Silicon Wadi Hopes Waze Becomes 'Instagram of Israel'

Photographer: Chris Ratcliffe/Bloomberg

Waze Inc., the crowdsourced-map provider that’s seeking $1 billion in acquisition talks with Google Inc. and Facebook Inc., moved its headquarters and some of its operations from Israel to Palo Alto, California. Close

Waze Inc., the crowdsourced-map provider that’s seeking $1 billion in acquisition talks... Read More

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Photographer: Chris Ratcliffe/Bloomberg

Waze Inc., the crowdsourced-map provider that’s seeking $1 billion in acquisition talks with Google Inc. and Facebook Inc., moved its headquarters and some of its operations from Israel to Palo Alto, California.

(Updates with Waze user numbers in sixth paragraph.)

As Israeli venture capital struggles, entrepreneurs are cheering for a big acquisition to bring the spotlight back on the region.

Waze, which makes software for crowdsourced maps, looks like a good candidate to accomplish that. Google and Facebook have each been mulling a takeover of Waze, which is seeking more than $1 billion, Bloomberg News reported.

Last year, Israeli venture-capital funds raised $607 million, down 30 percent from 2011, according to the IVC Research Center, which tracks Israeli startups. Magma Venture Partners and Vertex Venture Capital, both based in Israel, are among the early investors in Waze that are poised to benefit from a sale. A blockbuster deal for Waze would give Israel's entire startup industry a "shot in the arm," said Koby Simana, IVC's chief executive officer.

"We've been waiting for years for the Instagram of Israel, and here it is," Simana said. "The impact will be across the board."

Facebook valued Instagram, the mobile photo-sharing service that has yet to generate revenue, at $1 billion when it agreed to acquire the company last year. (A slide in Facebook's stock put the closing price at $715 million.)

Waze's free service, which has 47 million users, makes money via location-based advertising. Its mobile apps can alert drivers to potential traffic slowdowns, suggest alternative ways to reach destinations and gently nudge users about advertised offers from nearby stores.

One Israeli government official is less enthusiastic about the prospects for Waze to get gobbled up by a Silicon Valley juggernaut and relocated from Silicon Wadi, an Arabic word used colloquially in Hebrew for valley. Acquisitions "are one of the potential outcomes in the life of a startup,'' said Avi Hasson, Israel's chief scientist. However, he would regret seeing an Israeli company "be forklifted to the domicile country of the buyer."

"That is good for the entrepreneur and the investor, but not for the Israeli economy,” Hasson said.

The Israeli government could still benefit from a deal, whether or not Waze agrees to move. Hasson's office, which is part of the Ministry of Economy, provided early-stage funding for Waze, he said.

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