Profile Feature - Q&A with Shlomo Dovrat, co-founder of Viola

PROFILE Feature

Innovation, Resilience, and Bold Ambition in Israel's Tech Ecosystem

We sat down with Shlomo Dovrat to discuss his remarkable journey from elite military service to co-founding Viola Ventures, his vision for Israel's tech ecosystem, and his insights on innovation, resilience, and the future of AI in various industries. Shlomo Dovrat is a globally recognized tech entrepreneur and investor with over 40 years of experience, having co-founded several successful companies and Viola, Israel’s largest technology-investment group with over $5B AUM. Viola includes Viola Ventures, the leading early-stage ventures fund in Israel where Shlomo serves as general partner. In 2003, Shlomo also co-founded Vintage, which acts as a global venture platform that invests in the world's leading venture funds ($6B AUM). Shlomo currently sits on the boards of leading companies such as Unity (TASE:U), Outbrain (Nasdaq:UB), and ProteanTecs. Beyond business, he has been a leading figure in Israeli social and economic policy, serving as the chairman of the National Task Force for the Advancement of the Educational System, chairing the Israel Democracy Institute, founding the Aaron Institute for Economic Policy and co-founding Pnima – an Israeli movement aimed to address the polarization in Israeli society.

Shlomo Dovrat

Co-Founder

Q: Can you walk us through your professional journey and what led you to become a high-tech entrepreneur and a co-founder at Viola (and a co-founder of Vintage)? My journey began in Israel's elite 8200 unit, equivalent to the NSA, where I worked with some of the country's brightest minds in the early '80s. I then pursued a career as a high-tech entrepreneur, moving to Silicon Valley to connect with early-stage startups like Sun Microsystems and Silicon Graphics, becoming their first non-U.S. customer. I launched my first company after my service, taking it public on NASDAQ by age 26, one of the first Israeli IPOs. By 34, I had taken a second company public while managing both. I later became chairman and co-founded two successful FinTech companies with Avi Zeevi, working together for nearly 40 years. We sold the companies to SunGard, so after four exits before I turned 40 I became financially independent, though I found myself without a job. In 2000 I started Viola with an early-stage fund that was double the size of any other Israeli fund at the time, writing larger checks, being more patient, and building larger companies. I also realized that Israel’s financial ecosystem needed to evolve to support this emerging tech industry. So, we started venture lending, which didn’t exist in Israel at the time, and later launched Vintage, a secondary and fund of funds to help my competitors raise money. We also started a growth fund. Overall, we've created a series of related asset classes within one unified structure: the venture side, the credit side, and the growth side all share the same infrastructure, brand, and network, but are separated by discipline. Personally, while I’m still involved in day-to-day operations, what I enjoy most is investing in early-stage startups. I’m a general partner at Viola Ventures, and I also sit on the investment committees of all the other vehicles and engage in a lot of philanthropic work.

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Q: Much has been written about Start-up Nation. If you were to author your own chapter, would you have any additional points to make? What is Israel’s “secret sauce” from your PoV? I know the guys who wrote Start-Up Nation very well, and I’ve talked to them a lot about it. I said that the next book should probably be Scale-Up Nation. I deal a lot with the country’s economy, policies, education, and public economic policy. Today, Israeli high-tech makes up 20% of our GDP, which is higher than any other country in the world. It accounts for 55% of exports and 12% of the workforce, contributing about 35% of income tax. It has been truly transformative for the country. The next chapter should focus on how we transformed the startup industry into a main economic pillar, creating a real industry. Today, 67% of Israeli high-tech comes from growth companies, most managed and based in Israel. In the original Startup Nation era, it was about developing products, finding a U.S. CEO, moving the company to the U.S., and selling for $100-$200 million. Now, we have bigger dreams. Like in archaeology, one era must end for another to begin. Without the Startup Nation phase, we wouldn’t have the Scale-Up Nation. This is my chapter—how did we transform startups into a real industry? The chapter in Israel is also about making entrepreneurs more well-rounded. While Israelis were always strong engineers, they now focus on scalable business models, building organizations, and developing execution skills. Companies like Wix, Monday, ironSource, and Outbrain have built and run massively scalable businesses from Israel. It’s not just about great engineers; it’s about much more. That’s the incredible evolution Israel has gone through. The secret sauce is Israel’s can-do attitude. Israelis don’t see anything as impossible. We may not know much about business, but as smart engineers, we figure it out. This attitude and entrepreneurship are key. Let me tell you a story. I was head of a task force reforming Israeli education and wrote a report on how to become more like Singapore. The Education Minister of Singapore visited Israel, having read my report, and asked me what our secret is in growing amazing entrepreneurs. I sent him to visit a school, and when he returned, he said, “It was like a battlefield. The students were shouting, disrespectful, interrupting each other. How does anyone learn in that environment?” I replied, “Yes, it’s tough to manage Israelis. They always have an opinion.” But from an entrepreneurial perspective, they don’t accept authority. They challenge everything, which fosters entrepreneurship. As a young officer in the Israeli army, I ran multi-million-dollar projects critical to the country, and people were encouraged to make mistakes and fail. This culture of accepting failure and challenging authority is key to entrepreneurship. It’s not just about the CEO—it’s about every engineer, product manager, and salesperson. They all have opinions and challenge you. It’s tough to manage, but it’s the secret sauce. In many companies I’ve been involved with, some of the best ideas came from employees, not the CEO or founder. It’s a bottom-up culture that makes Israeli companies and R&D centers unique. Nearly all major cloud providers and semiconductor companies design products in Israel—Apple, Microsoft, Google, etc. Why? Not just because they’re good at coding, but because they’re creative. If you throw them out the door, they’ll find a way in through the window. That’s the secret sauce.

