Winners in 2001 will be companies who have an indisputable technology innovation that addresses big markets. Emphasis is on the technological breakthrough that brings about a real change.

While in 1999 and 2000 we saw a lot of companies becoming successful, many of them were “riding a wave". In times of prosperity and growth, it is so much easier to float with the rising tide and if it turns out that management was not so correct in specifying its product or targeting its markets, it still had time to make corrections. Abundance of capital made it possible as well to have oversights by management go unnoticed. Add to that strong exit markets and the pattern is clear.

The year 2001 will cut out the fat and create a much more lean and strong market for venture capital. I do not like to use the terms "Bear market" or "Bull market" for venture capital, which inherently is a very long term business. Some of us may have forgotten that period when the time between the first financing of a company to a successful exit at times was less then a year or two. I believe that we may go back to healthier fundamentals of building real and long lasting value before a company may go public.

In this more demanding environment, only the healthy will survive. And healthy in our business means healthy unique breakthrough technology that markets will want to adopt even if there is a downturn in the economy. One such example is a little heard of company from Petah Tikva called Actelis Networks. Actelis developed technology that would bring about a huge change in the communications industry: broadband over copper in the local loop. DSL technology, a booming market, delivers effectively 6 MB/s to the subscriber. The Actelis solution will bring 622 MB/s, 100 times as much, to the local loop, and will represent the only viable alternative to laying fiber in the local loop, a solution that is likely to develop very slowly because of cost prohibition.

My other two candidates for huge success are, again, companies who have developed very unique technology. One is Mercado Software, that provides users with a very intuitive business search engine. As amounts of electronic data keep growing, ones ability to sort through and effectively and intuitively find what he/she are looking for offers huge value and time savings for the user. Mercado already has some of the worlds largest electronic retailers as their customers.

The third big winner in my view will be Lynx Photonics, an optical switching company out of Rosh Ha'ayin. Unlike many of the players in this industry, Lynx has a working product and is working with practically all the major telecom players in the market. It is only a matter of time before their technology gets implemented worldwide.

The writer is a general partner in Walden (Israel)

Published by Israel's Business Arena on January 1, 2001