He who laughs last . . .

VENTURE CAPITAL:One look at perennially cheery Israeli tech VC Yossi Vardi is enough to know he's not your usual spreadsheets-and-business-plans type of angel, but his record is nothing to laugh at, writes RICHARD GILLIS

YOSSI VARDI IS not hard to find. The Israeli tech investment guru is sitting in the huge atrium of the St Pancras Hotel in London, waiting to give a talk at Wired 2011, the magazine’s inaugural conference.

Next to him is Peter Lunde, creator of digital download site The Pirate Bay and micropayment service Flattr. “Talk to him, he’s the future, not me. I’m the past,” says Vardi, laughing (he laughs a lot).

Vardi has a warm, kind demeanour, his grey beard and wild hair framing a comedian’s face. It’s what Einstein might have looked like had he chosen kindergarten teaching rather than fiddling around with space and time.

Around him Wiredreaders wander the corridors: trendy geeks, a few marketing types and a sprinkling of serious investor money. It's a world in which Yossi Vardi has become something of an institution.

He made headlines when his investment vehicle Mirabilis sold ICQ (I seek you), the first internet-wide messaging programme, to AOL for $400 million in 1998. This year he has exited three of his investments successfully, selling the search engine answers.com, online toolbar company Wibiya and the Gifts Project, the last of these to eBay.

He told TechCrunch recently that social television was where his current interests lie, but the truth is he has been putting his money into tech for nearly 40 years, covering sectors from software, internet, telecommunications and energy. He was appointed director-general of Israel’s development ministry at the age of 27 and led or helped to found more than 75 companies such as Israel Chemicals, the Israel Oil Company and ITL Optronics.

But it’s fair to say that Vardi is not your usual spreadsheets-and-business-plans type of angel. He is known for getting in early, at the high-risk, high-return end of the market, where the other big VCs dare not go. People, he says, mean more than numbers.

Getting him to focus is hard enough. As I’m lining up questions about the Israeli start-up culture, he sees someone over my shoulder and starts shouting at him.

He does this mid-sentence.

“Of course, the government has an important . . . RORY! RORY! . . . do you know Rory? He’s the smartest guy in the . . . RORY! RORY! . . . but I don’t think government can really create . . . RORY! . . . Ah you must meet him, he’s brilliant.”

He’s waving furiously now, moving from his seat to a half-standing position, so desperate is he to make the connection. The object of his attention is Rory Sutherland, vice chairman of Ogilvy, the advertising agency, who is here for a star turn on the topic of behavioural economics.

The noise has alerted the Russian body builder on the door – he looks over, hoping we might be anti-capitalist protesters.

Finally, Sutherland waves a hello and Vardi can relax, settling back to his seat to discuss Jewish mothers, who he says are the answer to everything.

“The secret of the rise of Israeli high-tech is the Jewish mother,” he says. “To be a Jewish mother you don’t need to be Jewish and you don’t need to be female. From the age of five if someone is asking you, ‘What? One Nobel Prize?’ She’s never satisfied. They have a peculiar outlook. They use a formula of guilt and panic.”

So Philip Roth is a better guide to start-up culture than the business text books, I say. He likes this. “Yes. Philip Roth. That’s good.” He breaks off from his comedian schtick for a moment. “Tell me what’s the Irish mother like?”

I’m not sure I say, on account of being English. He chuckles again. An Englishman in Ireland? “So why don’t they kill you?”

This is how a Yossi Vardi conversation goes. A few moments of seriousness, wrapped in jokes and asides. “Ireland. I’ve never been to Ireland so I can’t compare it to Israel. So don’t ask me to,” says Vardi. “We envied the Irish economic model over the last 20 years. What went wrong in the last few years?”

“Read Michael Lewis,” I say. We’re in danger of forming a book club.

Finally, he gets going on Israel Inc.

“What I’d like to suggest is that it’s not about technology, government support, the military, education. All these things are needed, but it’s about culture and spirit. Like every other social phenomena around the world. You take another city which is excelling in another sphere, be it art or whatever, it is about these two things. These are the driving force. In Israel there is an entrepreneurial spirit. This started with high-tech, but it was there when people emigrated to Israel from nowhere, an uncharted land. The whole thing was a start-up. They came from nowhere to try to create something new against all the odds.”

He references the kibbutzim and the creation of the state – “It is one long start-up.” People are willing to take risks and are constantly thriving for excellence. “They want to out-perform and achieve. They are not afraid of failure and are not satisfied. You can’t buy this with government grants. Grants can help ease the way, but they cannot create the spark.”

On a broader scale, he says, if you want to understand Israel you must think of it in tribal terms, not as a country.

“It’s me and my brother against my cousin, me and my cousin against the rest of the world. There is a very strong alliance to the cause. When it comes to the best interests of the country, although they may not agree with what the government does some of the time, they will pull together. They used to talk about Japan Inc, now they talk about Israel Inc. The government will do what they can, whether they are of the right or left, they understand that high-tech is important.”

Vardi’s other big theme is people. The younger, the better. “I just sold a company to eBay. The CEO was 26-years-old. Newton said that if he was far-sighted it was because he stood on the shoulders of giants. If I have been successful in my start-up investments it is because I was standing on the shoulders of children.”

His approach is not for everyone, he accepts.

“I want them to be talented and with good virtues. Life is too short to stick with jerks, particularly at my advanced age. Being nice is more important than anything else. Talent is in second place. I take great pleasure in seeing young kids with a great idea and it becomes a product and then a business. It’s like standing next to a talented sculptor, when you look at a piece of rock and he knows there’s a great sculpture in there he just has to get it out. It’s a very creative and exciting process seeing the idea come to fruition. Sometimes if I’m lucky I can suggest something useful, or even better, restrain myself from confusing them with my suggestions. This is where I like to be. It’s a place where most investors don’t like to be because the failure rate at this stage is at its highest. There is nothing people hate more than being perceived as being stupid. Only a very few people are in at this stage because the risk of appearing stupid is very high. One of my main achievements in life was to gain a reputation as an idiot and therefore am unafraid of being perceived as stupid. I can go in to this stage of investment.”

Then we’re back with Jewish mothers.

“This is because my mother, from a very tender age, used to tell me I was an idiot. This prepared me very well for this business. She would always complain that my cousins, the sons of her sisters and brothers, were very smart – they are doctors and professors. Only I’m the idiot. She had a good intuition about genetics. You are an idiot and they are not because they are not contaminated with the genes of your father.”

This is, of course, nonsense. But the jokes are a tool, erecting a formidable barrier he uses to deflect journalists away from stuff he’d rather not talk about. I mention the other part of his investment strategy, which involves a carefully selected group of people who vet every proposal before it gets the top man. “I see you’ve done your homework. You should find something more interesting than reading about my investment process.”

Then he’s off again. “Rory. Now, that’s an amazing guy. He’s with Ogilvy, part of WPP, one of Ireland’s great companies,” he says, laughing at his own joke, a reference to WPP’s decision to relocate to Dublin for tax reasons. “Martin Sorrell . Now there’s a good ‘Irish’ man,” says Vardi. “And he has a Jewish mother.”