California-based Group 11, headed by its founder Dovi Frances, has announced a $120 million first closing of its fifth fund for investment in fintech startups. Unlike Frances's previous funds, which were mainly based on investors from the US, this time his anchor investors are Israeli institutions Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) and Harel Insurance Investments and Financial Services Ltd. (TASE: HARL).
The anchor investors are joined by Menorah Mivtachim Holdings Ltd. (TASE: MORA), More Investment House, Hachshara Insurance Company, US investment management company True Capital Management, and several family offices in the US and Israel. According to Frances, the money was raised within 90 days.
Last December, the Tel Aviv Stock Exchange held a press conference at which it presented Group 11 as the first to join its TASE UP platform. The new Group 11 fund will start to be traded on the platform in April, with investors able to exchange their participation units for tradable units. In addition, Group 11 will open up a further allocation totaling $10-20 million to qualified Israeli investors, who will be able to buy participation units via TASE UP.
Frances lives in California, and his funds mainly invest in financial software companies in Silicon Valley, but most of them have some connection to Israel, through Israeli entrepreneurs or the operation of a development center in Israel.
Among Group 11's portfolio companies are Israeli fintech unicorns Tipalti (which has raised funds at a valuation of over $2 billion), Next Insurance (currently engaged in raising capital at a valuation of $4 billion), and Papaya Global (which recently completed a fund-raising round at a valuation of $1.2 billion). Another portfolio company is business travel company TripActions, which was founded by Israeli entrepreneurs in the US and which recently raised finance at a valuation of $5 billion. Other portfolio companies are Sunbit, EquityBee, Lili Banking, and HomeLight. Frances generally invests in seed and A rounds. The firm has $400 million in assets under management.
Fintech has been a booming field during the coronavirus pandemic, with investors believing that the pandemic is considerably accelerating the switch to new methods of payment and of obtaining credit. The outstanding example is payments startup Stripe, which this week announced a fund raising round at a valuation of $95 billion, making it the most valuable privately-held startup in the US. In April last year, the company's valuation was $36 billion.
"Since the inception of Group 11 a decade ago, the impact of FinTech on transforming and revolutionizing the traditional financial services industry has increased dramatically. The Covid pandemic has further accelerated the FinTech Cambrian Explosion and we expect this digitization renaissance to last for decades to come. Group 11 has been fortunate to be at the forefront of this revolution as a partner of choice for many founders of young companies that over the past few years have evolved to become category-defining unicorns," Frances said.
"While we invest predominantly in US FinTech based companies, about 70% of our portfolio has emerged out of Israel with Israeli founders at the helm and R&D presence in Israel so naturally we are very pleased to welcome Israel’s largest institutional investors into the Group 11 family. The same spirit of innovation that has inducted so many of our companies into the prestigious unicorn club, is also rooted in Group 11’s DNA which is why we are delighted to go where no venture capitalist has gone before and become accessible, fully transparent, and tradable as the first venture fund that offers its membership units on the Tel Aviv Stock Exchange (TASE), where Israeli institutional investors and Israeli accredited investors can buy, sell, and exchange ownership," Frances added.
Harel chief investments officer Sami Babecov said, "The decision to invest in both of Group 11’s Funds IV and V is combined with Harel’s strategy to expand its investments in early and growth stage technology companies as part of our private equity portfolio, with an aim of creating superior yields to our policyholders. Harel is also pleased to contribute to the Stock Exchange objectives of advancing the TASE UP trading platform."
Published by Globes, Israel business news - en.globes.co.il - on March 17, 2021
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