Large Israeli high-tech companies are growing in terms of sales and profits at a fast pace. In some instances at 25%-35% or more a year. The highly profitable ones are plowing back profits to advance their future development. There are those like CheckPoint and Comverse whose stocks are sizzling and at these high-levels their shares are cash equivalents for acquisitions. Medium-sized companies, not yet public, are on the receiving end of follow-on investments from corporate and venture capital investors. Keeping in mind these conditions it should not surprise anyone that the ongoing and growing wave of financing activity is focusing on the myriad of Israeli start-ups. These number anywhere between 1,500-3,000, by our and other sources. Internet and communications both software and technology projects related activities are clearly of interest to American "big corporate players". They have full confidence "that if it's developed in Israel" it is likely to work. E-commerce, broadband, building web communities, foreign languages word translations, communications systems over high-frequency communications network, e-mail and fax routing solutions, Internet security and encryption are," hot" start-up areas which need and will attract capital. However, mature investors are looking for companies which have a developed product, a proven technology and even patent protection. Before they can reach these achievements the companies need to attract the attention of the hardy breed of investor variously known as angels, seed money providers or vc'ers specializing in start-ups.
For the more venturesome investors this scenario represents a window of opportunity. There are those that are climbing onto the "invest in the start-up and early stage" bandwagon. Mentioned in this issue is the formation of a new venture capital fund founded by Robin Hacke-Farhi and Julie Kunstler. The new vc fund has started to raise a war chest of up to $100 million. The fund will specialize in investments in early stage companies in the communications field in Israel, Europe and the United States. The Israeli based partners are making it clear that they hope that at least a third of the money will flow into Israel "but if valuations here are high we will go elsewhere", says one of the partners.
The large number of young companies seeking a place among their more mature brothers has put a strain on venture capital firms to evaluate the hundreds of business plans and propositions which they receive each month. An attempt to speed up the process is a new Internet based website which takes a square aim at Israeli startup companies. Visitors to the site are told that if their project meets standards they will get their money within five weeks.
Israel's investment bank and venture capitalist community could hardly be culpable of transparency or ease of approach. They exude the smell of success, are hard to reach and often even more difficult to offer personal contact, thus they are far from being easily accessible to the startup entrepreneur. Those who have previously proven themselves by starting and selling a company, that is successful entrepreneurs, have little difficulty in getting a hearing to promote a new idea or new widget. The five year old Jerusalem Global Ltd. (JG) is out to change this by launching a website for entreepreneurs. Those using the its website "yazam.com" will find that JG is offering the entrepreneur a quick way to be exposed to the possibility of raising capital for a startup or for a company at the seed investment stage company level. An extravagant promise but we understand that it is moving ahead.
Then there is another Internet based "matchmaker" calling itself: Angels for Israel, an investor/entrepreneur Internet matching service This new service is aimed at enabling individual and corporate investors to access young Israeli high-tech companies. The emergence of venture capital funds specializing in startups as well as new services such as Yazam and Angels for Israel are an indication of a recognition of an unbalance of investment focus by venture capital funds. The recent Money Tree Survey pointed out that while overall venture capital investments are pouring at a rate of more than $900 million a year, seed investments amounted to a miserly 3% of the total venture backed investment. However, just as nature abhors a vacuum so do enterprising investors who can seek and identify new opportunities among Israel's vast ocean of start-ups .