"We're seeing how the opportunity for venture capital is growing because the markets are growing," said Pitango Venture Capital general managing partner Chemi Peres at today's press conference to mark the closing of the firm's sixth fund and its 20th anniversary. The markets he was referring to were geographical - China, Taiwan, and India - the source of the some of the investors in the new fund; and the target markets for new products, such as digital consumers and online advertising, where Pitango barely had a presence in the past.
Last week, Pitango closed its sixth fund at $270 million, above the $250 million planned. It now manages $1.6 billion.
The message of Peres and Pitango's other partners is optimistic. "A large number of Israeli companies will go public in 2014. Some of them of them are our portfolio companies," he said. Pitango believes that ten of its portfolio companies will near IPOs over the next 18 months. With the Pitango VI Fund, the firm plans to diversify investment stages, with a stronger emphasis on growth-stage investments, as well as a kind of mini-fund, under managing general partner Rami Beracha, which will make seed-stage investments.
Commenting on the two-year process to raise the Pitango VI Fund, Peres said, "In 2008, there was a huge financial crisis, and some investors personally suffered. In 2012, we stopped investing from Pitango V, and we wanted a quick first closing of the new fund, which was largely based on longstanding investors. We saw that some of the investors had stopped investing in some fields, some had quit certain funds, and some said that they would reduce their investment. Beyond that, they said that we should bring investors from China, and that's another matter. They are all making their first investment in Israel. These are sophisticated investors who carried out very thorough due diligence."
As for Israeli investment institutions, Pitango said that while it received larger allocations than in the past, they were still immaterial. "Israeli institutions have an assessment of what Israeli high-tech and venture capital are, but they apparently still need to realize that this is a long-term investment," said Pitango managing general partner Rami Kalish, who co-founded the firm with Peres.
Pitango CFO and general partner Zeev Binman said, "In work with high-tech, the institutions are not yet there. You also see this in IPOs in Tel Aviv. This is partly because their staffs are not well prepared. They're being trained, but they're not ready. It will take time."
Between the lines, Peres offered some constructive criticism, saying, "I can certify that, to date, investors in our funds have not lost money. In good times, there is a very high return on investment. There is an idea that venture capital is something irresponsible and risky, but it's impossible to claim that we have struck it rich. We're dealing with many crises at the companies, and we go around the world and learn. There is also a cultural change; the rush for an exit has abated, and there is a wish to build big companies with value. Not investing in venture capital is like lagging behind and not keeping up-to-date."
Published by Globes [online], Israel business news - www.globes-online.com - on October 9, 2013
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