Israeli High Tech Community Proves PT Barnum Wrong
Business Leaders are filling the void left by political leadership everywhere. In Israel, they took the lead to prove that suckers are no longer born every day.
This week saw a remarkable display of action from Israel’s high tech entrepreneurial leaders to save our community’s reputation from irreputable actors peeing in our collective punch.
The Shellanoo Group filed to go public on Israel’s Tel Aviv Stock Exchange at a valuation of almost $200MM. They claimed that their app downloads (9 Million) were users and it was abundantly clear that their projected revenues derived from “businesses” and “technologies” that did not exist yet. The valuation was “established” by BDO, a well-known accounting firm, and passed the regulators’ scrutiny. Shelanoo (the word means “belonging to us” in Hebrew) was on the IPO launchpad, with local investment bank, IBI Securities, serving as underwriter. Some members of our community (who know a bit about how some of the pension funds and institutional investors in Israel act and invest), immediately became worried that those investors would deploy our hard-earned money into this sham.
Immediately, Israel’s high tech entrepreneurs took to Facebook to rally the troops against this IPO and the institutional investors who would dare or unwittingly invest our money in this vapor company. They decried the blatantly misleading use of celebrities who had “invested” in the company previously, the fraudulent claims in the prospectus, and the specious valuation performed by BDO. Some worked behind the scenes, threatening BDO that they would cease to use their services if they continued to support this “Go public or go bust” IPO. Finally, the media caught on and Shaul Amsterdamski did a 150 second masterpiece video on the IPO and the “Sham of the Shelanoo Group”.
Yesterday, Shelanoo pulled their IPO because of public pressure from the high tech community (and then the press) and immediately began firing its employees, because…well, if there is no IPO, then the company is effectively bust. What I find interesting is that the bureaucrats of the Israeli Securities Authority were somewhere between duped, careless, and negligent. The accountants could not be trusted, just like in Enron, and some institutional investors would have invested in the IPO, if high tech entrepreneurs had not rallied to save the public and demand accountability.
This trend is playing itself out in many places. As the US presidential election comes down to the final stretch, with nobody worthy of leading the free world, as institutions and government programs such as public education crumble and political leadership is at an all-time nadir, business people are stepping up to fill void. Marc Benioff has led numerous campaigns for equal pay for women, LGBT rights, cleaning up the oceans and more by using his business and public persona to beat back bad policies. Sal Khan of Khan Academy is leading the transformation of education and Bill Gates is fighting disease. Michael Bloomberg, himself a businessman and the successful Mayor of NYC, is now the leading voice on gun control.
As the world changes at an ever faster pace, we will increasingly see businesses and high tech business leaders play an ever more important leadership role. Government cannot move fast enough since it is handicapped by years of ossifying regulation and mediocre human capital. We need to see businesses and business leaders deeply engaged in self-policing industry, standing up for those in need and reforming education for those who need to be given a shot. To reframe something I wrote in an earlier post: we are starting to do a good job stepping in for government when they do not police well, but we need to each do a better job improving economic opportunity for 10,000 people who don’t yet have the skills to be successful in the 21st century economy. We can do both much more effectively. Waiting for the government or political leaders to do so is hopeful, but it is not a strategy.