Israel's high-tech sector, hit by a recession generated by violence and a global downturn, is emerging from the doldrums with a rash of planned IPOs, suitors seeking acquisitions and moneymen hungry to invest.
Fuelled by risk-taking entrepreneurs active in areas independent of a fickle Internet market and a government that finances early-stage technology, the sector behind Israel's economic boom in the 1990s is now stronger than ever.
"You would think Israeli technology, because of the Intifada (Palestinian uprising), got hit with a double whammy and would be lagging behind the rest of the world," said Jonathan Medved of Israel Seed Partners, referring to hostilities and the global market. "The exact opposite is true."
In June, Israel's PowerDsine went public on Nasdaq in a $69 million share sale, Shopping.com filed in March to raise some $75 million in an IPO, and Saifun Semiconductors is widely reported to be planning a massive initial public offering in the autumn.
At the same time, "the sector is alive and kicking very strongly and continues to be as strong an attraction as it was for early-stage innovative technology, the most attractive outside the United States," said Zeev Holtzman, head of Giza Venture Capital.
In 2000, 3 percent of U.S. venture capital dollars invested in technology landed in Israel. In 2003, the number doubled to 6 percent.
"Over the last 3 to 4 years, Israel has not only held its own relative to high-tech and technology and venture capital, but actually grown its market share and become more important in the world of technology," said Medved.
BUSINESS ENHANCED BY HARDSHIP
In the early days of Israeli-Palestinian hostilities in September 2000, Daniel Steiner, president of Whale Communications, watched the army hold back Palestinian protesters from the centre where his office is located.
But Steiner said the consequent bloodshed had little effect on Whale, which specialises in secure-socket-layer virtual private networks (VPNs) that enable mobile workplaces.
"Funny enough, during the Intifada we managed to position ourselves in the market and now hold a leading position as one of the three or four top companies in a very big and fast growing market," he said.
"Whale is now on a route that could end in an initial public offering in the next 18 to 24 months."
As economic recovery spreads around the globe, the Israeli technology industry is accelerating. This year will see the entrance of some 200 start-ups, a number that harks back to the industry's heyday in the late 90s.
Despite the rebound, "angel" investors in early stage technology have yet to return to the start-up market, creating a hole some venture capitalists have tried to counter by investing in core technologies themselves.
"It is clear that Israeli business is going forward despite the political situation," said Erel Margalit, founder and managing partner of Jerusalem Venture Partners, which is now funding early stage media and software technologies.
"It would be a lot better with a political settlement," Margalit acknowledged, noting that Israeli Prime Minister Ariel Sharon's plan to withdraw from the Gaza Strip was one step that could "be extremely important to contain and fuel a recovery".
Even without peace, others say the allure of Israeli industry remains its ability to embrace risk.
"We don't quit. Other people would say, 'Oh my god, they're blowing up here, let's go home and forget about it,' and we don't," said Medved, whose firm is backing the ventures of two comeback entrepreneurs. "Around the world there was a lot of giving up after the tech bubble burst. We buckled down and got some work done."