Q: How does Viola differentiate itself from other leading Israeli VCs? Do you see much difference between your approach and your counterparts in Silicon Valley? I’ve always admired how in Silicon Valley, people aim far beyond just building a startup. When you meet those now part of the Magnificent Seven or at Sequoia, Benchmark, Accel, and Greylock, you see their mindset is different. They weren’t just creating products to sell and get acquired by big companies—they wanted to disrupt everything. What I liked about Silicon Valley was the drive for disruption, not just selling technology to big companies, but changing the world and entire industries. The second thing I liked was the ambition—the boldness with which they approached goals. In Israel, we had great engineers creating excellent products, but they lacked that strategic, aspirational vision. That’s why I didn’t join an existing VC but started Viola, to bring that same boldness and ambition from Silicon Valley to Israel. When we started Viola, I believed we were the first to have a software company that reached $100 million in global revenue. My vision was to see Israeli companies with $400 million in revenue worth $1 billion. By 2007, after the mobile, social, and cloud revolutions, I realized Israel could create companies with $1 billion in revenue worth $10 billion. We’ve already done that with four Israeli companies. But now, with AI, I believe this is the first time Israel has a real chance to develop companies that will not only sell for $10 billion but could also be worth $100 billion. That kind of growth and ambition is something I learned from Silicon Valley. It’s about thinking differently, asking, ‘How can we do this in a completely new way?’ It’s about being bold and then understanding the details, the execution, the financing, and everything that it takes to make it happen.

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Q: The performance of Israel post October 7 has been remarkable. Did that just confirm everything that you knew about Israeli entrepreneurs that you just described, or did you learn anything new? I’ve been deeply involved with Israel's tech leadership since October 7, focusing on resilience. At one point, 21% of the industry’s employees were in the army—some companies lost as much as 40% of their workforce. Despite this, we didn’t miss any revenue or deadlines. People worked harder, stayed longer hours, and even worked from home or shelters. The Israeli tech community showed remarkable resilience. We at Viola even ran an ecosystem campaign under the tagline “Israel Tech delivers, no matter what” that captured the local entrepreneurship ecosystem's spirit and was shown on the Nasdaq tower (see picture). What surprised me were two things. First, the level of support from the global tech industry. Unlike previous crises, such as the Intifada or the oil crisis, Israel is now a crucial part of the global tech industry. Big companies not only showed support but also increased investments. 2024 saw the highest M&A activity in Israeli companies since 2018, which was unexpected. Salesforce and Nvidia made two acquisitions each. Google signed their most significant real estate deal for new offices in Tel Aviv, and OpenAI co-founder Ilya Sutskever decided to open his R&D center here in Israel. The second surprise was the speed with which Israeli entrepreneurs shifted focus. Despite the turmoil, they quickly moved into defense, drones, and other solutions, recognizing new business opportunities. This happened alongside the rise of AI, which I believe will be the most transformative technology we’ve seen in over 40 years. Despite the war, Israeli entrepreneurs embraced AI, proving that Israel will continue to lead the global tech scene.

