It is hard to blame Aryeh Skop for not adapting himself to the times. The founder of Microsoft Israel, who led the local branch for 16 years, he has become a serial angel since his resignation, investing millions of shekels in no fewer than 17 startups. One works in image processing, another in WiFi-based water meters, and a third has developed air bags for pedestrians - mainly senior citizens liable to fall on the street. As we sit in his apartment in Ra'anana, he tries to persuade us to attend a lecture by his daughter, Adi, a prominent digital currency entrepreneur. "It's terribly interesting," he explains. There is nevertheless one area in which he remains a conservative.
"A few years ago, a startup came to me and said it could increase the marijuana crop 10-fold on a certain parcel of land," he says. "They came from agriculture, and knew that the market in the US, which was going in the direction of legalization, was enormous. But I told them, 'I don't invest in grass; it's not for me'."
"Globes": You don't want to be identified with it?
Skop: "I didn't want to encourage it. I wouldn't invest in pornography, either."
Skop's inflexible attitude towards cannabis is ironic, because you get the feeling that there is something intoxicating about talking with him. His many stories merge into each other, and in many cases supplant the original topic of conversation, which is forgotten and abandoned. When we entered the house, he tried to remember the name of a forgotten chip company from the 1980s - and succeeded. After three hours of talking, the room filled up with many more companies from all time periods and important figures, some familiar and some less well-known, in Israeli and global high-tech history. His wife, Ayala, warns him every few minutes that they will arrive at their friends' house late - that it is time to stop talking. "Our friends will wait," he answers.
It is pleasant talking to him, but it has to be on his terms. When we go for photographs, he refuses a request from the photographer to open a button on his shirt, roll down his sleeves, or add a colorful item of clothing in order to make his appearance a little more relaxed; he insists that he is relaxed. He tries to lean on the sofa, or on Ayala's piano, and insists that he is relaxed. The photographer is not convinced, but he has no choice. After all, you don't get to interview Aryeh Skop every day; he has not given an interview for eight years, because he saw no need to. "I wasn't looking for publicity," he explains. Now that he has joined the Alumot Tech investment committee, he gave us a glimpse of his new life.
"I saw good startups close down"
Skop wears several hats in his new life. In addition to being a private investor and a director, he is a member of the investment committee of the Club 100 Plus angels' club; a real estate investor with land in Ramat Hasharon; a member of the board of governors of the Technion Israel Institute of Technology and the Open University; and he is now also joining Alumot Tech, one of the high-tech funds that will try to raise money on the Tel Aviv Stock Exchange (TASE) in the framework of the Ministry of Finance's new program. He has five computers at home: four with Windows 7 and one with Windows 10 ("no one likes Windows 8"). When he has a little time, he writes.
In a 2004 interview, just before you resigned from Microsoft, you said that you wanted to rest, travel around the world, and work in carpentry. Then you went on working hard.
"I realized that I have no patience for an easy life. Before I was married, I never spent time in a cafe. I have never managed to join a cafe social group. I went once on a Friday with friends, and didn't understand how they could just sit there. I disengage only on vacations. I have a friend who was a vice-president at Bank Leumi, and when I went on a vacation with him, they even called him at midnight. I asked, 'Do you know how to repair computers by phone? Why do they call you at midnight? In my opinion, part of being a manager is building a machine that operates without you."
How did you come to the venture capital industry?
"After I left Microsoft in 2005, I founded a fund with some friends. I tried to raise money from insurance companies. I told them that most of the Israeli funds get money from US pension funds. That did not impress them; they decided that their comfort zone was good enough. So that effort was unsuccessful
"Then I invested personally in three startups and made two exits of the kind that angels like - you invest for two years, sell the company, and get your money back five times over. There's a problem with just investing, however: I reached the conclusion that a single person can't do real due diligence. He bases his decision on falling in love with the product, the inventor, and the team. I was chairperson of several startups, and I discovered that I slowly become emotionally involved, and start investing whenever the startup gets into trouble. Falling in love with a company isn't such a great idea. They tell me, 'We have no money,' and I give it to them quickly."
This situation led Skop to join forces with other angels. "We founded Club 100 Plus five years ago, first as a four-person investment committee, and added more people later. 12 of my investments were made through the club - all of them seed investments that were far riskier than ordinary investments. This realization that it's better investing together is what led me to Alumot."
Almost $5 billion was invested in Israeli high-tech last year. Another NIS 1 billion invested in startups over a decade under the Ministry of Finance's initiative does not look like a revolution. Is this money lacking?
