Many venture capital fund managers have been active in Israel in recent years. An exceptional case is that of Battery Ventures general partner Scott Tobin.
Tobin moved to Israel with his family about a year ago, and since then has headed the fund's local office. His social acclimation process in Israel is aided by his Blackberry, which helps him in Hebrew studies. For someone who has been battling the language for only a year, his Hebrew is not bad at all.
Battery had previously made investments in Israel, but only opened its local office in 2006.
Sinatra sings about Israel
Globes: How has this year been now as an Israeli, not as one who bursts in on visits?
Scott Tobin: "The children acclimated in school, and are dealing with the language. The initial absorption was wonderful. But, I am shocked anew each time at how much people are surprised that we moved here. For Battery, too, there is an office here now in every sense of the word. David Sokolic, from Microsoft, also moved to Battery, and to Israel."
Globes: What have you learned from the move here?
"Israel has a reputation as a place where it is difficult to do business if you come from the outside, because everything is tied up in the hands of a few closed groups. When we met leaders of various industries, the reality did not match that perception."
How has the move been, on a personal level?
"Israelis tend to laugh at Americans, saying they are nice but not honest. That they say "Good morning, how are you" mechanically, not sincerely. As someone who comes from the US, I feel that Israel emphasizes the "big", and not the "small".
It is possible to aim for the "big" and still keep the small things. That is, to remain polite. These little things are no less important, and sometimes positively influence the big things.
Where does this find expression?
"I went with my two sons to a soccer game between Greece and Israel. On the field, the atmosphere was similar to any other sports event. But during a break, when we tried to get to a food stand, we met the other face of Israel the screams and the pushes. Of course, if there was a line, everyone would get what they wanted.
"To make a joke, it seems that the line "If I can make it here, I'll make it anywhere" from Frank Sinatra's "New York, New York", was written about Israel. The place is amazing and young, and it's fascinating to be part of its development."
Don't look for excuses
From the point of view of venture capital activities, Tobin had fewer surprises with regard to Israel, as he has already been here and had already invested along with local players.
Battery, which is marking 25 years of activities, manages about $3 billion in eight funds. Its Israel office employs 7 people. The firm is considered a leader in the US, as the returns on seven of its eight funds were in the top quarter among funds in the US. The only fund that had a lower ranking was the fund it raised in 1994, and has returned "only" five times on the money.
How relevant is private equity to Israel?
"It's correct that private equity is less developed here than venture capital is. But, when we considered the possibility of opening an office here, we found that in Israel there are companies that do good deals and make money, and can be appropriate for the financing structure that we offer."
So why isn't private equity flourishing in Israel?
"It will happen. There are financially efficient and profitable firms in Israel, from a local standpoint. It is possible to help them to leverage their talents and turn them into global companies. You don't need to find excuses for why it can't happen. Israelis also have natural talents of creativity. It happened at Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), and Strauss Group Ltd. (TASE:STEL) is one of the three largest coffee companies in the world."
And what about venture capital?
"We're enthusiastic about that sector, too. There are entrepreneurs here who are already on their third round. They are people who built successful companies which were sold or went public, people who filled senior roles overseas and are returning here to set up new businesses. It is a good sign for us, and its one of the reasons we opened an office in Israel, in order to be closer to them and not wait until they come to us in the US."
Does the venture capital model work?
"There is a tendency to view venture capitalists as professional leeches. But I find two reasons to be proud of my profession. First, when we succeed in building large and profitable companies, we bring our investors high returns. Second, it brings pride to see a company grow to become significant and relevant. It is what creates more jobs and fuels the economy."
And what about setting up large companies?
"There is talk in Israel of building the "next Nokia". But not every market has a dynamic which can allow companies to grow and become very big. So if companies are bought, its not terrible. For example, Israeli firm Kashya (in which Battery invested B.F.), which was bought by EMC, doubled, and nearly tripled, its size since the acquisition."
How much will you invest in Israel?
"In 2008, we made 18 investments around the world. Over the course of 2009 we'll make 16-20, of which 3-4 will be in Israel. We are not afraid of investing in a group of entrepreneurs with an idea. We did it already with Kashya."
Are there cleantech opportunities in Israel?
"It’s a young industry, which was surrounded by premature worldwide hype. But we are close to a more normal situation. In Israel there are researchers and academic institutions in the field which are top notch. But in order to create companies, there has to be more commercialization. In the US, commercialization is very strong, and we would be happy to see it happen here. We see exciting research which stays in academia."
In the US, there is also strong government support in the field.
"Correct, and Israel will gain if the government also decides to support the sector. As a foreign investor, I will definitely be happy to see this happen. The world is moving in the direction of clean energy, and that's the sector to be in now."
Published by Globes [online], Israel business news - www.globes-online.com - on September 23, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009