Q: How would you describe the current state of the Israeli startup ecosystem and the capital market that supports it? I'll give you both the positives and the negatives because I don’t believe in overselling. On the positive side, we're seeing the highest M&A activity since 2018. Early-stage capital was low in 2023 but has rebounded dramatically in 2024, and funding is not an issue. Global tech support is amazing—Sequoia, Greylock, and General Catalyst opened offices in Israel in 2024 and made significant commitments. Despite challenges like the war and airline disruptions, top investors are still coming to Israel, which is a good sign. However, there are three concerns. First, the AI revolution. Israel lacks sufficient infrastructure, especially in cloud and GPU capacity. Nvidia, Microsoft, and Amazon are rebuilding it, but we should have moved faster. Second, for vertical AI to transform industries like agriculture, construction, and drug discovery, Israel needs more scientific innovation. We need more investment in AI talent and basic science, and Jewish donors to US universities are now shifting their investments to Israel, which is promising. The third concern is an over-focus on cyber, which accounted for 42% of investments in 2024’s first nine months. While cyber remains important, there's a concentration risk. We need more diversification, particularly in AI and disruptive areas. It's easy to fund another cyber startup, but that won’t create a $10 billion company. I'm also the chairman of the Aaron Institute, Israel's leading economic think tank. We publish reports on these issues, emphasizing the importance of maintaining the competitiveness of Israeli tech. We need more investment in science, AI research, and universities. There's no shortage of capital or belief in Israeli entrepreneurs. What’s needed is a focus on bolder new areas, which I’m confident will happen. I'm incredibly bullish about Israel’s future and passionate about it.

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Q: What are your thoughts on investing in vertical AI within education? I’m a huge believer in AI's ability to transform the learning experience. The future of learning is about immersion and adaptability. With conversational AI, I can understand why a student is struggling and create exercises to help them, whether in geometry or any other subject. This needs to be personalized and adaptive. One barrier to educational excellence is the traditional school structure, where students are grouped by age, which doesn’t fit pedagogically. For example, I may be at a 10th-grade level in math but a 6th-grade level in English. We need to enable personalized, adaptive, fully immersive, and interactive learning. We also need to teach new skills. The education system moves slowly, but in the age of AI, which will significantly transform the labor market, we need to teach skills that keep people competitive. Many jobs we know today might vanish; McKinsey predicts 55% of all jobs could be at risk within the next five years. So we need to adapt quickly, teaching skills that reflect these changes. For example, data science didn’t exist as a profession 10 years ago, but now it's one of the most sought-after careers. How do we teach data science, and what should K-12 education look like to prepare students for that career? The education experience needs to adapt to shorter attention spans, interactivity, personalization, and gamification. We have a thesis on what needs to be done, but the challenge so far has been the business model. As long as K-12 education is dominated by governments or quasi-government institutions, scaling these changes is tough. The system is conservative, and it’s difficult to drive innovation at scale. Ultimately, I believe education will become more of a consumer product rather than just a systematic process. The traditional education system is still crucial for emotional and social development, as well as for fostering social mobility. But when it comes to pedagogical advancement, much of it will be driven by consumers—by parents and students who are looking for a different experience than what the traditional education system provides today. I’m very excited about this space. We are studying it closely, looking at every Israeli company in the field, and have just invested in a very exciting team building something new in this space.