"I see at least 10 companies a month trying to raise money. Most of the Israeli startups that I've seen that eventually closed down wouldn't have closed down had they been part of Microsoft, for example. Their ideas were good."
So the claim that there is more money than good investments is incorrect.
"No. It's like when they say that there is an infinite supply of desalinated water in Israel. I'll tell you something unpleasant: were today's Israeli startups in Silicon Valley, their chances of success would be much better. I see companies raising $5-10 million there; in Israel, they wouldn't get a penny. There's an atmosphere of getting rich from startups there, and there are enough people who've gotten rich that are investing their money. There is no such atmosphere in Israel."
From a young age, when computers still took up entire rooms, Skop realized what his direction in life was. He was born in Poland in 1946, lived in Germany as a small child, and he and his family immigrated to Israel in late 1948.
"Gates said, 'Your people steal software'."
Skop spent his childhood in the Yad Eliyahu neighborhood in Tel Aviv, and took part in designing the technological system in the IDF. He studied electronics at the Technion, followed by computer science, and joined IBM Israel at age 25, where he climbed the corporate ladder. He went from there to become CEO at HP Israel, and in 1989 got an offer from Microsoft, which decided that it was time to set up operations in Israel.
"Microsoft always looks like a big and intimidating company, but it began as a completely disorganized company," he remembers. "Bill Gates never worked at an orderly company; I had more experience in building a company than he did. But he and Steve Ballmer were people on a level unknown to me. I knew how to cope with the level of people at HP, but Bill Gates is someone who remembers everything you ever told him, what you promised, and what you actually kept, year after year. We began in Israel as a company with three people and grew gradually, but at the beginning, Gates didn't want to start a development center here. When I proposed it, he said, 'Your people steal software; they'll steal everything from us.' I told him that people in Israel steal finished products, but they respect development."
He learned an important lesson from Steve Ballmer, who replaced Gates as CEO in 2000 (until Satya Nadella became CEO in 2014)."I used to propose things to him, and he would say, 'You mustn't do that.' I put Microsoft into banks in Israel in addition to Oracle, not instead of it, and he called that trickery. I wanted to put Hebrew on Microsoft's telephones, so that it wouldn't have to be installed here, but the person responsible for telephone didn't agree, and Steve backed him up. At some stage, he said, 'It's better to say, 'Sorry' than asking me for permission.' In other words, do what you think is right, and if it doesn't work then apologize."
One of the projects most identified with him is translation of Microsoft products into Hebrew. Hebrew support is now taken for granted, but it was revolutionary at the time. I went to Gates and said, 'Listen, Microsoft's slogan is a computer in every classroom and every home. How can you do that if the software works half in Hebrew and half in English?' Even then, they told us that given the number of copies in Israel, it was not worth investing in across-the-board support; it was very expensive. So I decided to present it as if I were asking to add the support for the Arab world. There were almost no computers there at the time, but when you look at the size of the market, it's a very big market. So we built a team with 20 people: half Israelis and half Arabs. Actually, it's thanks to us that the Arabs have Windows in Arabic."
Another unusual encounter of Skop with the Arab world took place a year before the outbreak of the second intifada. "In 1999, they had a Davos-style conference at Lake Como in Italy. Shimon Peres was at that event, and told me, "Let's organize a meeting with Gates and Arafat. We'll establish a joint high-tech zone around the Erez border crossing with programmers from both sides.' The intifada killed everything in the end, but we had the meeting, and when I returned to Israel, I started looking for programmers in Gaza who could come to work. One day, two brothers came to me. I asked, 'Who are you?', and one of them answered, 'My name is Jihad. You know my father, Abu Jihad. You assassinated him'."
You were CEO of Microsoft Israel for 16 years. That's rare in the sector to this day.
"At age 56, I notified Microsoft that I would resign at age 60, come what may. I had enough money, and I said that I was merely working hard, and wanted to do other things. The process didn't begin until I was 59, when I myself made sure to interview someone to replace me. They thought, 'It works; if it ain't broken, don't fix it'."
Microsoft's support in Israel has deteriorated.
Skop is not in contact with Gates, and not really with Ballmer, either. He stopped by to say hello to Nadella, the current CEO, on the latter's visit to Israel. "I met him when he was a product manager. It's a pretty common route for promotion: Melinda, Bill Gates's wife, was managing the computerized encyclopedia that Microsoft was trying to sell at the time. Microsoft didn't want to go ahead with Hebrew support, so I had to persuade the product managers to put it in."
How did the meeting with Nadella go?
"The truth is that he didn't remember me."
What do you think about him?
