If you ever wondered where new internet ideas come from – they come from places like the minds of the people who entered the Exit ‘09 contest. The contest, sponsored by a slew of Israeli companies (chief among them Israeli development house Sergata) is open to anyone with a good idea – and if the idea is good enough to get into the contest, they could win a “startup package” worth $250,000 (including $100,000 in cash)! Even better – the format of the contest is a sort of “reality TV” show, where fans of startup ideas can vote for their favorites, with a panel of judges (top people from Google Israel, IBM, The Marker, and others) picking the winner.

Most of the 26 contestants put up a video on the Exit ‘09 site describing their idea or technology. I wrote about the contest in a Jerusalem Post article (which you can see here), but here I wanted to say something about the videos (ie, the ideas) – which got me thinking about the whole business of “innovation.”

There were a couple of really original ideas – one entrepreneur wants to put up a site where people who wear hearing aids can adjust them using a website, another plans a “pet interface” site for dogs and cats who are at home all day alone (they can communicate with their masters, or even with other pets!). Another site would provide a “virtual shrink” for counseling and coaching.

But many of the other ideas seemed to be very similar to already existing web sites and services. So, if the contest was based on “innovation” – having a really good, different idea – many of the contenders wouldn’t have qualified to be in the contest, based on what I could see.

But modern “innovation” – the kind that makes you hundreds of millions on the internet – isn’t necessarily just about having a unique idea. It can be about having a unique twist on an existing idea. It’s about the packaging, the marketing, the way you convince people to use it – the way YOU see it being used. You can take an existing idea and tweak it, turning it into something big – much bigger than the original idea you were tweaking. That’s really all you need!

Believe it or not, one of the biggest “breakthrough ideas” of the internet era – distributing music over a network – is actually a century old! The Tel-Musici Company of Wilmington, Delaware, was, according to this article, streaming music directly to users’ homes in 1909 – via the telephone! Customers would call Tel-Musici and order a selection, and for three cents (seven cents for lengthy operas), the company would stream music to the customer’s phonograph, via a special transmitter connecting the phone and the phonograph that “intensifies and enlarges the volume of sound of all phonographic records but eliminates the metallic, rasping and grating features which have heretofore constituted an objectionable feature of phonographic concerts.”

I couldn’t find any references on whether Napster inventor Shawn Fanning was aware of Tel-Musici, but I wouldn’t be surprised if he was. And there are lots of other examples of successful programs that conquered the market from less well-marketed previous offerings.

In other words, to succeed in the internet business, you don’t necessarily even need an original idea! And one thing I get from watching the videos on the Exit ‘09 site is that you don’t necessarily need much technical knowledge either (many of the presenters say straight out that they don’t have a technical background). And in fact, the premise of Exit ‘09 is that the winning idea gets lots of help from the dozen or so companies offering programming, marketing, and branding help. All that gets outsourced to the service providers. In other words, the only thing you have to bring to the table is the “tweak” – the little twist that will put even an already existing idea into a new light. Exit ‘09 proves it (and a number of friends of mine who began successful startups prove it too).

Wow! It that’s all it takes, what’s stopping us from raking in the bucks?!?

Usually, mixing business with politics isn’t such a good idea if you’re trying to sell somebody something. You never know whom you’re going to offend, and the customer (and cash) is king.

But if you’re just giving away your product, I guess politics can play a role – maybe a big one. That’s definitely the philosophy of Zvi Schreiber, CEO of G.ho.st. When you hold an opening event at a gap in the security fence (“separation wall”) separating Jerusalem from Bethlehem, you’re wading ankle deep in one of the hottest political issues in the region.

That’s exactly what Schreiber did, launching the final beta version of his G.ho.st virtual operating system at “this symbol of division,” according to special guest Tony Blair, who added “I’ve done many launches in my life, but this ranks as about the most unusual.”

