Mobileye a magnet for investment in Israel

Dubi Ben-Gedalyahu

The stream of global venture capital investment in Israel's auto-tech industry will now reach huge proportions.

Mobileye(NYSE: MBLY) was, and still is, the flagship of the Israeli auto-tech sector. It was the first company to plant significant roots in the auto industry. Its prodigious IPO drew the attention of the auto industry and global venture capital to Israel's unique stock of know-how and expertise in smart cars.

The beginning, however, was not so easy. The entrepreneurs struggled for many years to find investors for the visual sensors they developed, and had to raise money from local investors. In the auto industry, for example, Israeli car importers invested in the company by word of mouth. A considerable proportion of them, including Delek Automotive Systems Ltd. (TASE: DLEA), sold their investments for a quick profit following the IPO, and it can be assumed that some of them now feel pangs of regret (especially in the area of their pockets).

The exception was Colmobil auto agency (importer of Mercedes, Hyundai, and Mitsubishi cars) controlling shareholder Shmuel Harlap, one of the first investors in the company in its early days, who over time acquired almost 10% of its shares. He consistently refused to sell his investments, saying that it was a strategic investment, and that Mobileye had a long road ahead of it. It appears that his vision has now materialized, and he is emerging as one of the main beneficiaries of the deal - on paper, at least.

In retrospect, hints of the merger announced today can be found. Intel became part of a tripartite strategic partnership with Mobileye and BMW for developing an autonomous car last year. Mobileye recently began to move in the new directions of global mapping and big data, which would have made it the "auto industry Google." Furthermore, it is one of the few suppliers to be awarded the status of an "independent supplier" in the smart auto industry acceptable to rival auto manufacturers. Mobileye succeeded in becoming a preferred strategic partner of BMW, Audi, and many other automakers, and very few companies in the auto industry have accomplished this before. This year, it is also slated to unveil a breakthrough - mass produced cars with Stage 3 automated propulsion systems. These systems are regarded as just one step, or at most two, before the launching of car with fully autonomous capabilities - the auto industry's Holy Grail.

Let's not be provincial. Let's admit it - all of these developments have made Mobileye too big for Israel's britches. Mobileye is a company whose business now encompasses the entire world, and is likely to generate billions of dollars a year in revenue for its owners, if not more, and to provide a basis for multi-billion secondary IPOs of its subsidiaries. This is the playing field of a few major players. In any case, up until now, the stream of global venture capital to the Israeli auto-tech industry has been called "hungry." Now, you can bet that it will now reach absolutely voracious proportions. It only remains to hope that Intel does a good job of handling its new acquisition, and doesn't destroy its value.

Published by Globes [online], Israel Business News - www.globes-online.com - on March 13, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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