Nor is there any argument but that new fortunes were created at a dizzying pace. According a presenter at the Ben Gurion University
Conference, 63 new millionaires were created daily in Silicon Valley. When the shares of the CheckPoint fell by 50% one Israeli
newspaper was quick to point out that Gil Schwed, the young executive and founder of CheckPoint was still worth $1.0 billion after
incurring a paper loss of $1.0 billion! Our IHTIR Model Portfolio clearly reveals that the long term investor portfolio has been hit but
not deeply hurt.
The global stock markets are gyrating as they follow the violent up and down movements of the Nasdaq market. From our vantage
point in Israel the high-tech community, entrepreneurs, venture capitalists, technocrats, the Office of the Chief Scientist in the Ministry
of Industry and Trade and ultimately the investor, are now faced with the necessity to come to terms with the New Reality. The once
highly inflatable dot.coms have been deflated, as well as they should have been.
Recently we attended the 5th International Israel Venture Association Conference. Israeli venture capitalists appear are even more
restrained than investment bankers. Yet the bottom line of what was said and perhaps even unsaid was that financing of "concept"
start-ups is over. This does not necessarily mean that start-ups will face a money drought. However, the criteria for investment will
change. A clear-cut business plan will be a future pre-requisite for a serious financing discussion and a visible and viable product may
be required, as well.
Israeli entrepreneurs, leading the start-ups, due to the nature of the shift, will need be more nimble. However, they should be cheered
by the new trend now appearing to be firmly entrenched, whereby for every $1.0 invested by the Israeli based venture capitalists nearly
$2.0 is invested from sources outside of Israel. In 1999 the sum total of $1.6 billion was raised by all Israeli companies from all
sources.
Financial analysts, corporate executives, businessmen, investors, gurus and financial editorial writers were unanimous in predicting a
"major correction" in the valuations of dot.coms. Few accurately predicted the actual date in April. When the correction came it struck
with incredible speed and force with the greater part of the punishing damage to valuations inflicted over three days. That the recent
valuations were supported by a wave of greed speculation, not seen since the Dutch Tulip Craze, is not even arguable. Yet most
observers know that astute long-term investors in high-tech were still substantially ahead.