With G.ho.st, users can store up to 15 gigs of files, and use an office suite with their files, browse the internet, and access their e-mail from any computer in the world. User accounts are stored in the “cloud,” the one run by Amazon, and you can log into your G.ho.st  account anywhere.

Why the security fence? Because most of the programming for G.ho.st  is being done by programmers who live in Ramallah! G.ho.st’s corporate offices are in Israel proper, but Schreiber has outsourced almost all of the G.ho.st  architecture work to programmers in the Palestinian Authority (according to what he told me). “I’m perhaps the only CEO in the world who can’t visit the company’s main office, even though it’s like 15 kilometers my house in Jerusalem,” Schreiber said at the event.

In my interview with him, Schreiber described how staff meetings are held in a gas station near Jericho. “We’ve even had company meetings there, since it’s the only place we can get together that both sets of employees can get to,” he said. But it’s worth it, he added; “I’ve always wanted to make a contribution to coexistence, and a high-tech firm with offices in Israel and the PA seemed like a good way to do it.”

What to make of G.ho.st? The question come up because there are those who are accusing G.ho.st of “exploitation” in the guise of “promoting coexistence.” Why? Schreiber says his PA programmers are well compensated – “I’m not aware of any other company in the PA that gives out options to its employees,” Schreiber told me – but for sure the salaries those benefits are based on are going to be significantly less than he would pay to Israeli employees.

In that sense, Schreiber has succeeded in replacing Bangalore with Ramallah. If you think there’s nothing wrong with exporting jobs to the Far East, then there’s nothing wrong with exporting jobs to the Palestinian Authority; if you believe employers have a responsibility to their national entities and the citizens of the country that afforded them the opportunity to be in a position to employ others, then you have a problem with G.ho.st.

In addition, because the Palestinians are such bitter enemies of Israel, some would argue that Schreiber is wrong on two counts: One, he’s providing jobs to Palestinians who want to see us dead (or maybe just deported), and two, he’s exporting jobs that Israelis would be happy to do during these recessionary times.

According to this AFP article, most of the Ramallah employees work for a third of the pay of their Israeli counterparts. Quoting Dror Globerman of Ma’ariv, the article says:

“I think the incentives are definitely there. (The West Bank) is cheap and close, and Palestinian engineers are talented people.”

So it’s all about the money for G.ho.st – or is it? The AFP article goes on to say:

However, the persistent threat of political instability still encourages most Israeli entrepreneurs to look to calmer parts of the globe. “No one can guarantee that a Palestinian engineer will always be able to reach his office or have an Internet connection,” Dror says. “Israelis are used to having these fears addressed to them by foreign investors.”

In other words, Ramallah is not Bangalore. Given the volatile political and security situation, work could be suspended due to an IDF action in response to a terror attack at any time, or (probably more likely) a shootout between Hamas and Fatah troops near the G.ho.st offices. (Given the rampant crime in the PA, I wonder if Schreiber has to pay protection money to criminal gangs – or the “official” police -  in order to be left alone? See, that’s a question you can’t ask a CEO!). For dealing with those issues, Schreiber deserves a lot of credit.

And G.ho.st fits right in with Binyamin Netanyahu’s declared desire to help the PA economically – the idea being that once Palestinians get a taste of the “good life” in Israel, they’ll have a strong incentive to play peace ball. That there is something to this is clear when you speak to Arabs in Wadi Ara (as I did) about what they think of proposals to move the border and rope them into Palestinian Authority controlled areas.

So what do you think the Palestinians think about all this? Do they feel “colonialized” or “exploited” by Schreiber? Not according to this article by Ma’an, the official PA news agency.

The project, three years in the making, was funded by the Benchmark Capital Fund and Noa Rothman’s foundation, and hired Palestinian and Israeli developers trained in local universities to push forward the development.

“It was a program aiming to bring some of the prosperity and skills to Palestinians that have brought success to the Israeli [IT] industry,” one organizer said.

