In 1981, entrepreneur Zohar Zisapel and his brother, Yehuda, decided to form a company that would manufacture data communications products in Israel, and export those products outside the country.
The primary obstacle to success in this endeavor was that, as Zohar Zisapel recently told TMCnet during a phone interview, “there was really no high-tech industry in Israel. It wasn’t a place you bought high-tech from. That was a big disadvantage.”
To say the least.
But, 25 years later, Zisapel is Chairman of RAD Group, which is composed of the original company—RAD Data Communications—and 14 others with aggregate sales of $640 million (2005 figures). Six of those companies are now publicly traded on the NASDAQ stock exchange.
Choosing a Challenging Path
So how did Zisapel succeed in becoming, as some have called him, the “Bill Gates (News - Alert) of Israel”? The short answer is: by turning disadvantages into advantages.
For example, he pointed out that, 25 years ago, there was a lot of talent in Israel and his company faced very little competition utilizing that talent.
Zisapel confessed that, had he founded his company in the U.S., he would have faced far fewer challenges. Even today, he said, Israel only represents about five percent of the worldwide high-tech industry, which is largely dominated by Silicon Valley in the U.S.
But, Israel is Zisapel’s home, and so he chose to found and operate his business there, despite the obstacles.
One reason why Silicon Valley dominates the high-tech industry numbers-wise, Zisepel told TMCnet, is that media covering the industry is concentrated there. (Of course, there is similar media in Israel, but very few people outside the country read it.)
The dearth of media coverage was more of a problem pre-Internet, Zisapel noted. Twenty-five years ago, he remembers, the only way to stay on top of what was happening in the industry was to attend trade shows each year—a necessary but not very effective strategy, since the shows were mostly venues for reviewing information everyone else had already known about for months.
The advent of the Internet helped level the playing field.
“With the Internet, at least you can connect to the same information as everyone else,” Zisapel said.
Advantage of the Underdog
Despite making up such a small percentage of the worldwide high-tech industry, Zisapel told TMCnet, high tech businesses in the Israel today actually have an edge over many of their counterparts elsewhere.
Why? It could very well be the advantage of the underdog who works harder because he or she has to.
“People are trying to do the impossible more in Israel than the U.S.,” he said.
As a result, investors interested in the high-tech industry look to Israel not just for better price deals, but also for more innovation.
It helps that, as Zisapel told TMCnet, “In Israel, it's still considered dignified to study technology, engineering, or computer science. In the U.S. it’s not.”
Instead, he noted, most of the best and brightest Americans spring for MBAs or become lawyers.
Surviving the Burst of the Bubble
It was good, old-fashioned hard work and determination—coupled with solid a business model and quality products—that helped RAD Group weather the burst of the tech-boom bubble in the late 1990s.
In fact, Zisapel said, his group of companies actually had an easier time staying strong than many Silicon Valley businesses—in large part because of the solid foundation upon which RAD Group rested.
To illustrate this point, Zisapel used one of his companies, Ceragon Networks (originally Giganet) as an example.
Ceragaon manufactures point-to-point, high bitrate wireless products. In 2001, all of the company’s clients—bandwidth dealers competing with the big carriers—went bankrupt in the span of a single week.
In response to this apparent catastrophe, RAD Data found a new market that Ceragon could serve.
“We took the technology and moved it into the cellular backhaul market,” Zisapel said.
Many of the Silicon Valley companies, he said, didn’t fare as well because they relied too heavily on new business models. When the market experienced a serious downturn, their foundation wasn’t strong enough to survive.
Reflecting on the past twenty-five years, Zisapel focused on the burst of the bubble as the most exciting and challenging event in his career.
“Going through the burst was something that I learned a lot from,” he noted, adding that “We are better now because of our experience, because we've seen so much.”
Sticking with a tried-and-true formula, Zisapel said he plans to continue adding about one company to the group each year, as well as growing the existing companies and taking as many of them public as possible.
But RAD Group’s founder isn’t resting on his laurels. In fact, he’s as ambitious as ever.
“We still have not managed to create a Microsoft (News - Alert),” he said. “We still have much to do.”
As business incubator, Zisapel plans to keep branching out into new segments of the high-tech industry.
Two of those segments that are on his mind these days are video and wireless. Video, he said, has a lot of potential to enhance various communications applications, including conferencing.
The increasing demand for unwired homes also makes wireless an appealing market segment. In this area, the U.S. lags behind some other areas of the world, including Israel.
“In Israel there are more wireless phones than people,” he said. “Every child has a wireless phone.”
Mae Kowalke previously wrote for Cleveland Magazine in Ohio and The Burlington Free Press in Vermont. To see more of her articles, please visit Mae Kowalke’s columnist page.