Milk, Honey and Mlavsky

By: Prof. Shlomo Maital

The 19th century historian Thomas Carlyle once wrote that "the history of the world is but the biography of great men [and women]." The history of Israel proves his point. Its history was crucially shaped by Theodore Herzl, Haim Weizmann, David Ben Gurion, Golda Meir, Moshe Dayan, Ariel Sharon and Ed Mlavsky. 

Mlavsky? Who in the world is Mlavsky? And what is his name doing on that stellar list? Who is this man who came to Israel for a brief visit and stayed for 30 years?

Ed Mlavsky is the last undiscovered Great Person of Israel's high-tech industry. For example, in the business daily The Marker's recent list of Israel's great business leaders of the decade, Mlavsky's name is absent.

Perhaps his new autobiography Milk, Honey and High Tech (Weill Publishers/Gemini Israel, 2009) will remedy that. It contains enormous wisdom for entrepreneurs, managers and all those who seek to understand what drives the creative genius of Israeli startup pioneers and innovators. 

Mlavsky made two seminal contributions of Israel's high tech industry. First he led and shaped BIRD-F, U.S.-Israel Binational Research and Development [R&D] Fund, for 13 years, from its founding in 1979 through 1992. BIRD-F played a key role in the birth and growth of Israeli high-tech, by successfully partnering Israeli startups with American strategic partners, funding half of joint U.S.-Israel R&D projects. Second he helped launch the Venture Capital (VC) fund Gemini Israel, Israel's first major VC fund, which ultimately catalyzed attraction of enormous additional VC funds to Israel. 

And all of this happened partly by chance.

Mlavsky's parents were born in a small town in Poland known as Ciechanover, close to the village of Mlav (hence his name) and emigrated to London. Interestingly, the ancestors of Israel's 2004 Chemistry Nobel Laureate, Technion Professor Aaron Ciechanover, are from the same town.) His father Bernard had lived in Paris for a time, where he brought food up to a starving artist living in the attic named Marc Chagall. 

Mlavsky got his Ph.D. in Chemistry from London's Queen Mary College, and became expert in growing silicon crystals − what was to become the semiconductor industry, a career path similar to that of former Intel CEO and Chair Andy Grove, also a Ph.D. silicon expert. Mlavski showed talent at continually putting himself where cutting-edge science intersected with burgeoning industrial technology.

Mlavsky emigrated to America in 1956. There he later helped found Tyco International, a Fortune 500 company, and compiled some 25 key patents in his name. 

BIRD-F: While living in Lexington, Massachusetts, near Boston, Mlavsky met a neighbor named Stefan Peiser, who worked at America’s National Bureau of Standards (NBS). Peiser’s daughter had been the babysitter of the Mlavskys’ infant daughter. Someone at NBS asked Peiser about a suitable candidate for the board of a new body known as the U.S.-Israel Advisory Council on Industrial Research and Development. The council advised BIRD-F, which had a $155 million endowment from the U.S. and Israeli governments; the annual interest on it would fund BIRD-F's activities. But who would be the founding director?

Peiser remembered Mlavsky and recommended that Jack Goldman, another board member, founder of the renowned Xerox Palo Alto Research Center, contact him. Goldman eventually persuaded Mlavsky to become BIRD-F's first executive director.

His initial contract was for two years. It lasted for 13. Mlavsky established BIRD-F’s successful model, pragmatically matchmaking between tiny Israeli startups and established U.S. firms enchanted by their creativity but wary of their inept management and marketing skills.

Up to 2006 (latest data available), BIRD-F had approved 743 projects, generating Israeli sales (almost entirely exports) of at least $4.4 b., created from only $245 m. in R&D grants. (The real export number is far higher; once companies repay their BIRD-F grant, they need not report future sales). Other nations like Taiwan have closely copied the BIRD-F model. And Israel now has similar cooperative R&D agreements with Singapore, UK and Korea.     

Historian Isaiah Berlin once said that there are only two kinds of people, foxes (those who have many small ideas) and hedgehogs (those who have one big idea). At BIRD-F Mlavsky was a hedgehog. I recall his sharp seven-word message to my Technion students, echoed throughout Israel incessantly: "Every Israeli startup needs a strategic partner". I repeat that message constantly. It remains truer than ever.   

Initially, Mlavsky notes, "since BIRD-F was the only game in town for seekers of US partners, we were approached for help by virtually every high-tech company, actual or putative, in Israel."   

Gemini Israel: In 1992, writes Mlavsky, "I looked around and decided it was time to embark upon an as yet undefined new career." There is a major lesson here for managers and entrepreneurs. Mlavsky had several stellar careers, and was never afraid to plunge into new and unexplored territory. I believe this kept his brain vibrant and productive. I highly recommend it.

Mlavsky spoke with Dov Tadmor, then managing director of Discount Investment Corp., a component of one of Israel's largest holding companies IDBT.  

"How would you like to run a venture capital fund?" Tadmor asked.    

"Sounds interesting", Mlavski said.

"OK, you've got the job", Tadmor said.

Mlavsky helped found Gemini Israel, a 50-50 VC partnership between Advent International, a Boston-based private equity fund, and Gemini Capital Fund Management, a top US VC firm.  

Gemini became a top-tier VC fund. It has launched five funds, from Gemini I through Gemini V, with funds II, III and IV still active (i.e. actively supporting startup firms). Its total VC investments amount to some $700 million. Gemini Israel is now independent of its parents, Gemini and Advent. Doubtless, Gemini's success had much to do with the birth and growth of Israel's key VC industry. It was launched even before Yozma, the government-intiated VC fund, was established in 1993. 

As he celebrates his 80th birthday, I sought Ed's wisdom and advice on several key issues.  

There is a threat to Israel from declining VC funds - does Israel's VC industry have a future? 

"Since most important innovations come from smaller rather than larger companies, the wellspring of the high-tech industry – past, present and future – is the startup. Angels shmangels: the VC industry, warts and all, will remain the dominant source of nurture for these pesky infant companies, and we as Israel will probably get even more than our fair share of the action. Why? Because we’re good at it!"

Is Israel spreading its R&D dollars too thinly, across too many technologies?

“Let’s face it. We will always be a niche market player for whom any concentration of resources will be at the cost of flexibility. We can’t compete seriously in grand scale areas like nanotechnology or cleantech, but we can innovate fruitfully in slivers thereof. Our ‘industrial policy’ should, I believe, focus on improving our ability to discern whom to back that are the most likely to produce serious economic benefit to the country, whatever the technology involved, and then back them heavily. By all means, let them get rich in the process."

His advice to Israeli high-tech managers, especially CEOs:

"a) Read The Black Swan [author Nassim Nicholas Taleb's best-selling book about high-impact, hard-to-predict, and rare events beyond the realm of normal expectations] and ask yourself what to watch for that could totally upset your applecart; b) cultivate a relationship with at least one mentor (with a stake in the company) whom you trust and with whom you can openly and regularly discuss whatever is on your mind; c) hire only people to whom you’d be happy to report if your roles were reversed."

________
*This article originally appeared in the Jerusalem Report's Marketplace column, August 3, 2009.