Intel/Mobileye — Another Notch In Scale Up Nation’s Belt
Not long after news of Intel’s acquisition of Mobileye leaked, the inevitable melancholy about the selling out of scale-up nation hit my Facebook feed and inbox. I think it is important for those worried that selling this company is somehow selling out scale up nation to gain some perspective. Start Up Nation is a success and Scale Up Nation is a work-in-progress. This acquisition is both a success and an important step forward in that progress.
First, Amnon Shaashua and Ziv Aviram should be commended for building a tremendous company, a mission driven company. They advanced humanity, saved lives, and advanced Israel’s leadership in machine vision. Moreover, they built a company of real scale that worked with the largest automotive companies in the world, from our tiny piece of land between the Mediterranean and the Jordan River. They enriched many families, created honorable jobs of all kinds, paid (and will pay) lots of taxes and made our country and people proud. Facebook, the radio, the city of Jerusalem, and our government are swelling with national pride over this acquisition. Shaashua and Aviram committed to keeping jobs in Israel and intel is even investing more by moving their automotive unit to Israel. With Intel as a partner, that is likely a long-term commitment, given Intel’s already sizeable commitment to Israel. That is a big win.
Second, we need to realize that building global companies at scale is a process. You need to walk and jog before you run. You need to first build a $1 Billion company, then a $5 Billion company and then a $15 Billion company. By building companies of this size, especially one like Mobileye with real revenues, you create a cadre of management talent that can execute globally at-scale. You train and educate engineers and engineering managers that can develop for scale. That is an important notch in the belt of Scale Up Nation. For example, Mercury bred Nolio, Check and Capriza. Checkpoint gave birth to Imperva, Trusteer and many others. Fraud Sciences has spun off numerous companies.
Third, tonight Israeli entrepreneurs will go to bed with great pride in Mobileye’s accomplishments. Tomorrow morning, they will wake up and ask themselves, how can I build a bigger company than Amnon and Ziv did? As I have referenced before, scaled-up ambitions require icons to emulate. Given Israel’s competitive nature (and abounding Chutzpa), people want to beat their icons. Now, they know it is possible to build a global $15 billion company in 10+ years. They will aspire to build a $25 billion company and keep it independent or sell it. This is true for public companies such as Checkpoint and Wix who have stayed independent (so far) and are building meaningful businesses. It is also true for the entrepreneur sitting right now at the cafe at Rothschild 12 in Tel Aviv, or for the student toiling in the bowels of Hebrew University’s Image Recognition department, where Mobileye came from. They too will aspire to best Mobileye. I am confident several of them will do it, and soon. In fact Shaashua himself launched Orcam to aid the visually impaired, and is again aspiring for greatness.
It is also critical that all Israeli companies play by the rules of the game in order to continue to attract the billions of dollars of investment that are needed to keep building these Scale Up Nation companies. Those rules include the fiduciary duties of directors and investors to maximize the profit of shareholders. Shaashua and Aviram set out to build a big company in Israel. They raised lots of money from investors who will fund the next Mobileye. Paying their shareholders a handsome return is the best way to insure that they come back to fund the next one.
Lastly, Mobileye has validated something more important and central to Israel’s role in the global economy and our ability to scale up. Brains and Data are worth at least $15 billion when applied to a very large business and opportunity, such as automotive and autonomous vehicles. In fact, to paraphrase Clive Humby, cars will run on data and not gasoline. There is a burgeoning startup scene in Israel that is targeting the Automotive sector from Nexar* to Otonomo to Oryx and many others. Today, Mobileye told them, you CAN win in this big market, heretofore owned by German, Japanese and US automakers and the Gulf Arab States, that supply much of the world’s oil.
Data is truly replacing oil, literally and figuratively. This has geopolitical ramifications in our region over the long term, but in the shorter term, it means that many giant industries are up for grabs. Israeli entrepreneurs and engineers can look at any industry on the planet and see how it can be disrupted with software and data. They can do that from Jerusalem or Tel Aviv, in the same way Silicon Valley has done it for decades. Literally, every multi-billion dollar industry on the planet is up for grabs, from Insurance, to Banking, to Oil, to Logistics, and anything else.
While some are upset at Mobileye “selling out,” I could not be more pleased. I look forward to recruiting the great teams at Mobileye to scale up the next big company in Israel. I am equally or more excited about bringing more engineering and management talent from abroad to Israel. This engineering and management talent now knows that you can build large businesses from the land flowing with milk, honey and data.
*Nexar is an Aleph investment