Corporate venture capital has utterly changed in the past decade. In the late 1990s, every respectable large corporation opened a venture capital arm, which scattered money widely, and usually lost it. The collapse of the high-tech bubble in 2000 put an end to that trend.
But large technology corporations did not forget the importance of maintaining close ties with the entrepreneurial community, and once again, at the start of a new decade they are continuing to make investments, albeit cautiously and gently.
Amdocs Ltd. (NYSE: DOX) is an Israeli high-tech company that wants to participate in the field. A year ago, it began to seek investments in technology companies, and it has made three investments since then.
In the past few weeks, it seems that Amdocs has shifted gears and is in more intensive negotiations with Israeli start-ups. Investments amounting to several million dollars are reportedly in the works within a few weeks.
Amdocs is establishing its ties with the Israeli start-up community through its collaboration and investment programs, called "Open Innovation". This program has three platforms for fostering collaborations with high-tech companies: Engage, which links start-ups with Amdocs customers; Ascend, which combines Amdocs solutions with start-ups' technologies; and Amdocs Venture, an investment program.
Amdocs Venture is the investment arm. It does not operate as a for-profit venture capital fund, but aims to find for Amdocs technology companies that are developing products that supplement Amdocs’ own offerings, or that can be integrated with them, or expand them.
Amdocs has not disclosed the size of the investments that it has already made in start-ups. One of the criteria for investment is that the start-up must have revenue. An exit is not the primary objective either; the emphasis is creating synergy between the companies and Amdocs’ current or future products portfolio.
Amdocs VP innovation, technology solutions and strategic investments Ariel Efrati heads Amdocs Venture. He examines companies and innovative technologies and leads collaborations between Amdocs and start-ups, while closely working with the venture capital community.
Amdocs Venture does not manage a defined amount of capital. Its team locates opportunities that meet the investment criteria, brings the information to Amdocs’ management, which decides whether to invest or not, and if so - how much.
Amdocs Venture does not restrict itself to investment only in Israel, but the three companies that it has invested in to date are all Israeli. Amdocs Venture has already had one exit. According to the Israel Venture Capital Association, in August 2008, Amdocs participated in the third financing round of Amobee Media Systems Inc., which has developed an advertising management platform for mobile devices. The $22 million funding round was held at a company value of $78 million. Amobee is considered a leader in its field, and was named one of Israel’s most promising start-ups of 2008-09 by the “Globes” Journey Conference.
In 2009, Amdocs Venture invested in a $19.7 million third financing round of Pontis Inc., which develops mobile targeted advertising solutions, and was named one of Israel’s most promising start-ups of 2009-10 by the “Globes” Journey Conference.
Amdocs Venture’s exit was in Trivnet Inc., which has developed a secure payment platform for mobile devices. The company was sold for $40 million, after $45 million was invested in it. Amdocs Venture participated in its last financing round before it was sold to France’s Gemalto NV (Euronext: GTO. The investment was a small one, one of five companies participating in a $10 million financing round.
An examination of the investments in Israeli companies shows that Amdocs focuses on products being developed for the mobile industry, mainly to offer solutions for mobile vendors that will differentiate Amdocs from its many competitors.
In addition to these collaborations, Amdocs and AT&T Inc. (NYSE: T) have established a joint innovation center in Israel, and have called on start-ups to contact and work with them. The call was to developers of mobile devices, mobile applications, or network equipment, with the objective of accelerating the development of next-generation broadband applications for fixed line and mobile devices.
Published by Globes [online], Israel business news - www.globes-online.com - on December 9, 2010
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