Battery Ventures was founded in 1983 making it one of the oldest venture capital firms in the US. It has been operating in Israel since 1995. Recently, Battery Ventures decided to extend its presence in Israel, and opened its first regional office outside the US. Avi Domoshevizki, former partner in the now disbanded Concord Ventures, was appointed local venture partner. During his visit last week, Battery Ventures general partner Scott Tobin said that next month, the firm would make its first investment in Israel since opening the local office.
Last week, Battery Ventures realized an asset in Israel in with the sell-off of Israeli start-up Kashya to US information management and storage company EMC Corporation. Battery Ventures, along with Jerusalem Global Ventures (JGV) venture partner Micah Avni, invested in Kashya right from the early stage. In contrast to other US venture capital firms operating in Israel, which invest in companies at later stages, Battery Ventures joined Kashya while it was still at the concept stage and nurtured the company together with Avni and the entrepreneurs right through to the exit. In an interview with “Globes”, Tobin and Domoshevizki say that Battery Ventures seeks to invest in companies at all stages, from concept to maturity.
Globes: This is a very wide range of activity.
Tobin:”This is Battery Ventures’ specialty. We invest at the seed stage, and we even invest in public companies and take them into private ownership. We invest in companies developing technology or companies whose business is based on advanced technology. One such example is our investment in the London International Financial Futures Exchange, where we converted the market’s manual trading system to a computerized one and then sold the company to Euronext, the joint French, German and Belgian venture, which has made an offer for the London Stock Exchange.”
Does this mean you limit yourselves to certain fields?
”We look at everything, from hardware developers to semiconductor manufacturing through to service companies.”
Battery Ventures’ latest investments come from its seventh $500 million fund, which closed last year. The company has offices in California, Boston, and now Herzilya.
Will your investments in Israel also cover all stages and fields?
”We intend, with the help of our local team Avi Domoshevizki and Ronit Koren, to build a portfolio of early stage and advanced stage companies. We intend to focus our efforts on developing Entrepreneur in Residence (EIR) models. Over the years, we cultivated the ability to help entrepreneurs take their first steps. That was how we worked with Kashya and more recently with another company called Agito that we established in San Jose. We believe that this could be a good opportunity for entrepreneurs and us to harmonize our efforts to develop ideas and form companies.”
Have you earmarked a specific amount of capital for your investments in Israel?
”No. We decided to open an office in Israel because we realized that it’s difficult to invest in the best companies in their fields, if you don’t know what’s happening in Israel. In other words, when we look at a company, we check out all its competitors, whether they’re in Boston, California, Israel, or anywhere else. We have always had strong ties with Israel, but we wanted to deepen them further.”
You’re no doubt aware that many US venture capital firms now operate in Israel as well as a considerable number of local firms. Is Battery Ventures competing for the deal flow?
”Like many other US venture firms, we tended to invest in companies at the later stage, but we recently concluded that it would be better for us to make investments at an earlier stage, as we did with Kashya. We have enough free capital to invest at an early stage and remain partners through all the rounds up to the exit. We intend to invest in partnerships with local firms. The fact that it’s a bit “crowded” doesn’t worry us.
"There are a lot of venture capital firms in the US too. We won’t tread on anyone’s toes. Battery has a well established procedure for working with companies. We may not be suitable for everyone but we will work with the best companies and entrepreneurs who believe in our strategy. I believe there will be those who will find us attractive.”
Avi Domoshevizki adds that one of the differences between Battery Ventures and other US venture capital firms operating in Israel is the fact that it will make its investments from its general fund, rather than allocating a special fund for Israel. “Every deal will be examined by the global fund’s partners and not just the local venture partners. The global fund’s partners will also handle all portfolio companies.”
Domoshevizki refuses to be drawn, but he is referring to venture capital firms such as Sequoia Capital and Benchmark Capital, which set up local funds that are managed by local teams, with less intensive connections with the big US funds.
The next exit
What is Battery Ventures’ strategy?
Tobin:”We’re closely involved in all our companies but remain aware of the fact that each company has needs of its own. We don’t have any formulas but we’ll always look for the most suitable approach for each company. This also applies to Israeli companies. We don’t believe, for example, that every Israeli company should relocate its management team to the US, although a management team also doesn’t necessarily have to be based in Israel. We try not to dictate to companies what they should do, but instead we work together with them. We bring 23 years of experience.”
Domoshevizki stresses that the Battery Ventures strategy entails a holistic view of the market. “The fund assesses a certain field and then maps out all the companies worldwide that are active in it. We try to find the suitable company rather than waiting around for it to appear. As a result, the firm specializes in many fields and knows the markets inside out.”
Why did you decide to open an office in Israel, rather than in India or China?
” Recently we invested in a systems company in India and found, much to our surprise, that it employs several Israelis. We’re more conservative than other funds when it comes to China. Our plans are based on projections for the next five to seven years. We believe there is a bubble around investment in China, so we are looking at more companies in India, and will review the option of investing in China in three years time. This is now the opportune moment for us in Israel. We have been operating here since 1995 and recently decided to open an office in Israel too.”
Tobin adds that Battery Ventures has three more portfolio companies in Israel with Israeli entrepreneurs or CEOs. “Israel is a sort of island in the Middle East, but for Battery Ventures, it’s like Silicon Valley and the Boston region.”
Battery Ventures is likely to make its next exit soon, from another one of its portfolio companies, Veraz Networks, which is preparing to make its IPO on Nasdaq at the handsome value of $500 million. Tobin will not comment on the IPO but says Veraz is making good progress and that he hopes it will be a good investment for the fund.
Published by Globes [online], Israel business news - www.globes.co.il - on May 15, 2006
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