Bessemer Venture Partners (BVP) is one of the world's oldest venture capital funds. Six months ago, the fund opened its Israel office and appointed Adam Fisher, former partner at Jerusalem Venture Partners (JVP) as local partner. In an exclusive interview with "Globes," Fisher talks about the fund and its investment strategy.
Bessemer was founded in 1911 by Andrew Phipps, a childhood friend of Andrew Carnegie. The firm focused on private equity during its early years, investing in industrial companies as Bessemer Securities Co (BSC). In 1981, its venture capital arm, BVP, was founded, with BSC its sole investor. The fund differs from the usual model, since it has no investors. "The returns were good enough for BSC not to want to bring in additional investors", says Fisher. "This situation has now changed slightly, and 10% of the fund's investors are external."
Bessemer played a key role in the development of the venture capital sector in the US, and the founding of the National Venture Capital Association, and it was the first fund to operate on the East and West coasts. Today, four of its partners rank high on the "Forbes" Midas List of top deal makers in the high-tech and life sciences sectors. Bessemer closed its latest fund on $1 billion a few months ago.
Globes: What it is like to have a fund with almost no external investors?
Fisher: "It gives us maximum flexibility. We don't have the pressures that partners in other funds are under when it comes to, for example, valuations of the companies they've invested in, geographic focus, or pace of investment. We are not hamstrung, and decisions are pushed through quickly."
How significant is the independence of the funds' partners?
"The partners collaborate with one another, but there are no senior partners approving investments. Obviously we consult one another, but every partner has responsibilities, and he is the one who decides which company he wants to invest in and under what conditions. This gives us agility. Other funds find it a bit harder, since you have to have several meetings with all the partners, and perhaps also an investment committee, before an investment gets approval. This is especially true of foreign funds that often have a representative in Israel whose goal is to get deals approved by the headquarters in the US. As a partner, I have the ability to define the road map for the fund's activity in Israel."
Why now, and why open an office?
"It's hard to ignore Israel. We want to be nearby and get to know the companies before we invest in them rather than after. I believe my presence will result in us making more deals."
Have you earmarked special resources?
"We don't have a defined allocation for investment in Israeli companies. We invest opportunistically. More than once, other partners in the fund look at Israeli companies."
What are you looking for in Israel?
"Right now, we're looking for more mature companies, ones which have initial or large revenue. When it comes to fields, we're interested in companies developing software, principally software as a service (SAAS), and at present we differentiate between companies that do business and technology companies. In other words, we'll invest more in companies that sell than in companies focusing on technology.
"We'll invest in companies in online advertising. Financial services also interest us, and I believe there's potential in these fields in Israel, and that we'll see more exits in them. We're also interested in database architecture, software and components, and less in hardware."
Israel is renowned for its early-stage companies. Yet you are looking for more mature ones.
"A partner will find it difficult to reach early-stage companies on his own. The Israeli funds invest in early-stage companies. We're more interested in companies at the later stages."
Will you collaborate with local funds?
"We'd certainly like to work with them, be partners and invest in their companies. We don't have to lead rounds or reach a specific size of holdings."
Will you do private equity deals as well?
"We usually don't do leveraged buy-outs, although we could be owners of a company if we see an exceptional opportunity. Our goal, like that of most funds, is to reach a holding of 15-30%, support, give assistance, and sit on the company boards."
Missed opportunities
Bessemer has a long list of successful portfolio companies, 150 in all, which were a success, 50 of which are displayed on its website. But also on the site is a most unusual page, one containing information that other funds go to great lengths to hide. Bessemer calls it the "anti-portfolio" page and it lists the fund's missed opportunities. Among the companies Bessemer could have invested in and didn't are Apple Inc. (Nasdaq: AAPL), eBay Inc. (Nasdaq: EBAY), Google Inc. (Nasdaq: GOOG), FedEx Corp. (NYSE: FDX), Intel Corporation (Nasdaq: INTC), PayPal, Lotus, and Cisco Systems Inc. (Nasdaq: CSCO).
"In the past, we've invested in a wig company, a chips producer, and a railway company, and there were investment opportunities that we chose not take up and they became phenomenal successes," says Fisher. "Our decisions not to invest were varied. In any event, we respect these companies for the inspiration their phenomenal success gave us, or in other words - had we decided to invest in them, as we could have, perhaps we wouldn't be working today."
Published by Globes [online], Israel business news - www.globes.co.il - on November 15, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007