The program’s launch, in front of Israel’s separation wall in the Bethlehem-area town of Beit Jala, focused on the potential of creativity and economic development for the creation of a stable future for both Israel and Palestine.

Of course, there was the requisite paragraph afterwards on how there needs to be a full Israeli withdrawal to the pre-1967 borders and the return of descendants of refugees, etc. etc. But it sounds to me like Ma’an knows a good thing when it sees it. As the AFP article quotes Ramallah office director Khaled Ayyash as saying:

“We are creating jobs, we are getting good salaries, and we can work here in Palestine instead of going abroad.”

So was it a fraud – a scam – as so many now seem to believe? Was the story earlier this week about the miracle LifeKeeper patch – the patch that could predict heart attacks in advance, and give blood sugar readings without injections – cooked up for some nefarious reason?

If you haven’t been following this story, you’ve been missing some high drama. After the initial news reports on the patch developed by the SafeSky company (I have to admit, I thought from the start that it was a strange name for a medical device company!) that was now valued at over a billion dollars, after the company made a deal with MicroStar International to sell a one third interest in it for over $300 million, an avalanche of reports appeared questioning whether there really was such a deal, or if the patch even existed. The patch has never been seen by an independent third party, apparently; MSI denied that there was any deal with SafeSky, and has even threatened to sue for defamation if their name was not kept out of the story.

CEO Gabi Picker quit, saying that he, too, had never seen the device, or any of the paperwork revolving around it (like FDA certification). One of the principals of the company, Arik Klein, served time for crimes some years ago after he was convicted of fraud. The deal was mostly worked out by fax and e-mail (some reports said), with the e-mail address not really that of MSI, but of an e-mail address that looked legitimate but was really owned by Klein himself. Etc. etc. etc.

So how could so many intelligent people (I’d include myself in that number, but I’m not that intelligent!) fall for this alleged scam (we’ll get back to that word “alleged” in a minute). Only because so many other medical and tech miracles have come out of Israel in recent years.

I spoke with my buddy Jameel at length about this story – he didn’t believe a word of this from the beginning. He is also a certified EMT who has had (unfortunately) much experience with heart attacks and the like, and according to him, the signs of an imminent heart attack (high blood pressure, an adrenaline rush) could be attributed to many factors other than heart problems, such as exercise (but for people with weak hearts, wouldn’t those signs indicate increased danger anyway?). Plus, he says, the idea of a non-invasive method for checking blood sugar doesn’t exist either.

Well, I’m not a doctor (I don’t even play one on TV!), so I can’t comment on the medical aspect of what Jameel says. But I do know something about medical devices and software technology – and the idea of using sensors to determine a threshold (such as heart rate) that sets off an alarm is nothing new. The patch is supposed to relay the information it collects by bluetooth (certainly not unfeasible). Similar technology – sensors, alarms, communication – can be found in any number of products. The issues being disputed are getting the data (using sensors in a patch) and communicating it (the patch is thought to be too small to hold a communications chip).

But I still say that the scam is “alleged” – meaning that there really could be a LifeKeeper patch.  According to this story, the folks behind the patch are to appear on Israel Channel Two Friday night in an exclusive interview, and will continue to claim that the patch exists, and that it will be sold. Dr. Amos Bouchnik, a respected businessman who is half owner of the company, says that there will be a big deal for this patch, which does exist. “I believe that there will be many deals. The company called SafeSky will be worth $20 or $30 billion in the future.”

Is he crazy? If you believe the whole thing is a scam, and considering the week Bouchnik had, you would have to think so. And yet the man is a millionaire several times over. You would think that he would drop the pretense at this point. Any value that could have been attributed to this scam has now been compromised. Some said it was designed to pull in investment money, others said it was a money laundering scam (lots of money going into the SkySafe account that could be sourced as part of the deal by tax authorities). But the story has been reported around the world by now; who would sink their money into this?

In other words, what does Bouchnik get out of going on TV and continuing to make claims?

Until I get a satisfactory answer, I’m sticking with “alleged” scam – and hoping that this is the real thing!

