Israel's Silicon Wadi

How booming Web ventures are transforming hip, arty Tel Aviv into a top city for startups

As a result, Israel’s tech pool has grown, particularly in Tel Aviv, while attracting more investors from Europe, Asia and the U.S. Operating from a refurbished headquarters in a landmarked Bauhaus building on Rothschild Boulevard, eBay recently purchased social e-commerce platform The Gifts Project and opened a new global center for social shopping. And Microsoft runs one of the companies’ three Innovation Centers in Tel Aviv, fostering startups and big ideas.

As part of Tel Aviv’s soft-landing program for newcomers, the city lobbies the national government for special visas for entrepreneurs. There is also The Library, an incubator offering heavily subsidized working space and startup facilities within the municipal library of the Shalom Tower, the city’s first skyscraper built more than 40 years ago.

The tech shift into the city proper allows easy access to creative talent crucial to the elegant design needed for consumer Web apps and software. “Today people understand the value of inspiration,” says ironSource co-founder Tomer Bar-Zeev. “This building we work in on Rothschild, it’s inspiring, and people have to identify with where they are, working in a company that feels like a second home as opposed to an office.”

Despite the hip work environment, these Tel Aviv Internet pioneers are deadly serious about building out their companies, which wasn’t always the case. During the first boom, Israelis aimed more for the quick sale to the highest bidder or going public on foreign stock exchanges. Those early successes as well as failures—often the result of a well-documented lack of marketing skills—were generally blamed on a particular Israeli personality defect: the famed impatience and too-macho attitude. Israelis could build software but couldn’t promote it.

Though he sold three earlier ventures, Wix’s Abrahami now wants to grow his company. Likewise, ironSource’s Harish and Any.DO’s Perchik hope to follow through on what Israelis have yet to accomplish: building significant global companies that will create jobs throughout the country­—not just in Tel Aviv—and support the economy beyond the few hundred thousand currently employed in technology.

That kind of expansion is possible, says investor Wurtman. Still, while companies such as ironSource and Wix have broken or are nearing the $100 million mark, they will need to hit at least $1 billion to reach corporation size, while also developing sufficient platforms and sturdy management teams.

Venture capitalist Soberg believes some of today’s Israeli teams are as strong as those in Silicon Valley, though it could take 10 to 15 years to build a company the size of 34,000-employee Google. In a country with only 7 million people,­ that would be far larger than the nation’s biggest tech company, government-owned Israel Aerospace Industries, which has 15,000 employees.

With many of Israel’s leading entrepreneurs in their late 30s and 40s, they made many of their beginner mistakes in their 20s, when the Internet was new, they say. “There are some people who have proven they could build a billion-dollar company,” says Wurtman, pointing to Wix and ironSource’s potential. “Now, 15 to 20 years later, we have experience and maturity, and we’re doing it right. That’s the path everyone’s taking.”