It is surprising to discover that the Technoplast group, which combines industrial activity with exciting investments in the advanced technology front, chose to set up shop in a dilapidated, almost miserable building, in the Ramat-Gan Diamond Bourse compound. This is a U-shaped building, demarcated by a yard that serves nearby workshops loading their merchandise on trucks.
This contrast, between the dun-coloured buildings and the sparkling glass towers surrounding it, reflects, if you will, the two worlds in which Technoplast owner Itamar Patishi lives. The old (albeit highly profitable) industrial world, and the new, fashionable world of high-tech investments.
Technoplast Industries, controlled by Patishi and his wife Orna, was founded in the fifties by Orna's father, and functioned as a small plastic injection workshop, from where company management has its offices. Today, following the impetus that Patishi brought with him, joining the company as soon as he was demobbed from the IDF in 1974, the company operates out of two state-of-the-art factories in Barkan and Migdal Haemeq. It has a sales turnover of more than NIS 100 million a year, with exceptional rates of profitability, bringing it to trade at a value of $50 million.
Young sister Technoplast Technologies has yet to show a profit. At the same time, shortly after being spun off from industrial activity, in late 1999, it is already trading at double the value. This is a venture capital fund, which, correct to the present, has already invested $25 million in some sixty start-up ventures. This figure positions the company as one of the largest high-tech funds being traded on the stock exchange, in terms of investment, even though there is a qualifier. In contrast to long-standing funds, Technoplast Technologies has still not realised even one of its investments (by way of sale or issue). Also, its relatively small-scale holdings in each of the technological ventures in which it is invested, expose it to not so great a profit in case of success.
New world, old world, no difference
The case of Technoplast illustrates the split personality from which not a few industrialists, contractors and veteran dealers have recently been suffering. They can but gaze sadly as the splendid businesses they built up and nurtured over decades of toil, become part of the "old economy".
One of the results of the confusion and frustration that the technological revolution is causing is that veteran entrepreneurs, no matter how well established and rich, still rush to invest huge amounts of money in "new economic fields", sometimes indiscriminately. Just as long as they can manage to board the speeding train.
Patishi proposes a model in which, he maintains, traditional industry and venture capital can dwell harmoniously side by side. "My concept, in the early nineties", he says, "was to seek investments that would give added value to the plastics business. The initial investment was made in ZAG, the plastic-casing enterprise that is actually also Technoplast Technology's first and only exit to date. After that, we also invested in Friendly Machines, which develops robots for domestic use, and in this case, it was done out of the affinity for our manufacture of plastic and plastic products. The conception was to invest while expanding our core activity, namely the plastic business.
"Later, after bit by bit we managed to convince the Board of Directors that the deal was economic, we also started to invest in companies with no direct affinity for plastics. We did this once I realised that there is nothing sexy about the plastics business, and I cannot obtain value not connected with performance there. Instead of buying iron and machinery, we started investing the money we earned in our industrial activity in start-up companies. We reached aggregate investments of $10 million, until the spin-off".
"Globes": Why start-ups, why not real estate?
"I don't know why we did not invest in real estate, but it's just as well. What I do know is that venture capital is like any business. The game rules in the new world everyone is talking about are very similar to those of the old world".
A safe harbour for a stormy day
Fifty year old Patishi was born and raised on kibbutz Yagur. As a national serviceman, he flew fighter planes. He left he kibbutz on demob, and started working in his father-in-law's plastic industry. To this day they share the same office. Shortly, he says soothingly, Technoplast will relocate its offices to Ramat Hehayal and yes, the new office will accommodate them both.
Despite the socialist background, he comments "I am a entrepreneur in my bones, and if a day goes by and I haven't done anything, I die".
Last year Patishi almost sold control in Technoplast Industries to US conglomerate Stanley Works. But the deal fell through.
Why in fact won't you sell the plastics business and concentrate all resources in high-tech?
"That's a good question, but meanwhile, we benefit from our activities in the field of plastics. We still believe in the old world. Business is fine, it's interesting and involves developments."
Perhaps the risk in high-tech dictates ensuring a safe harbor for stormy days?
"Exactly. The plastic business does not bob up, but neither does it fall down. It certainly provides the bread and butter for years, and works like a cash register. Venture capital involves risk."
Although Technoplast appears to be a one-man orchestra, Patishi shares the helm with two other high caliber local financiers. The first is Itzhak Shrem, through Orlite, the industrial arm of Poalim Investments, Patishi's senior partner in Technoplast Industries.
Shrem is known as a leading provider of lively developments in the financial and advanced technology markets. He is also estimated to be largely responsible for the spin-off at Technoplast.
The other is pilot friend Meir Shamir, who partners Patishi in Technoplast Technologies through Mivtah Shamir, which he controls.
Silent robots, foot massage, and Internet in Japanese
Although none of the technology ventures have yielded profits for the fund, a number of ventures are estimated to be already close to market, or have held significant capital raising rounds, both vis-a-vis the identity of the investor, and the amount involved.
Domestic robot manufacturer Friendly Machines was one of Technoplast's first investments. Technoplast has a relatively large share (10%) in the company, which held its most recent round of financing at a company value of over $32 million. As far as is known, Friendly is currently negotiating with a leading US underwriter with a view to issuing.
Manna Network Technologies, a software management company for e-commerce sites customer care management, has already held a round of investment, in which investment bank Robertson Stephens participated.
Technoplast also has an interesting cooperation with Microsoft in Itran, which develops hardware components for cheap, but high-quality power line communications networks. Microsoft recently invested in Itran, based on a company value of $32 million, following which it holds 2.4% of Itran's capital.
NetGame, which developed a platform for broadband communications for various hardware applications, among them cable television infrastructure, has a proven value.
Perhaps the company closest of all to Wall Street's much-sought-after money tree is Skyline, developer of three-dimensional Internet maps and about to hold a large private placement, followed by a Nasdaq issue. Medical respirator developer VersaMed also announced a while ago its intention to issue overseas by the end of the year.
What about the failures? It is obligatory. One outstanding failure was Technoplast's refusal to invest in Silicon Value, sold last week to Orckit in exchange for shares worth $140 million.
Published by Israel's Business Arena on 4 April, 2000