Size is not important for venture capital funds, the characteristics of small funds are, Silicon Valley Bank director of Israel operations Naomi Herman told "Globes". "Small funds tend to be more focused and have expertise in a particular field or specific growth stage of companies. Their expertise gives them a better high quality transactions flow than at large funds that invest in a range of industries."
Herman added, "Small funds also can supplement the abilities of large funds, rather than compete against them. Small funds can set up investment syndicates. Because of their small size, management fees are low and their partners appear to focus on fostering and the success of the portfolio companies."
"Globes": Is the venture capital model broken or not?
Herman: "I don’t have a crystal ball to tell me what will happen. SVB, as an institution, doesn’t think that the model is broken. If it were, we'd be in trouble. The industry is still developing and changing, and the funds that survive are the very strong ones."
What will the industry look like in three years?
"We're still consolidating. There won't be the money that there used to be, but the contraction will bring the industry to its proper and normal size."
Herman spoke at the College of Management CEOs conference earlier this week. Her co-panelists on the "Venture Capital - is the model broken?" were Genesis Partners managing partner Eddy Shalev and Aviv Venture Capital managing partner Yoav Chelouche. She presented a study by her colleague at Silicon Valley Bank, Sven Webber, which found that small venture capital funds are more profitable than large funds. The study defined a small venture capital funds as managing less than $250 million.
Although most Israeli venture capital funds fall into this category, they do not appear to be particularly successful.
Silicon Valley Bank is the venture capital arm of SVB Financial Group Inc. (Nasdaq: SIVB), which has been active in Israel since the 1990s and opened a local office three years ago. Herman, who has been with SVB for 12 years, was recently appointed to the post in Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on June 1, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010