Six months ago, at the peak of the silly season in Israeli venture capital, several leading funds and major investment groups declared their commitment to investing in Israel. Some of them, such as Sequoia Capital and Benchmark Capital, even opened offices in Israel. Sequoia’s Israeli office is managed by Haim Sadger and Shmil Levy; Benchmark’s is managed by Arad Naveh, Mark Kramer, and Nachman Shelef. Both companies have invested in numerous early-stage start-ups.
During this era, a new fund, founded almost at the exact same time as the other two companies' arrival in Israel, garnered headlines. The new fund was supposed to focus on investing in Israeli companies. The new fund was called Gilo Ventures, after its founder, Davidi Gilo. Gilo’s resume lists an attempt to acquire Scitex (Nasdaq: SCIX), the founding of DSP Group (Nasdaq: DSPG), the sale of DSPC to Intel (Nasdaq: INTC) for $1.6 billion in cash – probably the most expensive transaction in Israeli high-tech – and the founding of Vyyo (Nasdaq: VYYO) and Zen Research (LSE: ZEN). He is, without a doubt, Israel’s most successful serial entrepreneur.
At the press conference announcing the fund back in mid-November, Gilo revealed that the new fund would invest $100 million of his own money in Israel. Gilo took the opportunity to say that the announcement about the founding of the fund was originally scheduled for early 2001, but he decided to bring it forward because of the security situation - specifically, the outbreak of the al-Aqsa Intifada. It was apparent from other details mentioned that the fund included an operation both in California’s Silicon Valley and in Tel Aviv; that it would be run by CEO Emiko Higashi, formerly a senior executive at Merrill Lynch; that the Israeli office would be run by Gilo confederate Adv. Avi Fischer, with the assistance of managing director Ilan Judkiewicz and Avi Fischer’s son, Shai, who would be the vice president in charge of the business sector.
Seven months later, “Globes” set out to examine Gilo Ventures’ investments. The surprising answer is that the fund has not invested in any company to date, not in Israel or anywhere else in the world. There are two items on the fund's website news page, both referring to the November announcement in Tel Aviv.
We do not mean to cast aspersions on the fund’s personnel, and we certainly believe that Gilo is a man who keeps his word. It should be borne in mind that these are not easy times for anyone, not even Gilo. Vyyo (formerly Phasecom), which he led for the past two years, has lost 97% of its market value, leaving Gilo, who owns 40% of the company, with rather less equity than when the company was trading at its peak value of over $1 billion. Zen Research is in even worse straits. As part of the restructuring, Gilo personally took matters into his own hands and is serving as CEO. Even DSP Group, the jewel in the crown, is trading 70% below its peak price.
Ilan Judkiewicz told us that nothing has changed in the initial program and that Gilo Ventures is operating as usual, with an emphasis on the components sector, in which the Gilo group has a great deal of successful experience. Judkiewicz explained that the fund’s personnel are assisting Gilo’s other companies by acting as transaction consultants.
Published by Israel’s Business Arena on 26 June 2001