Denny Chared, owner of DC Finance which organizes financial conferences for family offices and high-net worth individuals is convinced Israeli tech companies have yet to discover the hidden vein of venture capital, and he intends to uncover it.
“Seventy percent of the capital in the world is held by private hands, and half of that 70% is held by the top one or two percentile. It is a difficult audience to target. There is no list of high net- worth individuals with their numbers and email addresses like you have with institutional investors. This market is undocumented. No one knows who the son of a wealthy family may be, who they are married to, and how much money they have.
“It is unfortunate because these people and offices can invest in any company, in any sector, for any timeframe short or long. These are not institutional investors which must show annual returns. These are people who can make instant decisions, with no need for committees or complicated processes.”
Why should they look to Israel?
“Israel is a point of interest because it has a significant presence of these individuals. There are three types of high-net worth individuals: the first founded a company and made an ‘exit’ and there are many of those in Israel. The second type comes from families who are the third generation born into wealth and there are many of those in Israel. And the third are extremely wealthy ultra high-net worth individuals who are also Jews, and they have several good reasons to come here, from anti-Semitism to tax benefits.
“For these people, the sectors which are out of bounds for institutional investors have an advantage. For example, the life sciences and medical devices fields are considered risky for institutions, and those investors keep their distance. But these individuals have a special allocation for these fields. First because they are innovative but secondly because they are easy to grasp unlike a chip and thirdly because they meet people affected, who were sick, and needed these developments.”
There are massive icebergs of capital that are out of reach for the industry. That’s great. How could this affect the Israeli high-tech scene?
“It could have a momentous influence on the industry. On our end, we open each conference with an innovation session. We now decided to launch an entire conference dedicated to innovation, with sessions on life sciences, fintech, and even innovation in film which will host the directors of Captain American and the Avengers.
“These people know the ‘Startup Nation’. It is a fantastic marketing tool, but they do not come to DLD or the innovation conferences. If I can select sexy startups and present them even at a conference on other topics then there is a chance to hook them.
“I brought Yossi Vardi to one of our conferences. He said it was the first time he spoke at a convention in which he did not know anyone and no one knew him.”
Sixth-generation of fasion
Why do others not bring these individuals to their conferences? How are they unfamiliar with the Israeli industry?
“I spoke to people in Israel involved in conference organizing. I was very disappointed with the high-tech association. They told me, ‘Everyone wants us.’ But they aren’t even on the map for these individuals. I’m talking about Rockefeller and Firestone families of billionaires.
“The Ministry of Economy is playing in the same court as the association in venture capital and private equity. They are not looking at the invisible market of hundreds of billions. The potential is massive, and these companies would love to hear about Israeli technology.
“This year, I hosted individuals like the Spielberg family, Silverstein, Uri Levine, the Arison family, Bronfman, the founder of hotels.com who is also Jewish Firestone, Mars (of chocolate fame), and Rockefeller.
“Interesting things are happening with these families. Of the pie the 70% of capital I mentioned there is a small slice we know as angels. And they have a long line of companies seeking their investment. But most of the private wealth is concentrated with families that have no ties to high-tech. They did not make their money in high-tech and they are not interest by it. They are fifth-generation real estate moguls, sixth-generation fashion magnates, the seventh-generation heirs to Mercedes or Louis Vuitton. The older generation is still part of the business, but the next generations are much more open to the notion that wealth is generated by innovation.
“The second generation, for example, is always in the shadow of the founding generation. They always need to prove themselves to their parents, who often succeeded despite being born to poverty. These people came from nothing. The second generation was fed with a silver spoon. They also want to leave their mark. One way is to invest outside the core family business. They tell themselves: ‘Worse case we lose something, but if we invest in high-tech instead of real estate, like father or grandfather who founded the family business, then we will leave our own mark.”
Application for fishermen
Marcia Dawood, who will speak at a DC Finance conference in New York, said she has been investing as an angel for five years and serves on the board of the self-described leading professional association of angel investors in the US the ACA. She said many angel groups in the US take part in the association.
In a phone conversation, Dawood said she has yet to invest in an Israeli startup but was interested by Ourcrowd the crowdfunding venture from Jon Medved. She said she has yet to invest using the platform but often looks at the investments being offered.
Dawood invests in tech and life sciences companies; she stressed her preference for companies that are highly-focused on their core operations. For example, she invests in a company that developed an application for fishermen, which allows them to increase their efficiency by reducing the time they spend on identifying best fishing conditions. She added she was also looking to invest in companies specializing in agricultural tech.
“Sometimes there are less sexy ventures that are very attractive,” she said, “We are looking for less crowded spaces.”
What do you know about Israel?
“I am not sure I know enough Israeli companies. From what I heard, there is a lot of innovation and a lot of interesting things coming out of Israel.”
Casper von Winterfeldt, another scion of a wealthy family to take part in the conference, works mainly in the virtual reality sphere and also in cinema development. He heads a company in the sector and said his family business for many years focused on deliveries, import and export, textiles, and the wool trade. He said the family business was sold in the 1980s after surviving for ten generations.
Von Winterfeldt also said the investments he has made so far in the tech world were motivated by his personal interest in innovation and technology.
Do you invest only in film?
“I am interested in all media. But I graduated from the American Film Institute, so film is my starting point.”
What tech sectors draw your interest?
“I am not a fan of investing in hardware. I’ve seen too many companies ruined by competition after finishing the development cycle. I prefer to invest in software and content.”
Published by Globes [online], Israel business news - www.globes-online.com - on April 3, 2016
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