Joseph (Yossi) Vardi is the founding investor and former chairman of Mirabilis Ltd., the creator of ICQ, one of the most wildly successful Internet products ever. In 1998, Vardi sold Mirabilis to AOL for a reported $400 million. Today, Vardi is president of International Technologies Ventures, a private venture capital enterprise investing in high-tech companies, including software, telecommunications, electro-optical, energy, the environment and other areas.
In an exclusive interview, the Virginia-Israel Alliance newsletter had a chance to talk to Vardi and hear his views on a myriad of issues, including the state of technology, what the future holds, and where the next ICQ may come from. Although he still believes in his famous quote, "revenues are a distraction," Vardi still holds dear to the belief that great companies are built by great people, who have the passion and the vision to bring wonderful new products to the masses.
How would you characterize today's technology landscape?
I believe there's a huge disconnect between the financial markets and actual usage and consumer sentiment. The Internet continues to be incredibly popular, with broadband usage up dramatically from year to year. Yet because of the huge collapse of the financial markets, less companies, and fewer great ideas, will go unfunded for some time to come. The financial markets are overcorrecting themselves the other way now, and being ultra-conservative. Before, it was like a huge land rush with everybody rushing, but only a few reached their destination. Now, investors are overshooting the other way. I think we need to prepare ourselves for a very long expansion, not the overnight success stories that we had before. Today, you are seeing the rise of the "value-tech" investor, ones that are doing deals on much lower valuations. We're heading in the opposite direction, for now anyway.
So where's the turnaround?
The turnaround is around the corner. Now the only thing we have to figure out is where is the corner... The real question is where and when. Right now, the forces are accumulating -- broadband, new devices, how computers talk to each other, how they talk to your television, etc. Once we can more fully experience the impact of all these forces, we will see a comeback in the marketplace. It's a lot like a spring that you keep pressing. It will eventually pop loose. We still have lots of hurdles. At the same time, for certain, much of the turnaround lies with our youth. Technology is such an integral part of their lives today, and they are growing up with it. They hold the key to technology's future and how it is to be used and adopted.
Can another ICQ success story happen in today's market?
I think yes. Just look at Napster and Google. People are continually coming up with wonderful new paradigms. If you have a great idea, you can still do it on a shoestring, but it has to be an idea that is attractive to millions and millions of people.
Can you provide a few key pointers for companies seeking venture in today's marketplace?
Number 1 is that you have to show a sound business model, and you have to show revenues. In other words, you have to show that you have a business, led by credible management. And be willing to reduce your valuation. Unfortunately, you don't see enough people willing to give seed money to startups, and the venture firms are unwilling to participate unless these conditions are met.
Mirabilis was sold to AOL, a US-based company. Can something like that happen again, and what do you see as some of the key synergies between Israeli and U.S. companies?
Can another AOL/Mirabilis type deal happen again today? Absolutely! To illustrate this, just go to CNET download.com and look at the top 25 downloads. You will see, at most any time, at least six to eight of those top 25 downloads coming from Israeli-based companies. Israeli companies have a knack for innovation and making great products. We are like quick-strike commandos, and we know what it takes to move rapidly from R&D, to prototype, to tested product that's ready for market. We know how to make great products, and U.S. companies know how to market and make them credible in the enterprise. Between U.S. and Israeli companies, you get the best of both worlds. And there are 100 examples of this teamwork. All one has to do is look at Microsoft, Intel and Cisco, or at any other major U.S. company that has set up operations in Israel to take advantage of our innovation. It's an incredible partnership.