2006 has been a successful year for Israeli venture capital. With just over two months to go to the end of the year, the number of exits recorded by the funds is reminiscent of another period, even though the sums this time round are a lot lower. If we had told venture capital fund executives a few years ago that the funds of the 1999-2000 vintage would produce the impressive list of exits we are seeing today, they might not have believed it.
The "Globes" Ten Most Promising Start Ups of 2006
- Actimize - Operational-risk management software
- Xeround - Data systems for telecommunications companies
- Metacafe - Video sharing technology
- Zend - PHP development language
- Gamida Cell - Stem cell therapy technologies
- Siano - Silicon receivers for mobile digital TV
- SuperDerivatives - Options pricing system
- GI View - Advanced endoscopic devices
- Business Events - Business intelligence solutions
- dbMotion - Medical informatics
One thing that venture capital funds learned to do during those tough times at the beginning of the decade was to examine the companies in depth and only invest in them after a meticulous review of the technology and the management team. This, of course, does not guarantee a fund a high return on its investment but it does at least lower the risk. Funds in Israel are set to implement the conclusions they drew from such examinations with the $2.2 billion estimated to be available for venture capital investment in the Israeli economy.
The current list of promising companies was chosen by partners from dozens of venture capital funds. Each participant was asked to choose three companies (of which only one could be from his or her own portfolio), based on the following criteria: promising and innovative technology; at least one successful financing round; sales of up to $10 million; a promising management team; a large target market, and the potential to become a market leader.
This year’s list is most notable its diversity. Topping the list is a software company which focuses on data analysis, primarily for the financial market. In second place is a company which develops databases for telecommunications companies, while third place goes to an Internet company whose users are mainly private customers. Further down the list are companies specializing in business, financial and medical information, medical equipment companies, a biotechnology company, and a chip company.
But if you insist, the choice this year pointed to one trend: databases. Four companies in the list have developed technologies for database management: Actimize Inc., selected as the most promising company for 2006, develops operational risk management solutions for financial enterprises; Xeround Systems, which came next, develops flexible database technology for integration in the systems of telecommunications giants; dbMotion Inc., develops web-based information sharing technology for the healthcare industry, and Verix (formerly Business Events) has developed a technology for identifying and monitoring factors affecting substantial business changes.
This year’s list of exits also has a clear connection with databases and enterprise infrastructure related activity, a field that has become especially significant in light of the increasing competition between the sector’s giants, and the intense wave of mergers and acquisitions.
This year’s acquisitions have left investors with more than $2 billion, and the potential for many more acquisitions. Zend Technologies Inc., for example, was a candidate for acquisition by Oracle Corp. (Nasdaq: ORCL) for $250 million. Actimize has confirmed that it has been inundated with offers, while Verix and Xeround are still too young, but they clearly have potential.
The companies selected this year are the product of funds that have reached maturity. Most of them are stable companies that have established themselves and talk about success regardless of buyers. Time will tell whether any of them of will become a company with billion dollar price tag, if at all.
Published by Globes [online], Israel business news - www.globes.co.il - on September 20, 2006
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