In light of the changes in the high-tech market, BRM Capital venture capital fund has announced a reduction of about $100 million in investors' commitments, out of a fund totaling $253 million. This change has been made in accordance with the relative share of each investor in the fund. After the change, the volume of assets under BRM management will total $250 million. Among the fund's investors are Koor, Bezeq, IBM, NTT Data and private investors.
The BRM Capital fund completed the raising of $253 million in 2000. BRM Capital has invested about $60 million in eight companies to date. After the change, the fund will be left with a sum of about $90 million. BRM plans to allocate most of the remaining capital to new investments in the fields of enterprise software and telecommunications.
The continuing crisis in the high-tech market has caused a slowdown in activity, and a reduction in the number of firms worth investing in, on the one hand, while at the same time, there has been a significant decline in the estimated value of the firms, so that less capital is needed for new investments.
The significant changes in the market caused the investors to reconsider the amount of capital needed to implement the business program. This initiative led the managing directors of the fund, who are themselves among its major investors, to carry out the necessary change. The managing directors of BRM Capital have carried out this step with an eye to the overall good of the fund and its investors, and an assessment that through this move will be possible to meet the business goals of the fund while adapting to the new market conditions.
According to Menashe Ezra, a joint CEO in BRM Capital, "The present step was carried out after a thorough analysis of the market, and the overall business outlook. It was done with the goal of making the fund more efficient, and adapting it to the changes that have taken place in the high-tech market. We have reached the conclusion that a smaller volume of capital is required in order to carry out the company's business plan."
According to Nir Barkat, "As former entrepreneurs, we are reacting to the basic need to adapt to the changing environment. We believe that this rule also applies to us as investors and as managers of venture capital. Although we are the first in the Israeli market to implement a step of this kind, BRM's cumulative experience in the market has taught us that the key to success lies in the ability to be dynamic, to adapt quickly to change, and to read the map of the market in real time. The unique executive structure of the fund, in which a significant percentage of the directors are central investors ensures alignment of the interests of investors and directors leading to maximum flexibility in day-to-day management."
According to one of the fund's investor's, Idan Ofer, of the Israel Corporation,: "We consider this move a correct one, and we estimate that the ability to implement this change will be to the credit of the fund in the future. We continue to be full partners in the development of the fund. As investors, we have high regard for a company that operates based on a long term strategy that will serve it to raise future funds."
The BRM Capital fund made seven investments in 2000, its first year of existence. During the course of 2001, the fund did not make any new investments because of the crisis in the market, focusing instead on investments in existing portfolio firms. During the second quarter of 2002, the fund renewed its investments, and made an investment of $1.3 million in Passave, a broadband high-tech company, as well as a continuing investment in Prosight. BRM's portfolio companies include Schema and Whale, which have recently been ranked by Tornado Insider magazine among the most promising private high-tech firms in Europe.
One can learn about the changes in the Israeli venture capital market from statistics published on the volume of investments, which show that investments in 2001 totaled $1.6 billion, a decline of 50% compared to 2000 (according to the Money Tree Survey by PWC Kesselman & Kesselman). During the first quarter of 2002, Israeli venture capital funds invested $138 million, a decline of 18% as compared to the fourth quarter of 2001, and a decline of 48% as compared to the first quarter of 2001 (according to the IVC Report).
Published by Globes [online] - www.globes.co.il - on 08 July 2002