capital and technology industry has a unique problem that does not simply mirror the high-tech slowdown in the U.S., it's that Israel's security situation is deterring potential investors, partners and customers.

But that's another problem altogether, a complex, charged one, a controversial conundrum that Tommy Lapid can't resolve with a simply packaged revolutionary idea. No, that he leaves for some other entrepreneur to tackle.