"Look, I still own shares in Microsoft, and since he became CEO, the share price has doubled. I don't think it's a coincidence, and it's clear to me what his trick is. It reminds me of something that happened during my time with the company. Four months after we launched Windows 95, Microsoft discovered the Internet. It announced that it was halting the development of all its products, and making them online. Word would be a tool used to write Internet content, and Excel would publish tables on it. All of the workers at the company have to put all of their reports on the Internet. They had to turn a giant ship in a new direction, and I didn't even know what a URL was at the time.
"Nadella is now doing the same thing with cloud computing. It's a difficult decision, because when you move the office to the Internet, someone might switch to Google Drive on the way. But he said, 'I'm a cloud company; that's what I'm trying to sell.' At the enterprise level, he realized that Microsoft had something that the others didn't. Most companies are all or nothing: you either switch the enterprise to the cloud, or you don't. Microsoft, however, mixes things together, and makes it possible to make the switch gradually. That's smart. Personally, I'm staying with the regular Office."
He retains very close relations with Microsoft Israel. "Shelly (Landsmann), the CEO, started working with me as the person in charge of advertising, and then marcom. I interviewed her not long ago for a podcast, and she said, 'At a certain stage, I decided to switch to sales.' That's not the real story; she went to work at a different company, and came to me after a year and said that she wanted to come back. I told her, 'Marcom is taken, but if you're willing to begin as a simple salesperson, I'll agree, and you'll have a better career that way.' She agreed to go two levels lower on the ladder."
How does a simple salesperson become CEO?
"It has to do with two elements of management that I introduced to Microsoft. First of all, people should be promoted from inside the company, instead of bringing in people from outside. Danny (Yamin) the previous CEO, also came from inside. I also did something that the global company had not done: rotate all the managers. The sales manager was a marketing manager, the marketing manager moved to support, and so on. Shelly was promoted in sales, and then worked in all the management positions. When she was support manager, there were 100 developers under her, while she didn't know how to write a single line of code. It worked well; otherwise, she wouldn't have become CEO."
In contrast to the model you used to build Microsoft Israel, multinationals like Facebook don't really operate from here. Does that make you angry?
"There are no gifts in life. If someone says, 'I want Facebook for free,' there's a price for that. It's not just Facebook; Meir Brand (CEO of Google Israel), who today is senior VP for half of the world, worked for me as development manager for small businesses. He's an amazing guy. Ayala and I are friends of his parents. Google is doing excellent work, and is driving the startups I invest in crazy. Every change they make in their code costs us huge amounts of money. But Google in Israel is a digital advertising agency; that's what they do. Since most of their consumers are home consumers, not the businesses on which Microsoft focuses, we don't get complaints about service.
"What is true is that I'm glad that the example we gave at Microsoft with Hebrew support also guided Facebook and Google. People don't realize that it costs a lot of money: think about what the computer does when it makes Excel go from right to left; it wasn't always that way. You can't expect more from them when they're providing the services for free. Incidentally, Microsoft's support has also deteriorated. We had 100 support personnel for helping customers in Israel, but the calls now are made from Athens."
"I do something for a few years, and grow tired of it"
After many profitable years in the Israeli high-tech elite, Skop no longer has to run after an exit. This situation and the fields of business of some of his startups (airbags for senior citizens, for example) indicate that his investment motives are not purely monetary. "I never know how to separate capitalism from altruism," he says in response to my question. "Some girl came to me and said that she had an idea in immunology for treating cancer. I told the investment committee in Club 100 Plus, 'We understand nothing about this, but let's invest $200,000 or $300,000 in it. We'll either lose a few tens of thousands of dollars each, or we'll have done something important in the world.' Still, when I look at my investments, I can't say that altruism is a leading consideration."
Skop reserves volunteerism for other areas of his life. He is a member of the board of trustees of Meir Hospital, says that he invented Shari Arison's Ruach Tova project ("it will eventually be something completely different from what I intended"), and is mainly known for the "computer for every child" campaign. "I'm the first CEO to win the Israel Prize for volunteerism," he says. "It's a pity that the president at the time was Katsav."
To how many families did you distribute computers?
"80,000. We have an annual budget of NIS 25 million, including government support, and we also give free Internet for the first three years. After a few years, when the computer is outmoded, 90% of the families buy a new one with their own money. That's an amazing fact. The idea was originally to bring them computers that high-tech had thrown away, but I was against that. I said, 'We'll buy the best computers around for them.' Those homes have nothing new, and if they get something secondhand, it's like canned goods for which the expiry date has passed. If something new in a box comes all of a sudden, they see it as something from heaven."
Published by Globes [online], Israel Business News - www.globes-online.com - on January 1, 2018
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