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Wheels up: SF techies get direct flight to Israel

It took the Israelites 40 years in the desert to reach the Holy Land. Silicon Valley techies can now get there in 14 hours.

United Airlines 954, the first nonstop flight from San Francisco to Tel Aviv's Ben Gurion airport, takes off at 8 p.m. Pacific Wednesday. The initial return flight, United 955, leaves Tel Aviv early Friday morning.

Technology executives, venture capitalists and entrepreneurs have been anticipating this day for many years, and for obvious reasons. Outside the U.S., Tel Aviv is the world's most vibrant city for start-up activity, according to data from Compass.

Google, Facebook, Intel, Oracle and Cisco all have sizable operations in Israel, and three Israeli start-ups have been purchased by U.S. companies this year in hundred-million-dollar deals. Data from CB Insights shows that venture investors have poured about $1 billion in Israeli start-ups each of the past three years.

Acquisitions of Israeli companies

Acquirer Target Price Year
Google Waze $1 bln 2013
Oracle Ravello $500 mln 2016
Cisco Intucell $475 mln 2013
Apple PrimeSense $345 mln 2013
Cisco Leaba $320 mln 2016
Qualcomm Wilocity $300 mln 2014
Microsoft Adallom $250 mln 2015
Source: FactSet, news reports

"It's quite shocking that we're in 2016 and talking about the first direct flight between San Francisco and Tel Aviv," said Adam Fisher, an Israel-based partner at venture firm Bessemer Venture Partners, which also has four offices in the U.S. and another in India. "This is a moment people thought would never happen."

Fisher's had an active cross-Pacific start to the year. He backed Ravello Systems, which Oracle acquired in February for a reported $500 million, and Leaba Semiconductor, purchased by Cisco this month for $320 million.

The 14 hour and 10 minute flight from San Francisco to Tel Aviv will run every Wednesday, Friday and Sunday, while 15-plus hour flights in the opposite direction on the Boeing Dreamliner are scheduled for Tuesdays, Fridays and Sundays.

The inaugural flight coincides with the Israel Dealmakers Summit in Redwood City, Calif., a two-day conference that bills itself as the "premier Israel-focused business event of the year."

"Everybody's very happy about it," said venture capitalist David Blumberg, whose firm Blumberg Capital has backed more than 30 Israeli start-ups. He hosted a dinner at his home in San Francisco Monday night with about 50 company executives and government officials from Israel and the U.S. "Some are taking it back on their return," Blumberg said.

Getting United to take the leap took hefty lobbying from prominent Israeli tech leaders.

Shuly Galili, co-founder of UpWest Labs, a Bay Area backer of young Israeli start-ups, was one of seven investors and executives who created an online petition in early 2014 to gather signatures, which ultimately numbered in the thousands.

Prior to UpWest, Galili spent 12 years as executive director of the California Israel Chamber of Commerce. Like all regular travelers back and forth, her own trips were long and cumbersome. Whether flying through Newark on United, Los Angeles on El Al Airlines, Toronto on Air Canada or Istanbul on Turkish Airlines, trips took 20 hours at a minimum and often involved delays, missed connections and misplaced luggage.

The biggest problem, Galili said, is the artificial hurdle that's been put in place for Israeli start-ups to get to the U.S., where 90 percent of them sell their first products.

"This is where they get access to their first customers, to investors, and an understanding of what the market is looking for," Galili said. "It was a big schlep for them."

Cisco, the networking giant whose routers and switches are used by the world's largest companies and governments, has 1,600 employees in Israel and a 20-plus year history there. It's been the most active dealmaking market outside the U.S. for Cisco, said Rob Salvagno, a 16-year Cisco veteran who now runs corporate development.

Of particular value to Cisco is Israel's strength in cybersecurity. The Israeli Military, particularly the 8200 Intelligence division, is known for producing the most sophisticated security engineers in the world. The country, which spawned Check Point Software, is home to more than 300 cybersecurity companies, second only to the U.S., according to data from YL Ventures, an early-stage firm that focuses on Israeli start-ups.

Two of Cisco's last four strategic investments in Israel were in the security space, including one deal that's yet to be announced, Salvagno said.

"We see a lot of innovation happening from a security point of view and it's one of the key focuses of our Israel investment theme," he said. "It's been a great region for us and one where we see increased activity. The transportation efforts will just make it more efficient."

Cisco is one of several large Silicon Valley companies with big research and development shops in Israel. Intel has five locations in the country, including a 42-year-old development center in the city of Haifa. Google has R&D operations in Haifa and Tel Aviv.

"It's quite shocking that for so many decades there's not been a direct flight," said Yoav Leitersdorf, the founder of YL Ventures and a native of Israel.

Air traffic patterns are a complicated issue that extends beyond just supply and demand. Airlines pay for the rights to land at certain times, so adding flights in and out of popular airports can be very costly.

Passengers on line for security control before departure at the Ben Gurion International airport in Tel Aviv July 22, 2014.
Siegfried Modola | Reuters
Passengers on line for security control before departure at the Ben Gurion International airport in Tel Aviv July 22, 2014.

In its press release in October announcing the new route, United said that "providing corporate customers from throughout the Bay Area and Silicon Valley nonstop service to the high-tech market in Israel has been high on our priority list."

That's welcome news for employees of Mellanox Technologies, a communications equipment vendor with offices in Israel and Silicon Valley. Mellanox, a Nasdaq-listed company with a $2.6 billion stock market value, counts Oracle as its largest shareholder, and Hewlett-Packard, Dell and IBM as its top customers.

"It will make communication and travel much easier and make customers more comfortable coming to meet us here," said Eyal Waldman, CEO of Mellanox.

The way Bessemer's Fisher sees it, speedier access to Silicon Valley may lead Israeli start-ups that would have previously opened offices in East Coast cities such as New York or Boston to choose the Bay Area instead, where they can be closer to partners and investors.

And personally, he would appreciate taking fewer trips to New Jersey, whether it be for a layover on his way out West or to visit companies that would be more favorably situated in Silicon Valley.

"Israelis are very familiar with a city in New Jersey called Newark," said Fisher. But, "having to fly through Newark is just not that inviting."

Josh Lipton contributed reporting