Meitav Dash raises $30m for new type of startup fund

Ilan Raviv Photo: Eyal Yizhar
Ilan Raviv Photo: Eyal Yizhar

Liquidity Capital invests in a startup's growth and revenue rather than equity.

Startup investment fund Liquidity Capital, set up by Meitav Dash Investments Ltd. (TASE: MTDS) has raised $30 million for its first fund from over 50 wealthy investors and family offices. Meitav Dash itself is investing $7 million in the fund.

In the coming few months additional investors are expected to join the fund, which hopes to reach $150 million this year. The fund was set up in January with nostro funds from Meitav Dash.

Liquidity Capital has the legal structure of a fund and the investors are limited partners. Meitav Dash has a 54% stake in the company controlling the fund.

However, the fund will not operate along conventional lines. While traditional venture capital funds invest capital in return for equity, or offer a loan, Liquidity will buy the company's future assets. In other words, Liquidity provides financing to increase growth in exchange for returns on any future revenue. For example, the fund might invest $9 million and receive $10 million back from revenue.

Liquidity CEO Ron Daniel, who comes with a high-tech background, said that the fund had invented its own model and not taken it from elsewhere. "We are attempting to solve a flaw in the market in the technological world whereby companies that are actually growing with a proven model need a lot of capital to finance growth. 80% are financed by equity and 20% by debt. What happens is that entrepreneurs grow a company and then need to dilute their holdings to finance growth. Instead of venture capital funds engaging in risk they are involved in mature companies. Furthermore, the moment a venture capital fund invests, it has a conflict of interests with the company because it is only worried about the value of its shares."

Daniel adds that Liquidity's management fees are similar to venture capital funds - 1.25% annually. Returns of up to 8% are paid fully to investors and for every dollar above that $0.25 goes to the fund.

Meitav Dash CEO Ilan Raviv said that the new fund is an important growth engine for the investment company.

Published by Globes, Israel business news - en.globes.co.il - on April 2, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Ilan Raviv Photo: Eyal Yizhar
Ilan Raviv Photo: Eyal Yizhar
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