Q: How do the developments in AI play into your investment theses? I've been passionate about AI for many years, long before it became a trend. To provide some context, we've seen several revolutions. First, the cellular network connected 4.5 billion people, a groundbreaking achievement. Then, the internet enabled global connectivity and content sharing. But the most meaningful revolution was the emergence of social, mobile, and cloud. It began in 2007: Facebook created the social paradigm, AWS made infinite compute and storage accessible globally, and the mobile revolution made the internet always available. This led to $1.5 trillion in venture investments, fueling companies like Facebook, Netflix, and Uber. Despite this, traditional industries like automotive, aerospace, and agriculture have seen limited innovation. While these industries are often seen as traditional, the real challenge lies in the limitations of computer science. Social, mobile, cloud, and data innovations have been largely linear, relying on simple programming like 'if-then-else.' But real-world problems, such as autonomous driving, require non-linear solutions. AI is the breakthrough, processing vast amounts of data and building neural networks that allow machines to make better decisions than humans. I believe AI will soon outperform humans in almost everything, and solve complex problems in fields like aviation, energy, autonomous vehicles, and drug discovery—transforming human tasks with machines that do more with less. At Viola, we see major investment opportunities in AI, which has shifted how we make investments. Every tech transformation has an infrastructure layer, enabling technologies, a horizontal layer, and a vertical layer. The infrastructure layer includes semiconductors, storage, quantum computing, etc. Israel has strong capabilities in this area, and at Viola, we’re not afraid to invest in bold technologies like semiconductors and storage. The horizontal layer involves things like large language models (LLMs), where I believe Israel doesn’t play a large role due to the lack of AI talent. The US and China are much further ahead in this field. In China, the fact that they have been boycotted and not have this latest technology available to them has made them creative. While the US will likely maintain leadership, China will provide serious competition in driving down costs. Our main investment thesis around AI is what we call vertical AI—applying AI to specific industries that haven’t seen innovation. We see a lot of potential in vertical AI for industries like agriculture, construction, and drug discovery. A great example of this is the pharmaceutical industry. Drug discovery is a $200 billion industry, but most of that money goes to scientists, clinical trials, and laboratories, with very little spent on software and AI. The industry has been underperforming, with few new drugs coming to market. But AI has the potential to change this by enabling faster, cheaper drug discovery. We’ve already invested in a company called Immunai, which simulates the immune system to help pharmaceutical companies discover new drugs more efficiently. Another company we’ve backed, PhaseV, takes failed clinical trials and identifies subsets of patients who could benefit from the drug, saving billions in wasted research. We see great potential in AI transforming industries that have lacked innovation for years, and drug discovery is just one example where AI will have a massive impact.

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Q: You have extensive involvement in philanthropy; how do you prioritize these activities versus your day job, and what are you most proud of in this area? We have a family foundation, which my daughter, who used to be an engineer and lived in New York, started after moving back to Israel. After having her third child, she decided she wanted to do something more meaningful than just being a product leader in a big tech company in Israel. That's when we created the foundation. Both my wife and I have been very active in it, and we've always kept a low profile—no names or credit—because that's what philanthropy should be all about. One of the more public aspects of my involvement is in policy work in Israel. About 22 years ago, the Israeli government asked me to head a task force on reforming Israeli education. It was a landmark project because it was very different from typical policy work. We took an interdisciplinary approach to education policy in Israel, looking at it from economic, pedagogical, technological, and government administration perspectives. This broad approach has, I believe, led to meaningful changes. I continued to be involved and served as chairman of the Israeli Democracy Institute. Ten years ago, I also started the Aaron Institute for Economic Policy and Pnima. These organizations are part of a broader effort to create a large ecosystem of Israeli think tanks that are privately funded but have a significant impact on government policy. The Aaron Institute, which takes up much of my time, has become Israel's leading think tank. It is led by Professor Zvi Eckstein, former Deputy Governor of the Bank of Israel and a world-class economist, supported by a team of experts. We are focused on developing policy recommendations based on data, research, and international comparisons. We’ve created a framework focused on economic growth and social mobility. Our goal is to figure out how to achieve both, comparing Israel to countries like Switzerland, Austria, and Denmark. These countries have similar sizes but higher GDP per capita, better productivity, and more advanced infrastructure. Israel faces challenges like a high cost of living and an Arab society that is staying behind. We’re doing deep, impactful work in these areas, and I believe we’re making a difference. We work closely with the Israeli Ministry of Finance, the Bank of Israel, and the Ministry of Economics, as well as with ministers, though we mostly focus on the professional level. After October 7, I decided to make a major commitment through our foundation. I’m personally very involved in these efforts, and it’s become a huge part of my focus. We’ve gathered a group of think tanks working on Israel’s future. The aftermath of October 7 was a massive crisis, and Israel now needs a clear vision and strategy, as well as actionable plans to drive change. One example is decentralizing government—Israel is the only country where the Ministry of Education runs schools. We need to empower local authorities with the financial tools and authority, while shifting the government’s role to regulation and policy. Additionally, we must rethink our defense strategy, military spending, foreign policy, and education system. Through the foundation, we’ve launched a large project with hundreds of people working on a comprehensive strategic plan for the country, driving the change Israel urgently needs.

Interview conducted by:

Joshua Schwartz Managing Partner

Ethan Galiette Director

Chelsea Chen Associate

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