Shavit Capital raises $75m Israel start-up fund

Gary Leibler

The new fund, raised within a few weeks, will invest at least 50% of its money in biomed.

Shavit Capital Fund, headed by managing director Gary Leibler, has raised $75 million, sources inform "Globes." Most of the investors in the new fund are not from Israel, and are mainly from the US, including both institutional entities and private investors. Leibler has said in the past that some of his investors simultaneously manage multi-billion dollar investment funds. These funds themselves do not invest in Shavit Capital, but their senior executives invest their own money in the fund.

Leibler explained, "I had no concrete plans for raising a third fund, but I went to the US in February, and I got such good feedback that I was able to close the fund within a few weeks. The amount raised could also have been bigger, but I thought that because of the fund's unique model, this amount was optimal."

The Shavit 1 and Shavit 2 funds each managed $30 million, making the third fund a major step forward. Prominent companies receiving investments included ReWalk Robotics Ltd.(Nasdaq:RWLK), with a current market cap of $130 million; Foamix Pharmaceuticals Ltd.(Nasdaq:FOMX) ($332 million); SuperDerivatives, sold for $350 million; and Kamada Ltd. (Nasdaq: KMDA); TASE: KMDA) and Brainsway Ltd. (TASE:BRIN), in which Leibler says the fund was successful in exploiting a wave of rises, while getting out before the ensuing downward corrections. Leibler does not disclose the fund's return, but notes, "In the rapid pace at which money was raised for the new fund, it can be seen that the return was a good one." It can also be concluded from the total amount of the (relatively small) Shavit funds that not much was invested in each company. Other companies in which the funds invested include EBV (Shavit 1) and Intec Pharma (Shavit 2).

Like Shavit Capital's two previous funds, this one is also expected to operate according to a unique model of a minority investment without any demand for a place on the board of directors, "unless they invite us," Leibler says. "From our perspective, the significance is the great trust we place in the entrepreneurs and management."

Shavit's model is also special in the stage at which it prefers to operate - in bridging investments in companies about to embark on offerings on a US exchange, or those already listed on the Tel Aviv Stock Exchange (TASE) and planning on dual listing on a US exchange. Shavit's success therefore depends on a continued active window for offerings.

The market is more selective

In an earlier interview, Leibler said, "I didn't found Shavit because I was eager to manage a fund, but because I felt that there was a vacuum in the industry. Companies that could in principle conduct an overseas offering or raised large amounts of capital experienced liquidity problems just then because the terms they received weren't good enough, as happens to a company that lacks bargaining power.

If a company has no money, the underwriters leading the issue can do whatever they want with it. The underwriters are supposed to take care of the company, but they also have a conflict of interest. Just before the offering, they can suddenly lower the price in order to enable their investors to jump in at a lower price, and themselves to profit by exercising their green shoe options. The more cash the company brings to the offering, the easier it is for it to withstand these pressures. Ostensibly, the stage preceding a public offering and private equity is a venture capital fund, but these funds are devised to achieve huge multiples on their investments, and they therefore need to invest at an earlier stage."

According to Leibler, investments at this stage became even more significant last year. While companies could go to market in 2014 without an healthy balance sheet, the market has now become more selective, and it is harder for companies without cash on hand to make offerings.

Leibler added that the new fund has already closed its first investment in a company about to conduct a US offering. In the current market situation, about 50% of the investment is expected to be in the biomedical sector, but there is no official commitment to this, and if the state of the market changes, the investment pattern can be expected to change accordingly.

Published by Globes [online], Israel business news - www.globes-online.com - on May 19, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Gary Leibler
Gary Leibler
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