You’ve probably tried out CamSpace, the Israeli “Wii Killer” that lets you interact with your computer screen without a mouse or keyboard – just using your body. And if you haven’t, shame on you, because you didn’t read my great article about it at Israel21c. CamSpace is still maturing, but already you can play dozens of games that let you be “in” the game, waving your hand around while playing tennis, boxing, playing Donkey Kong type games, etc.

Well, it turns out there’s yet another Israeli company working in this space – and its technology is apparently going to be at the heart of Microsoft’s Project Natal which will be included in future Xbox editions. According to Engadget, Israel’s 3DV Systems’ ZCam, which

“is at the size of a typical webcam, and provides home users revolutionary gesture recognition capabilities in addition to real-time background replacement, enabling them to control video games and personal space through intuitive body gestures and immerse themselves with virtual reality”

will be the piece of hardware Natal uses to connect users to the their screens!

The ZCam is actually a hybrid between the Wii’s approach and the CamSpace approach (but closer to CamSpace); using dedicated motion detection hardware and software like the Wii does (CamSpace is software and works with any web cam), with a full body orientation like Camspace allows, instead of just limiting you to interactivity with the remote control, like the Wii. According to Engadget,

“Project Natal really couldn’t be further from the Wii when it comes to motion controls. Instead of representing potentially arbitrary controller motions and gestures, Microsoft has its sights set on capturing the motion of the entire body. The technology is certainly impressive, combining an infrared camera and traditional camera to capture motion and 3D location in with glorious resolution and responsiveness — from furious full body flailing to the subtle motion of an imaginary steering wheel, gas pedal and gear shifter.”

And that camera combination will apparently be coming to you courtesy of Israeli startup 3DV Systems. Apparently a deal for MS to buy 3DV has been or is about to be completed, and it’s possible the first ZCams (or whatever they evolve into) will show up in Xboxes next year.

Israeli hi-tech may be down – but it certainly isn’t out. That’s the conclusion you would have to reach if you spent time at Tuesday’s Israel Venture Association annual conference. The IVA brings together investors – VC’s and angels – with Israeli companies looking for funding. Over the past couple of years, the organization has been responsible for getting tens of millions in funding for Israeli companies. At the IVA convention, investors and industry folk meet, with the idea that some deals will emerge from the balagan.

While I attended some of the sessions, I found the “startup pavilion” most interesting. While many of the companies presenting in the organized sessions – with sessions on gaming, telecom, cleantech, mobile, and “traditional” areas like semiconductors – were startups too, they were “mature” startups, who were already well funded and, in many cases, already making money. The startups I spoke too were far younger, although some were on the verge of signing contracts (they said) in the areas they specialized in. Some of the more promising ideas: a company that has figured out a way to conduct wide-scale and accurate TV and radio ratings, a better system for oil and water exploration, and an easy way to move pictures between different social network photo sites.

There were also in-depth sessions, as I mentioned, with VC’s choosing companies in their portfolios to present their technology at the show. I went to a couple of them to see the presentations, as did many others. I made sure to check out the Cleantech presentations, sponsored by the California-Israel Chamber of Commerce. Very nice, with discussions of what might be one day great technologies that will save the environment. Of course, with Cleantech a hot area for investments – private and government – the session was jam-packed.

But the discussion was a bit too theoretical for me – lots of “ifs” and “we believes” and “at some point in the futures.” In other words, there are a lot of great ideas and a lot of possibilities – as well as a lot of speculation. A little bored (to tell the truth), I moved on to another session – the one in the next room, called “Semiconductors.”

Well, if I was bored at Cleantech, I’d probably end up taking a nap at Semiconductors! I mean, could there be a drier, less “modern hi-tech” topic for discussion? Apparently, most of the people at the show felt the way I did, because there were barely two dozen people in the room, as opposed to the couple of hundred in the Cleantech room (as well as at the other presentations). As it turned out, though, there was plenty to hear in Semiconductors – plenty of great ideas that are much more likely to change the world – and make their investors a lot more money – far more quickly than Cleantech investments will, at least for now. Let’s just say that the two companies I saw presentations for – Sandlinks, and especially Siverge – have amazing products that will really impact on society.

