JVP's Erel Margalit, Israel's foremost venture capitalist, won't join the secular stampede away from Jerusalem.
Ari Livsker
Jerusalem is slowly losing the secular core it has had for years. “The last of the Mohicans are leaving,” comments a guilt-ridden Jerusalemite, who recently moved to the Dan region.
“I’m one of those who hung on by their fingernails,” the ex-Jerusalemite says. “I insisted on remaining in the city at any price, and struggling to maintain its liberal secular features. With the outbreak of the intifada and the change of mayors, I gave up, and left the city in the hands of the extreme right wing and the haredi (ultra-Orthodox).”
Erel Margalit, on the other hand, who easily fits in with the same population segment as the above-mentioned exile from Jerusalem, is convinced otherwise. “If Tel Aviv is a sexy city, Jerusalem is an erotic one,” he says. “In Jerusalem, desires and emotions are so strong that if they oppose each other, they can lead to an explosion. But if you know how to maneuver them into the right places, this creative force can become a gold mine.”
There is a very significant difference between these two people, although they both seemingly come from the same socioeconomic background. Among other reasons, the afore-mentioned exile from Jerusalem left the city from economic motives. Margalit, for his part, is a founder and managing partner of the Jerusalem Venture Partners (JVP) venture capital fund. “Forbes” magazine recently put him in 48th place on its Midas list of the world’s best venture capitalists, 11 places higher than the preceding year. Margalit is the highest-rated non-US investor on the list, and the only Israeli on it.
Teddy and me
Margalit founded JVP 12 years ago. As part of his duties as manager of the fund, he was a partner in the founding of dozens of companies, most of which have held IPOs or been sold to international corporations. Among others, Margalit invested in Precise Software Solutions, Chromatis Networks, PowerDsine (Nasdaq: PDSN), Fundtech (Nasdaq: FNDT; TASE: FNDT), Jacada (Nasdaq: JCDA; TASE: JCDA), and Netro Corp. JVP currently manages almost $700 million in four funds.
Margalit consented to be interviewed in order to promote “Salome”, which is being staged by the HaMa’abada (The Jerusalem Performing Arts Lab). HaMa’abada is his baby. As he puts it, “What will we invest in? What will we do with all them money we’ve earned? Some people invest in the works of plastic artists. I invest in the creation of a whole spectrum of art in Jerusalem. That’s my hobby.”
The cost is not small. Margalit finances a small non-profit theater out of his own pocket. The theater has an ensemble of artists and actors, who are paid salaries. They are orchestrated by art manager Ofira Henig, a director who turned the stalled Khan Theater into a success story, and who until recently was Israel Festival artistic director for theatre, dance and new Israeli works. Henig’s resignation from the Israel Festival in order to manage HaMa’abada illustrates how serious Margalit is about his new hobby.
We met on Friday morning, after a full week of shifting meetings around and maneuvering Margalit’s schedule in an attempt to find some combination that would somehow allow me to squeeze into his very crowded timetable. Before his gym exercise, and on the way to another meeting, we somehow manage to meet for an exhaustive interview, which we finish a week later with a transatlantic phone call, with Margalit on the far side of the ocean waiting for an executive jet to take off somewhere in the US Midwest.
Earlier, Margalit took me on a guided tour of HaMa’abada, located on Hebron Rd. in Jerusalem, near the Khan Theater. We enter the impressive theater hall in HaMa’abada, where work is being done on the lighting for “Salome.” “The Khan Theater holds its rehearsals in Tel Aviv. We work here,” Margalit says, pointing to the stage. “People can come from Italy or Tel Aviv, but they work here.”
”Globes”: Why is it so important that everything be done in Jerusalem?
Margalit: ”That’s a pathological obsession with me. I come from a Sephardic family with deep roots in the city. When I finished my studies in economics at Columbia University, one of the things on which I concentrated was regional development. That’s what interested me in those days. I returned to Jerusalem in 1990, and began working with then-Mayor Teddy Kollek at the Jerusalem Development Authority. The Authority dealt solely with the city’s infrastructure. I brought in the content and the technology. At that time, a lot of research was taking place in Jerusalem, with findings like there are now, about the many art students who have no reason to stay in the city after their studies.
”Back then, there were no production companies. Within 26 months, we brought over 70 companies, including international companies. We founded the first incubators, even before the boom. We created the boom.
”It was the finest period in my life. I worked with Kollek; he was my main marketing tool. I used to take him to all kinds of places around the world, introduce him to heads of state, and bring about a hundred technology companies to every such meeting. A deal or two resulted from every meeting.
