Sources inform ''Globes'' that Giza Venture Capital plans to raise up to $50 million to make new investments and support the current portfolio companies of the Giza V Fund. The company raised the $100 million Giza V Fund in 2008.
One of the main motives for raising the capital is the government plan for encouraging investment by Israeli financial institutions. The plan will operate through 2012, and Giza wants to cash in and increase the number of Israeli institutional investors in the fund.
In addition, Giza will not launch a new fund in the next two years, and prefers utilizing the government plan and the opportunity to bring Israeli institutional investors into its current fund. Israeli financial institutions did not invest in Giza's previous funds; most of its investors are from North America and the Far East.
Giza managing director Zeev Holzman confirmed the report, saying that since Giza would not raise a new fund before 2013, it intends to raise a small amount of capital in the coming months. "This is not a real round of money raising for a fund. We'll go out only for a few weeks to enable Israeli institutions to invest," he said.
Holzman said that the follow-on funding was only possible with the knowledge and consent of the fifth fund's current investors. "Investors in the fund understand the importance of bringing in Israeli institutions, and everything is being done with their knowledge and consent," he said.
Holzman and managing director Zvi Schechter founded Giza in 1992. It manages $562 million in five funds. The funds make seed and early-stage investments in communications, semiconductor, IT, new media, Internet, and life sciences companies.
Giza's move is unusual on the venture capital scenee. Usually, when a fund that is close to the end of its investment period has several promising portfolio companies, it raises capital from current investors. Evergreen Venture Partners and Jerusalem Venture Partners (JVP) are examples of funds that have done this.
In contrast, Giza wants to bring in new investors into a fund that has been operating for six years, and to bring in shareholders who will be equal to the previous investors.
In some sense, the move resembles the way in which companies raise capital from funds when the stakes of previous investors are diluted, unless they maintain their relative holding in each financing round. In the case of a venture capital fund, the issue is more complicated. The holdings of institutional investors that invested six years ago will be diluted unless they participate in the current financing, even if they took a greater risk than the new investors, since some of Giza's portfolio companies have already matured.
Published by Globes [online], Israel business news - www.globes-online.com - on May 5, 2011
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