Israel's leading seed stage venture capital firm, JVP Studios, employing an aggressive development strategy (taking ideas from inception to market in only 12 months) has garnered five start-ups in only 18 months of operation.

The Studio, which acts as the seed stage arm of venture capital firm Jerusalem Venture Partners, was founded by Haim Kopans and Eli Wurtman.

Kopans, president and CTO of the Studio, was founder of Precise Software Solutions, which was sold to Veritas for $700 million. Wurtman, company CEO, has seen three companies through IPO including the $1.5 billion DeltaThree.

Seed stage work is no picnic. But no one ever said that creating the new companies to help lead Israel's hi-tech recovery would be easy."VCs don't usually invest in the seed stage. There's too much work," says Wurtman. "They typically like to invest further down the road. But you need to pass through the seed stage if you want a big company. Today there is a huge pent up demand for pre-seed investment. When we opened our doors we were overloaded with requests."

In the past year alone, Wurtman has met with some 300 entrepreneurs to hear their ideas. From these he chose the cream of the crop to become the five start-ups.

The Studio typically makes an initial investment of $500,000 - $1m. with a $5m.- $6m. follow-up. When the start-ups graduate from the Studio they can rely on the $400m. JVP fund for ongoing support.

That Israel's leading seed stage VC is located in Jerusalem and not Tel Aviv makes perfect sense to Wurtman. For him, Jerusalem isn't a location, it's an opportunity. The city's reputation for unifying opposing elements makes it ideal for creating cutting-edge companies. Wurtman believes the city combines two high caliber, critical business components rarely found together – technology and creativity.

"Jerusalem is home to Israel's leading computer science department, that of Hebrew University. It also has many other excellent computer science programs such as those at Machon Lev [Jerusalem College of Technology], Machon Tal and Hadassa College."

On the other hand, he says the city is an artist's paradise. "There is a lot of creative thought going on in the city. Jerusalem is of course home to Israel's leading arts school, Bezalel. Just a few days ago I had a couple of Bezalel students in here who presented me with tons of great ideas."

Wurtman says these two forces are nurtured by the existing business infrastructure. "Major industry in the city, such as companies like NDS and DeltaThree, provide an excellent training ground for people to develop their ideas."

Even the city's sacredness enhances its economic potential. "People don't usually take trips to Boston or Silicon Valley. But due to Jerusalem's spiritual significance many business executives come here anyway. Why not take advantage of that?" he asks. This unique combination leads Wurtman to believe that Jerusalem could become Israel's hi-tech capital.

As part of its commitment to Jerusalem, the Studio has instituted a mentoring program that takes the brightest local students under its wing and teaches them entrepreneurial skills. The program has already been instituted at Hebrew University of Jerusalem and is to be expanded to other colleges.

"The pay off will take a few years, but you need to plant seeds for a hi-tech economy to emerge," he says.

According to Wurtman, the Studio is distinguished by its field of operations. "A lot of investment funds are very general. We're focused." The Studio concentrates on only two types of technology: enterprise software and media technologies. Enterprise software is the safer side of the business. "Software is relatively cheap to develop and capital efficient." Media technologies are much more risky but Wurtman believes JVP can lead the way in this cutting edge business. "The media market today is huge – hundreds of billions of dollars a year and yet it remains woefully undeveloped. For example, movies are still distributed on individual film reels to movie theatres worldwide. Why not transfer the material digitally?" Media tech can include everything from gaming and advertising to simulation technology and animation.

Israel and especially Jerusalem, says Wurtman, can become a world leader in media tech. "Few businesses in Israel today are developing media related technology. But such was not the case a decade ago. Then Jerusalem was a media tech center, acting as a hotbed for multi-media companies."

One Studio start-up is M-Confirm. The company is developing a credit card fraud detection system to be used to combat the estimated $10b. lost to the crime annually. Some 90 percent, of that is absorbed by the credit card companies. "Today fraud detection is based on statistics – searching for irregular shopping patterns," says Tomer Eden, CEO of M-Confirm. "If suddenly you were found spending an abnormally large amount in Eilat and you never go there, this would set off a red light. But this method is very unscientific. Our system provides a black and white test. Are you or are you not at the physical location where your card is being used to make a purchase. We triangulate your location by determining the position of your cell phone and credit card." If they match, the sale is likely legitimate.

"Nobody else is developing this technology," says Eden. The system is complex because it must connect two massive and completely different enterprise software systems – credit and cellular. M-Confirm is currently conducting a pilot test of the software with both an Israeli credit card and cellular company. "We're getting tremendous results," he says.

On the media tech side is start-up Double Fusion. The company produces software capable of inserting advertisements into video games. "We asked ourselves 'What is the next big thing?'" says CEO Guy Bendov. "We knew there was a big growth in the games market. The public is now paying more for video games than it is for Hollywood movie tickets. The worldwide game market is currently $24 billion, $10 billion in the US alone."

Thanks to Double Fusion's software, every element of a video game can contain an ad thereby augmenting the product's revenue streams. In a car racing game, for example, this includes the car itself, billboards, even store fronts which can be transformed into actual stores such as Blockbuster and Starbucks. The ads need not be passive either. Driving up to a billboard advertising a movie allows you to see the movie trailer. The ads can even become part of the game itself, such as driving over McDonald's beverage cups to win extra points.

Studies show that ads wear out after being viewed more than 15 times. Double Fusion solves this by enabling the game company to update the ads continuously via the web. The company's technology also allows game producers to specify ads by region. Current video games have a single ad display for all copies of the game. This means, for example, that the beer advertised in the game will be the same the world over even if it is not sold in the country in which the game is being played. Double Fusion allows the game publishers to specify a local Japanese beer, for instance, if the game is sold there. The company can also provide reports on the number and type of ads viewed by the user and charge per impression such as Internet pay-per-click ads, significantly enhancing the effectiveness of ad campaigns.

The Studio has three other start-ups. Q-Direct is developing software to streamline and accelerate data warehouse software. Scio Systems automates organizational contract management. And Zoomix uses artificial intelligence to scan business databases for redundant data and eliminate it, as well as merge business resources of multiple business units.

JVP Studio was founded in October 2003 by privatizing the government run Jerusalem Software Incubator. Countrywide there are some 23 government hi-tech incubators half of which have already been privatized. While other countries have incubators, Wurtman says Israel does it better than others. "The incubators are a bright spot in the Israeli hi-tech economy and one of the most important pre-seed investments. Government can take risks that private businessmen are usually unwilling to take."

Even after privatization the government continues to support the start-ups. It currently grants $370,000 per company which is to be paid back if the start-up is successful. Wurtman says the incubators have also been important to aliya. "The incubators have helped absorb many Russian immigrants and make them part of a hi-tech economy."