”Digital came here, and IBM came here. Kollek was my sales promoter. When he lost his bid for re-election, I decided to found my first venture capital fund in Israel. Kollek asked me to stay in Jerusalem, and with great effort, I raised my first $20 million. That was the beginning. Today, our organization spans the globe, but its headquarters are in Jerusalem.
”Our starting point with art is the link between technology and art, like animation and simulation, and the distribution of video music. We’re soon going to transfer the media department to HaMa’abada. Video art artists will sit next to technologists.”
Technology in the holy city
Why don’t you hire artists to work for you and develop all kinds of media, instead of financing their projects and personal whims?
”When I worked with Kollek, I realized that you can’t rehabilitate just one aspect of a city. Jerusalem can be rehabilitated through multidimensional creativity, not just through technology. Not just technological ghettos, like those in Malha and Har Hotzvim. You have to put creativity into the city, and make connections between different aspects of creativity.”
”Jerusalem isn’t Herzliya Pituah, and it won’t become Herzliya Pituah. Jerusalem isn’t Silicon Valley. Jerusalem is a city with people and creators in all sorts of dimensions. In recent years, the energy hasn’t been flowing from one dimension to another. On the contrary; one dimension has been hampering another.”
But the talk is that people have been abandoning Jerusalem in recent years for political and social reasons.
”A lot of Israeli leaders like talking about the borders of Jerusalem, but very few talk about its content. Jerusalem is a sick city. It’s a city with many forces, and you try to see how you can engineer a transformation.
”What I’m saying now applies to Israel as a whole. In Jerusalem, there are virtual outlying areas, and neighborhoods that lie outside the game, just as in Israel as a whole, there are very large outlying areas that don’t take part in the game.
”In Jerusalem, you have the haredi sector, which many secular people from Tel Aviv see as a uniform block that should be regarded with suspicion. What they don’t realize is that there is a great deal of change in haredi sector society today, which is becoming open. It also is a consumer of culture; you can’t treat it as a single block. One of the amazing things happening to us today is that we have a very fruitful dialogue with them in a great many areas.
”My goal is to bring the haredi sector sector into the world of creativity. They don’t have to agree with me about all aspects of life, but I say, ‘You have to earn a living, and we need you in the labor market. You’ve done this in all kinds of places all over the world, so why not do it here, too?’
”With regard to the Arab population, I know that people in Tel Aviv and the central region find it very frightening that we have a lot of tension here. I want to tell you that the Arab and Jewish populations lived together here during the worst years of the intifada, and cooperated, mostly in the economic sphere.
”I’m not the one who will determine what arrangement will be reached here, and when. Eventually, however, there must be some kind of arrangement. When that comes, the Arab population will constitute a gateway to the Middle East. The Arab population is going to be an asset not only in Jerusalem, but for all of Israel. Israel is the world’s R&D laboratory. Israel can be the gateway to a new market and culture.”
You’re saying that the Tel Aviv population is homogeneous, while the Jerusalem population is heterogeneous, and the contrasts between the extremes actually constitute the city’s advantage. When I go to Jerusalem, however, I feel like I’m in a place that looks similar to the way Israel is portrayed in newspaper headlines conflicts between Jews and Arabs, leftists and rightists. In the central region, it’s less conspicuous. Life is more peaceful, and a little more normal.
”There’s a theory that holds that the most successful cities are not necessary the ones that attract the most business, but the ones that manage to integrate different dimensions of creativity in one place.
”In art, this is one of the most creative places in the world. In Jewish thought, there are amazing people here walking around in the streets. In northern Tel Aviv, art is more Ashkenazi and institutionalized. Because there was no support in Jerusalem, art developed spontaneously. The Gesher Theater started here, although no one had enough sense to keep it here.”
That’s exactly the criticism leveled against you in Jerusalem artistic circles. They say that you’re destroying spontaneity, and domesticating wild flowers.
”I acted out of a personal need. When the World Trade Center collapsed, I lived in the Tribeca neighborhood near the buildings. My wife and small daughters were traumatized, and didn’t even want to go back to the area for a visit. What opened the neighborhood to my daughters, what made them want to look in that directions, was a Tribeca movie festival organized by Robert de Niro. I wanted to do the same thing in Jerusalem. At the beginning, I didn’t think about the performing arts. I thought about cinema, but cinema is terribly expensive.
”I contacted the municipality, which told me to go ahead, and they would help me. I put the project on its feet, which you’ve seen now with your own eyes. It’s not cheap. Up until now, I haven’t heard from them, or gotten any economic support. If somebody criticizes me for giving creative people a place to work, when otherwise those people would have been working underground, instead of on a stage, I’m willing to accept the criticism.”
