The Genesis Partners venture capital fund is nearing its end, following an extraordinary deal with US fund Insight Venture Partners. Genesis is selling its holdings in its fourth fund for hundreds of millions of dollars. The successful fourth fund, which raised $90 million a decade ago, includes holdings in Sisense, an information analysis company; Monday.com, which develops software for streamlining work by teams in organizations; and Joytunes, which develops driver education apps.
Genesis decided to retain its holding in Riskified, a company that deals in Internet fraud prevention. This company has reached a more advanced stage, and its worth is believed to be in the hundreds of millions of dollars. Genesis believes that Riskified can hold an IPO within two years. The partners in Genesis are Dr. Eyal Kishon, Eddy Shalev, Gary Gannot, Jonathan Saacks, and Hadar Kiriati.
Genesis Partners, founded in 1996, has focused on investments in early-stage companies. It manages over $600 million in four funds, and has achieved over 30 successful exits in companies such as AudioCodes, SolarEdge Technologies, and Fundtech. After selling its fourth fund, Genesis will be left with holdings in Riskified and, through its third fund, in Valens, which developed chips for the auto industry, and Innovid, which developed a platform for marketing advertisements. 18 months ago, during an attempt to raise a fifth fund, the partners decided to forego raising another fund - an unusual step, especially since Genesis's fourth fund was successful.
In the venture capital funds' model, they raise money from investment institutions, invest most of it according to their investment policy for three-to-four years, and make follow-up investments for the next eight-to-nine years and help the companies develop. They usually raise additional funds during this latter period and begin investing from them. In recent years, given the lack of offerings and the desire of companies to remain private for longer periods, the duration of funds has been growing longer.
Genesis decided not to wait another two-three years, but to sell all of its holdings and return the money to its investors. "Instead of selling the companies one by one, an opportunity has come to sell the entire portfolio after 10 years to a very large fund that wants to invest in these companies," Kishon says. "If you look at the companies themselves, they get a large shareholder who can invest far more money in companies. People always talk about what needs to happen in order for Israeli companies to stop looking for an exit. For this to happen, more time is needed. I estimate it would take us five-to-seven years to sell our holdings. Insight made the acquisition through a venture capital fund it raised a year ago, so the companies now have time to develop," he added. Genesis does not say what investment institutions invested in it, but two Israeli and 10 foreign concerns are among them.
The connection between the parties resulted from holdings they both held in three of Genesis's portfolio companies. Insight, a $6.3-billion US fund, wanted to increase its holdings in these companies by purchasing Genesis's shares, but the fund designed a larger deal. Although Insight will have more influence in these companies, Kishon says that they do not have to approve the entry of a new investor. He nevertheless adds that the fund informed the companies' CEO of the deal in advance. Kishon said that they worked on the deal for a year.
Genesis will still have a representative on the board of directors of the other companies, at Insight's request. The deal means that Insight is expanding its activity in Israel. It currently has holdings in three promising companies: Walkme, JFrog, and Lightricks. As of now, Insight has no representative in Israel.
Published by Globes, Israel business news - en.globes.co.il - on February 26, 2019
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