A member of the UK House of Lords, a businessperson, and a veteran of an IDF intelligence unit are the three managing partners in Hetz Ventures, a new UK venture capital fund for investing in Israeli startups. Hetz Ventures, revealed here for the first time, is a $50 million fund for investment in Israeli startups in the early stages - the first all-UK fund investing exclusively in Israeli ventures.
The fund has met with over 60 Israeli companies over the past three months, and is continuing to meet with additional parties. The partners say, however, that it will eventually invest in no more than 12 companies. The fund's founders are Andrew Feldman, a member of the British House of Lords; Stuart Roden; and Judah Taub. All three are UK Jews from different backgrounds, who have decided to bring UK money to Israeli high tech and Israeli high tech to the UK market. Another partner who has joined them is Israel Seed Partners cofounder and Castel Partners chairperson Neil Cohen.
Between 2010 and 2016 Lord Feldman was chairperson of the UK Conservative Party, including during the term of former Prime Minister David Cameron. Prior to that he was the party's CEO. Before entering politics, Feldman founded and management a retail business. "These two dimensions, both the private and the public one, brought me to technology and Israel," he told "Globes." "Through politics, I was better exposed to what was happening in Israel. The UK ambassador was very interested in Israeli technology, and helped its progress a lot. This made me realize that the UK was under-represented in Israeli high tech."
Investments in new startups
At a time when investments in startups that are just beginning is declining, Hetz Ventures wants to invest in startups at the seed and Series A financing round stages. The fund's investment strategy is "constructive activism": they want to invest in companies with a relatively low value of around $10 million, and no more than $20 million. The companies receiving the investments are interested in the connection for getting ahead through the fund's connections in the UK in order to increase their value rapidly. Hetz Ventures is therefore looking for startups whose technology can serve companies in the retail, financial and holding companies sectors.
The fund has 15-20 investors, with each investor investing $2.5-3.3 million. All of Hetz Ventures' investors are from the UK, and although Feldman refused to disclose their names, he said they were senior figures in several major UK companies. He added that although the fund was relatively small in monetary terms, it had a great deal of strength in action - if a significant opportunity arises, many of the investors are likely to be interested in also taking part in later financing rounds.
Yehuda Taub served as an officer in a classified IDF unit, and was the senior data and technology consultant for the Lansdowne Partners fund.
"I think that one of the big differences between us and most of the other funds is that we want to invest only in companies we can supply added value to. What we understood from the companies we have met in recent months is that the game changer for them will be getting a major international customer - not only because of the million dollar payment at the end of the quarter, but also in order to get feedback from them and hear how it is worthwhile developing the product in order to obtain additional customers. So the companies to benefit the most from us will naturally be those that are not completely ready to go to market."
Taub and his partners will put the emphasis on working with large international companies already at the early stages of the ventures in which they invest, and on devising good solutions for existing problems in the market. They say that it will take a year or two for an Israeli startup without connections to gain the trust of large European institutions and obtain access to their information. They hope that the connections that Hetz Ventures takes with it will significantly shorten this time for the companies: "We aren't talking about years, but about weeks and months."
Roden, Hetz Ventures' third founder, is current chairperson of Lansdowne Partners, the second largest hedge fund in Europe, which manages $20 billion in assets.
Roden's experience in investments has already brought him together with several Israeli companies and funds. He says that one of the advantages that Israeli startups have over those from the UK is their marketing talents. "In the UK, you sometimes see entrepreneurs with good technology and a strong intellect, but they are rather terrible salespeople. Here, the entrepreneurs come, and they have the attitude of 'We can change the world'."
"Globes": Why is a UK fund coming to Israel now?
Roden: "I think that the UK is slower than the US, and slower even than the Far East and China, in recognizing the potential of what's happening here - the extraordinary explosion of technological innovation. We're providing sophisticated investors who don't necessarily have any connection to Israel with access to what they have begun to regard as very exciting technologies."
On the other hand, Israeli companies are inclined to look to the US, not the UK, as a basis for potential customers. Feldman says, however, "There are strong sectors in the UK that may never be as big as in the US, but they can be comparable in their concentration and thinking: financial services, retailing, and holding companies. I think that making the sophisticated investors accessible to Israel and Israelis startups accessible to investors in the UK is an important part of this story."
"When we worked with law firms here, they had no experience in how to get money from a UK fund," Taub explains. "Everything here is concentrated on the US and East Asia, but it's much easier to get money from the UK - the regulations are much friendlier. The US is obviously a bigger market, but airplanes fly from Israel every day to sell something to the US."
Published by Globes [online], Israel Business News - www.globes-online.com - on February 4, 2018
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