By David Shamah - Israel 21C
Times may be tough and credit may be short - but according to David Gitlin of Philadelphia's WolfBlock LLP, a partner at veteran law firm in the city, many American venture capital funds and angel investors still believe Israeli high-tech firms are worth investing in.
So much so, in fact, that some 70 VC's and angels gathered at the start of December for the fifth annual WolfBlock Israel Venture Conference. The potential investors met with directors and staff of 15 Israeli high-tech firms, working in areas like biotechnology, clean tech, and communications - and if all goes well, some deals will come out of the conference, says Gitlin.
"While there are some American VC firms that prefer to invest only in American companies, we have found that there is a great deal of interest in Israel among many VC's and angels," Gitlin tells ISRAEL21c. "It's not easy getting 60 or 70 investors together even during boom times, much less now, when recession is on everyone's mind." So it's a credit to Israel's high-tech reputation that these firms are willing to come, he says.
Now in its fifth year, the conference has helped dozens of young Israeli start-ups get the funding they need to go on to bigger and better things - and there have been many success stories, Gitlin says. The best known of these is Israeli data security company Safend, which presented at the first Venture Conference. Last year, Safend was elected as the most promising Software and Internet start-up in Israel for 2007 by Red Herring .
Getting on the map
"Most of the companies who present at the conference are pre-revenue or have only limited sales, so this is their chance to really get on the map," Gitlin says. "We are working on a couple of deals right now for companies that presented last year, and hopefully we will be able to work things out for the company and investors."
A time lag of a year or more is actually a typical amount of time investors and companies might take to decide to work together, after meeting at an event like the Venture Conference, says Gitlin - and that's one reason why the bad economy is less of a factor in VC and angel investment decisions than most people would think.
"VC's are in business to invest, and many have money in the bank they have to spend. Some funds have decided to go slow in calling on their limited partners to come through with their commitment," - an essential part of the VC system - "but there are plenty that have the cash to invest," Gitlin explains.
"What has changed is that all investors are more careful with their money, seeking the best opportunities that have the highest chance of paying off. Both VC's and companies realize that the vetting process is going to be more thorough now, so it's expected that both sides will take time to check each other out," says Gitlin.
The money for investment is there, however, and during tough times that money will go to the best companies, says Gitlin - the kind of companies that will be presenting at the Investment Conference.
The Venture Conference is a highlight of WolfBlock's Emerging Growth Services Program, and Gitlin, along with Emerging Business director Beth Cohen, vets the investors and presenting companies to make sure that interested investors are able to hook up with quality companies.
Israel's high-tech reputation precedes it
"Israel's reputation as the home of many innovative startups precedes it, of course, but each company has to make its own case. Fortunately, we have some good candidates coming from varied areas, including life sciences and clean tech, plus a consumer oriented website, which looks very good," Gitlin says.
Although it's almost axiomatic that startups are seeking money, that's not necessarily always the case, he adds - everything depends on the specifics of the deal. "We were prepared to do the conference with just 10 participants instead of the 15 we were aiming for, but in the end we had to turn down applicants," Gitlin says.
So how did WolfBlock get into the VC game? "The firm was established 103 years ago as a home for Jewish lawyers who couldn't get work elsewhere," says Gitlin. "We have actually been working with emerging growth companies for decades. Many of our clients started out as small merchants and manufacturers, and went on to become large Fortune 500 - and even Fortune 100 - companies."
Why Israel is a Top Destination for Venture Capitalists
By Orna Berry and Yigal Grayeff - Israel 21C
Many of the factors that make Israel a top destination for venture investment form interlocking virtuous circles: Israel produces great technology because it has great technologists, which has attracted the attention of multinational corporations...
If it was purely about the technology, Israel would be an easy sell: some of the innovations emerging from this tiny country are mind-blowing. A great example is Given Imaging's PillCam, a disposable pill-sized camera that is encased in a capsule and used to diagnose stomach disorders after being swallowed. Other Israeli developments have caused revolutions in their industries. Voice over Internet Protocol (VoIP) software, pioneered in Israel in the 1990s, has enabled tens of millions of consumers to carry out free telephone calls over the Internet. In addition, VoIP has had a major impact on telecom operators, many of which are converting their systems to transport voice calls via IP. In all, the list of highly influential innovations by Israeli companies is long and includes Internet security, voicemail, ICQ instant messaging and the disk-on-key, the flash memory device that has replaced the floppy disk as a method for saving computer files.
Although exciting technology is important, what also attracts VCs to Israel is the possibility of a successful exit. Israel has more companies listed on Nasdaq than any other country outside North America, and between 2004-7, Israeli firms raised $2.3B in IPOs on exchanges around the world... In addition, many firms have been acquired in high-profile transactions, and between 2004-7, almost $18B was spent on the purchases of Israeli high-tech companies...
Many of the giant corporations that have bought Israeli companies also have research and development facilities in the country, attracted, among other things, by a superior workforce. As Bill Gates said, "For Microsoft, having an R&D center in Israel has been a great experience... The quality of the people here is fantastic". This is also a factor for VCs, because they base their investment decisions on the caliber of a start-up's management and the talent pool from which it can recruit. Per capita, Israel is among the leading countries in the world for the number of engineers, PhDs, patents, scientific papers published, and citizens with a tertiary education. The World Economic Forum ranks Israel highly for the quality of its research organizations, which include the Technion - Israel Institute of Technology, the Weizmann Institute, the Hebrew University and Ben Gurion University of the Negev.
Without taking anything away from Israel's entrepreneurial spirit, credit is also due to Israel's government, which established Yozma and other initiatives to help start-ups, support R&D and encourage investment in high-tech companies. Yozma is a program that the Israeli government created in 1993 to develop a venture capital (VC) industry from scratch. Within a few years, dozens of local firms had been established and high-tech companies were routinely raising more than $1B a year on a collective basis from domestic and foreign sources. In 2007, the total figure was $1.76B, which in absolute terms, is comparable with the UK and France and greater than Germany, and per capita, comparable with the US. Since 1993, a number of major foreign VCs have set up branches in Israel, including Sequoia Capital (the firm behind Google and Apple), Benchmark Capital and Greylock Partners, while numerous others have provided financing to Israeli start-ups...
Articles courtesy Israel 21C