The Facebook page of PlayArt Labs, an Israeli gaming startup, looks more like the homepage of an art museum than the profile of an emerging technology company.
It features an article about Johannes Vermeer’s “Girl with a Pearl Earring,” an animation of Vincent van Gogh’s “Starry Night” and a link to a Twitter feed, @FrescoJesus, about a century-old Spanish fresco. The goal of the startup is to integrate art and cultural education into iPad games — to create “some added value from playing,” according to Adir Wanono, who launched PlayArt Labs 10 months ago.
But now Wanono, 34, who successfully funded another startup two years ago, has encountered an unfamiliar obstacle.
After eight months of working with barely any money, he has had trouble securing necessary funding from investors who like his idea but are hesitant to invest. He has secured $55,000 in investments from family and friends, but with four people working at the company, even that shoestring budget will run out in six months, Wanono estimates.
Wanono says the market in Israel has become tougher since his last startup.
“People say, ‘Go to the market, gain traction and we’ll invest,’ but this lowers the chances of most startups to succeed,” he said. “We need money now to maximize our chances to succeed. Without money now, we won’t be able to maximize the benefit from a good launch.”
PlayArt Labs is far from alone in encountering this problem. Recently, Israel’s famously booming startup scene has seen funding from large venture capital firms decline. That means there’s less money available than there used to be for startups — a key engine of the Israeli economy — to get off the ground.
10/12/2012 at 4:39 PM–This drop in funding has come as Israel’s technology sector, which includes startups and larger established companies, has experienced dramatic layoffs.
According to an August article in Haaretz, 16,000 of Israel’s 80,000 tech workers have lost their jobs. Government funding of the tech sector also has dropped 40 percent over the past decade, to $400 million in 2011.
While the number of new startups has not declined from previous years, industry investors and entrepreneurs say that venture capital firms have been less willing to take risks on those companies as they seek to expand.
“The entire venture capital model is broken,” said Yesha Sivan, president of the Israel Internet Association. “It used to be that a fund would get $100 million, it would invest in 10 companies and it would get two or three big winners that would make 10 times more on their money. Today the return on VCs is relatively lower, so people are looking for other avenues.”
Into that void have stepped individual “angel” investors, as well as several dozen companies called startup accelerators or incubators that provide funding, space, equipment and professional guidance to startups…Read More>>