Outlook brighter for Israeli VC funds, but don’t expect the go-go yearsOct. 3, 2013
Israeli high-tech appears to be booming, but megadeals like the $1 billion sale of Waze to Google and the approaching initial public offering by Outbrain conceal one of the industry's biggest problems: the meager capital being raised by Israeli venture capital funds. So Pitango Venture Capital's closing of its sixth fund at $270 million this week brightened the atmosphere.
Still, this was the smallest fund raised by Pitango, which has never matched the $500 million fund it raised in 2000. This has been the trend for Israeli venture capital; it has shrunk in terms of number of funds, amount of capital invested, and share in Israeli startup investments.
Pitango said the fund would invest in companies eyeing global markets with high growth and earnings potential in mobile apps, telecoms, the Internet, life sciences, medical equipment, biotech and nanotechnology – and at all development stages from early seed to expansion.
Besides Pitango, the new Aleph fund founded by Michael Eisenberg and Eden Shochat recently raised $140 million for investing in Israeli companies. Others like Carmel Ventures, Vertex Venture Capital, Qumra Capital, and Haim Shani and Moshe Lichtman's Israel Growth Partners are in various stages of establishing new funds, with more launchings likely next year by firms such as Gemini Israeli Ventures and Genesis Partners.
But despite the optimism generated by large Israeli companies like Outbrain, Wix.com and Conduit, Israeli VC fund managers find they need to lobby the world's major investment institutions if they want to reach their fund-raising targets.
"There’s a dissonance between the success of Israeli companies and the lack of appetite by financial institutions around the world for venture capital investing,” says Koby Simana, chief executive of IVC Online. Despite the acclaim for Israel's high-tech achievements, investment managers handling the public's pension funds – including those of the high-tech sector itself – are still shunning VC funds.
For the full feature story on Haaretz click here.