11 years ago, Omrix Biopharmaceuticals Ltd. (Nasdaq:OMRI) founder and CEO Robert Taub said that nothing came of all the approaches he made to venture capital funds. He predicted then that the funds would "eat their hats." Earlier this week, they did just that.
It is indeed unfortunate that not one single Israeli investor, private, venture capital, or other, benefitted from the spectacular exit earlier this week of the sole quality Israeli high-tech company to reach maturity at a time like the present. On Sunday, US healthcare giant Johnson & Johnson acquired Omrix for $438 million, in other words $25 a share. Why weren't there any Israeli investors in Omrix? The answer to that can be found in a "Globes" interview with Robert Taub 11 years ago, after he raised funding from a group of UK investors. "Actually, I did contact Israeli venture capital funds, but nothing came of it," he related. "Some of them weren't professional enough for my liking, and others actually functioned as brokers and were unable to deliver. Only one turned us down. It may have been personal, but I think they missed out big time, and there'll come a time when they'll have to eat their hats."
The unfortunate truth is that the presence of Israeli investors in most of the big exits in recent years has been sparse. Such was the case with fiber-to-the home optical networks company Passave Inc. which was sold in 2006 to PMC-Sierra Inc. (Nasdaq: PMCS) for $300 million, with Eli Barkat's BRM Capital, Eurofund and Walden Israel the only Israeli investors to invest in it when it was first launched. The same applied to contextual advertising technology company Quigo Inc., founded by Yaron Galai, which was sold last year to AOL for $360 million. It had just two Israeli investors - GlenRock Israel, founded by Leon Recanati, and Sigma PCM Investments (1992) Ltd., which was founded by Galai's father, Dan. Qumranet, the Israeli virtualization start-up which was sold to Red Hat Inc. (NYSE: RHT) for $107 million just before the current crisis erupted, raised $20 million in investment and had one Israeli investor only - Sequoia Israel.
All this shows that perhaps the Israeli venture capital industry would do well to spend some time reviewing the process they employ to screen candidate companies. If they make a better job of choosing the companies they invest in, they too could find themselves cashing out on the exits with high returns.
Published by Globes [online], Israel business news - www.globes-online.com - on November 26, 2008
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