Israel – Deals of the Month (September 2007)

By Danny Cohen, Guest Author

How time flies… It seemed to me that I just finished complied the August deals in Israel, and September just flew by. As expected, the investment activity in Israel during September did not slow down. Benchmark announced their investment in Broadlight, and Partech lead a round in PowerID, a spinoff from Powerpaper. But the most important news in Israel was related to the venture capital fund raising scene.

Pitango, one of Israel’s largest funds, announced their fifth fund, $300M dedicated to investments in Israeli technologies. Pitango’s strategy in Israele is quite broad – they invest in both early stage & late stage companies, and they do IT & Life Sciences. Their previous fund was closed in 2004, so they invested their 4th fund in about 3 years. Pitango’s ability to quickly raise a new fund shows the strong LP support for the Israeli high-tech scene, and specifically to the pure-play Israeli funds. This growing support comes at a time when more US funds are entering the market with dedicated Israeli funds (Greylock, Sequoia, Benchmark) or Israeli offices (Lightspeed, Battery, Canaan, and others). In my opinion, the Israeli start-up scene will always require the strong presence of the pure-play Israeli funds (Disclaimer: I am a partner at Gemini Israel Funds). These funds play a very important role in funding the seed and A-round companies.

As Pitango successfully closed their 5th fund, BRM announced that they are canceling their plans for a new fund. This is quite a loss as BRM was behind some of the more interesting Israeli exits, including Passave and OPlus. Although disappointing, I believe that the disappearance of Israeli funds is part of the maturity process of the local VC industry. The same is happening in the US, with funds such as Mobius and Sevin Rosen deciding to discontinue their future funds. In the past few years, other Israeli funds have disappeared from the market, including Concord, Israel Seed Partners, and Star ventures. My personal hope is that some of the ex-partners of these funds will create new funds, and not all be absorbed by the US VCs that are entering the market.