Andrew Friendly, senior associate at US venture capital fund Advanced Technology Ventures, (ATV) and a specialist in cleantech investments, was in Israel earlier this month to look at the field here and the opportunities the local market has to offer. Friendly previously spent five years at the White House in a variety of positions including personal aide to President Clinton. During the last three years he worked as a director at Idealab in Pasadena, CA, where he specialized in evaluating energy and cleantech technologies for possible investment and company creation.
ATV, which was founded in 1979, manages $1.4 billion in assets, and invests in software, telecommunications, medical devices, life sciences, and, in the last five years, also cleantech. The fund has not yet made any investments in Israeli companies.
Friendly was in Israel as a guest at the second annual Cleantech Investment Forum, conducted by law firm Herzog, Fox & Neeman, with the participation this year of Boston law firm Mintz Levin. The forum focused this year on the potential for overseas investment in Israeli cleantech. In her speech at the conference, Dr. Ruth Dagan, head of the Environmental Law practice at Herzog, Fox & Neeman, reviewed current trends in the sector. "Israel is characterized, at least at this point in time, by a wide range of investment platforms in the field - venture capital funds, private investors, and holding companies. As investors accrue more knowledge in the field and global activity in it expands, interest spreads from investments in mature companies already posting sales of their own to research into companies now in the preliminary stages of technological development," she said.
Looking for partners
But with all due respect to the conference, Friendly was also in Israel for a series of business meetings, as he explains: "The reason for the visit is to get to know the Israeli deal flow, the companies which are active, the R&D centers and the service providers. Israel has a worldwide reputation as a leader in research, and a location with an ability to incubate ideas. I want to see what's going on here in the solar energy and water fields. We did look at a number of Israeli water companies once, but we didn't make any investments."
Globes: Why didn't you?
Friendly: "We make investments at an early stage in the lives of companies, so being near to their management and founding teams is critical. We don't see ourselves as just a source of money; we bring added value by providing close support for the companies we invest in. The competition in cleantech is substantial, and we want to know what's happening in the fields we invest in."
Friendly says the purpose of the visit is, first and foremost, to get to know the players in Israel. "We want to get to know the local companies, and see whether there are any companies that wish to move their operations to the US. In addition, we want to see what's hot in research, and compare it to what we're seeing in the US. Aside from this, we want to meet the funds which invest in cleantech, get to know the deal flow, and maybe look for local partners for joint investments."
Do you think the venture capital model is a suitable one for setting up cleantech companies?
"Our experience shows that the expectations of a cleantech company are fundamentally different from those of IT or Internet companies. If we are comparing, they would actually be more similar in their life cycle to life sciences companies - the development takes time, there are often regulatory procedures and requirements to be met, and the customers are invariably authorities or large integrators."
Moving towards professionalization
Friendly believes that despite the problems, cleantech is growing in strength, and will become a key sector for venture capital investment.
So cleantech is not just another passing trend?
"There's already an industry, and this cycle looks like one that will turn into a central investment stream. There have already been a few waves in the past, such as, for example, the dot.com boom at the end of the 1990s. Companies that engaged back then in the development of fuel cells attracted a lot of interest, but that disappeared when the markets collapsed.
"I believe that in future there will be a much clearer divide between investment fields and professionalization. Macroeconomic researchers predict that even if there are corrections, in general this market will continue to grow because there are real problems that need solving.
"I remember one venture capital executive saying to me back in 2002, when the price of oil stood at $20 a barrel, that cleantech wouldn’t be a good field for investment. I think he was wrong. Climate change, energy, and security are critical. On the other hand, there will obviously be investors who will lose money, and whose expectations are out of tune with the level of capital required and the time it takes for a new company in the field to reach the market."
What are you looking for in Israel?
"Research institutes that want to plug the ideas of researchers, inventors, and entrepreneurs, although we know that in this field it’s hard to set up a company in a basement."
Published by Globes [online], Israel business news - www.globes.co.il - on December 27, 2007
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