ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the December 2000 issue


"Global Friendships are Made in Israel"

On October 24 the Department of State issued a warning to U.S. citizens to defer all travel to Israel, the West Bank and Gaza. The U.S. Government, the warning declared "has indications of a heightened threat of terrorist incidents in Israel, the West Bank and Gaza". In the aftermath of the warning two conferences were cancelled. Some Israelis, global investors and entrepreneurs were sure that the sixth consecutive annual Robertson Stephens Growth and Technology Conference scheduled to be held in Tel-Aviv November 6 and 7 would be postponed or cancelled. Not at all so! To underscore the 'business as usual' attitude, Andrew Kaye, Managing Director and head of Robertson Stephens Israel Ltd. announced on Kol Israel, Israel's national radio station that the conference would take place as scheduled. Israel's history has been marked by many conflicts, and the nation has endured short periods of above average politically instability. Israelis, over the years, have taken these events without breaking stride. Israel's high-tech sector is highly attractive to the international investment community. Even after nearly two months of violence on the West Bank investors continue to channel billions of dollars in merger and acquisition and direct investments. It is exactly five years since the inaugural conference took place. It opened only a few hours after the assassination of Israel's Prime Minister Yitzhak Rabin. Reminiscing about that day, one of the attendees of this year's conference expressed his gratitude, at the time, that the conference had taken place. "I was glad to have a place to go, to be with people and to hear company presentations", he told me.

IHTIR in turn, gave wide coverage to the event. As it turned out we were correct in our assessment that the conference would usher in more "world class investment conferences" to Israel. It was a stamp of approval by world class investment bankers, that the Israeli high-technology sector had come of age. We correctly reasoned, that Israeli technocrats and entrepreneurs had acquired sufficient attractiveness to attract serous investment consideration. At the first conference, the international venture capitalists and professional investors viewed 42 companies who were given the opportunity to present and showcase their products, systems and software. All were anxious to attract investment funds in order to speed up their growth. No fewer than 29 of these were hopeful of moving along towards an Initial Public Offering.

At this year's conference, indicative of the rapid growth of Israel's technology sector more than 100 companies participated. In the course of the two day conference IHTIR met with the top Roberston Stephens executives as well as with numerous venture capital investors. Here was a prime example of the globalization process: Tel-Aviv had become the venue for European, Japanese and Taiwanese venture capital investors. Israel has an outstanding record in bringing technology related Initial Public Offerings to the US capital markets. With 19 deals completed since 1999 it is second only, to the US, but well ahead of Canada, Hong Kong, the UK and Taiwan. The 19 companies involved in these deals accounted for $1.14 billion of securities offered. An additional 12 Israeli public offerings combined for a total of 31 public financing issues in less than two years. Robertson Stephens, in YTD 2000, ranked number one in US domestic common equity underwritings, It acted as Lead Manager in 52 underwritings and in another 92 as Co-Manager. It also ranked first with 105 technology equity offerings completed YTD 2000. However, in the current year it has only completed one Israeli Technology IPO.

The presence of many of Robertson Stephens' top level management is a potent indicator of a desire to assume leadership in public financing for Israeli companies. "Israel to me has more companies with real technology content than most countries worldwide and therefore in typical times, when other models are falling apart or investors decide to flee, there is always inherent value in technology. To put Israel into focus beyond the European perspective, Israel has more importance in terms of delivering new technologies to the world marketplace than Japan. There are many interesting technology companies in Taiwan but they are hampered by infrastructural impediments on the way to Nasdaq. Here, the Israeli incorporated company can go immediately to Nasdaq. Israel ranks number two among the world's top technology countries and that is the reason why we maintain an office in Tel-Aviv," IHTIR heard from Brian Bean, Managing Director and Head of Technology Banking.

The Israel High-Tech & Investment Report asked whether the current period of instability in this country is creating barriers for investing? "Risk begins when it impacts the earnings and the revenues of the companies based in Israel. Whenmaking decisions investors primarily look at financial performance. I wouldn't single out the political issue," noted Mr. Bean. GIZA in response to questions raised by Israeli journalists expressed deep concern about the flow of investment capital to Israel. However, Matthew A. DeBellis, in a Redherring.com report captioned Israeli VCs Raise Funds Against the Odds" comments: "The almost daily violence in the Middle East casts a pall over meetings between venture capitalists and entrepreneurs in Israel. But the zeal that U.S., Israeli, and international investors have for VC deals, appears to be stronger than their fear of war. The fund-raising stands in contrast to heightened concerns in recent weeks over turmoil between Israelis and Palestinians".



Reprinted from the Israel High-Tech & Investment Report December 2000

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