Sources inform ''Globes'' that Giza Venture Capital has completed the raising of a $30 million fund, Giza Polish Ventures, as the firm expands its international operations. Giza Polish Ventures will invest in local companies in Poland and will operate in parallel with Giza in Israel.
"The scope of venture capital operations in Israel is shrinking," Giza managing partner Ori Kirshner told "Globes" in an exclusive interview. "In 2010, venture capital funds invested $1 billion in Israeli companies, half the amount invested in 2000. There is a massive downsizing trend, and 80% of current investment comes from foreign investors. We therefore decided that in order to keep our relevance, we wouldn’t limit our operations to Israel."
Giza is only of Israel's oldest venture capital funds, founded by managing partners Zeev Holzman and Zvi Schechter in 1992. The firm manages $562 million in five funds.
Giza managing partner Shmuel Chafets said, "Poland is a key axis in Europe. It has a stable and growing economy, top universities, engineering and research students, and it survived the credit crisis honorably. It has a large domestic market."
"Globes": Nonetheless, what interest does an Israeli venture capital fund have in Poland?
Kirshner: "In the past decade, we've expanded the fund's international operations in all kinds of ways. Our strategy is to be active in areas with growing markets that are not saturated with competition - markets with potential synergy with Israeli high tech and with what Giza knows how to do. We want to identify and assist early-stage companies until the success."
Kirshner added that Giza raised an Israeli fund in 2008, and began investing relatively late. "We have $70 million available for new investments; in other words, six or seven new investments. But is Israel is small. As a venture capital fund, we believe that we cannot only focus on what happens in Israel. When investing in an industry, it is necessary to know the whole food chain."
Israeli venture capital funds have not been particularly successful with their foreign investments to date. Kirshner says, "That is because they approached the US market, which is saturated with competition from funds, investors, and entrepreneurs. We're looking at completely different places. Europe is closed and easier to enter. There are seven European countries with large untapped markets where it is easy to develop, for example, successful Internet companies in the local language. Many large Russian Internet companies were founded by Israeli entrepreneurs and have centers in Tel Aviv."
Giza managing partner Yuval Avni says, "In Poland, we hooked up with a local partner and began to raise the fund. The money raised in Polish and comes from many sources: individuals, families, and institutions, as well as government support. In the coming months, the fund will begin investing in Polish companies. Giza will manage Giza Polish Ventures, which will be a Polish fund with local management, and will invest in Polish companies. We'll be a part of its management, but the emphasis will be only local partners - industry executives with prior investment experience."
Chafets says that Giza saw Poland as fertile ground for seed companies, in contrast to other countries. "Government stimulus plans in New Zealand and Austria failed. No every place has the conditions for investing in these kinds of companies. To date, it has succeeded in Silicon Valley, Boston, and Israel. We want to bring our experience to more places where there is a chance of success."
Chafets said, "In Poland, companies are literally located in garages and in basements. Employees don’t get a company car, and operations are very modest. For example, a company decided that to give employees bicycles as a benefit." He added, "There are successful companies in Poland that look to the domestic market and generate revenue from day one."
Published by Globes [online], Israel business news - www.globes-online.com - on March 7, 2011
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