The lesson? DON’T follow the crowd – it’s usually as lost as you are! For Israel, “old,” tried and true hi-tech is where it’s still at!

So people check out your tweets, or surf to your Facebook page. What does it get you – directly, I mean? Sure, there’s the “value-added” of your enhanced online reputation that can get access to useful information – or even help you land opportunities- but you don’t get any specific benefit when people actually visit your pages. In the case of Facebook, clicking on your page lets them charge more money for ads, and find more customers for their “gifts” – and Twitter will figure out how to cash in one day very soon, as well. But what about YOU? Where’s YOUR payday?

Right here – at Inter8ing, an Israeli company, which holds social media popularity contests, where you get your buddies to vote fpr your profile. The most popular profiles on Facebook, MySpace, Bebo, Friendster, My yearbook, Netlog or Hi5 – meaning the profiles from these sites that garner the most votes at Inter8ing- win cash prizes! The top prize on the page right now is $200 (they pay through Paypal).

It looks like anyone from anywhere with a profile on these sites can join, and anyone can vote on the web (Israeli voters can vote via SMS).

According to the site’s rules, you can solicit friends, or even vote for yourself. All they care about is the votes. Why not use Twitter to get your buddies to vote for you? It could work like Twitter followers – “you vote for me and I’ll vote for you.” The $200 winner has 436 points, which I take to mean 436 votes. That’s small change for Twitter members with 4,000 or 5,000 followers! Talk about “monetizing” your Twitter popularity!

I met the guys from SaveAnAlien a few weeks ago at a VC pre-conference (a workshop to help startups get ready for their presentations – very cool! Read about it here), and as soon as I heard their presentation I decided to write about it for the Jerusalem Post (but see the article here!).

It wasn’t just me – everybody in that croweded room jumped when Raz Friedman started talking about his project. There were five other presentations that day, and as good as the ideas were, it was clear that SaveAnAlien was in a different class!

Why? Two reasons. “Social” isn’t really enough today – there are so many ways to be social, and just sharing avatars or letting your pets play with each other doesn’t differentiate you from the competition, of which there is a great deal in this space.

But SaveAnAlien is about “caring” – you “adopt” a lost soul that you can relate to. It’s not like a let, because an alien has the ability to be a sentient being. After the crash of materialism around the world, idealism is back in a big way - and letting users “save” a being like themselves appeals to a need that users have right now. Eventually, Raz told me, they hope to bring the concept down to this world, with users “adopting” endangered animals, starving children, etc.

The second big difference is that SaveAnAlien takes full advantage of the way cellphones operate to make money – letting users buy credits via SMS, through the phone company. IOW, any kid old enough to have a cellphone and has a plan that includes SMS is a potential customer. As the parent of two kids with iPod Touch devices who are constantly buying small $2 applications, I can tell you that parents fall for this stuff without an argument – the few bucks you spend a month keep them happy, and it’s not worth getting into an argument about.  That’s the nature of “microsales” – the purchaser doesn’t really feel it, but the company doing the selling does!

The result? Big profits for SaveAnAlien! They certainly didn’t invent the idea of buying credits using a social media application on the cellphone, but add that to the app’s premise, and SaveAnAlien becomes a company to watch!

I can promote myself on my own blog, can’t I?

Hope so! This is a companion blog to my newest site, http://www.israeltech.net. I’ve been writing about all these startups for years now, and I never had a site where I could archive them – or even “monetize” them, since I retain the rights to the articles I write for the Startup Sunday column in the Jerusalem Post. I won’t be posting just hi-tech info (”other stuff”, like the title says, will be here as well).

About time I started a blog, no?