The growing lack of available money at Israel's venture capital funds is not deterring the country's high-tech industries. The financing vacuum is being filled by foreign investment funds from the US and Europe as well as Singapore, Korea, and China. It may not fully replace Israel's venture capital funds but it does provide a provisional source of potential funding for promising companies.
One such US private equity fund investor is Riverwood Capital, which is seeking investment opportunities at Israeli technology companies.
Riverwood partner Jeffrey Parks told "Globes," "Riverwood is entrepreneurial in character. Today, private equity funds must maintain their character in order to succeed."
Riverwood was founded in 2008 and manages $800 million in assets. The fund is strongly interested in Israel technology market and wants to increase its investments here. Riverwood has already been involved in one deal in Israel having acquired full ownership of SintecMedia, which designs and implements innovative management systems for the broadcasting, cable and satellite industries, for $110 million.
Technology and finance
Riverwood Capital is a global private equity fund investing in technologies and services, which is managed by six partners with operative and financial experience. Parks himself was formerly a senior executive at US mega-fund Kohlberg Kravis Roberts (KKR) and before that he was part of the investment team at Oaktree Capital private equity fund, and an investment banker with UBS.
He said, "The idea of setting up a fund as partners was to match abilities in technology and finance. Three of our partners built Flextronics, which is today one of the largest technology companies in the world with annual sales of $16 billion.
What is your investment model?
"We are not limited. We can invest a little or buy control, and assist in business development, mergers and acquisitions, and access to new markets. We invest according to different models and buy out investors who have tired. Some of the deals we have done are secondary enabling the founders to sell part of their holdings."
What attracts you to the Israeli market?
"I've only known the Israeli market for 18 months but some of our other partners know it through the activities with Flextronics or their work at the Citigroup investment bank, which operated in Israel. We find Israel to be a commercially friendly environment and we have been impressed by the level of engineering and managerial talent."
He added, "We have identified great potential for us, and there are a large number of companies backed up by venture capital that are growing rapidly and need additional capital to continue growing. We have a mandate to invest in these companies. We know that the Israeli market lacks capital and that's why we are here. We are focusing on small to medium sized deals and most Israeli companies are in this category. They are not suited to the huge funds."
Parks said that Riverwood is looking for classic technological companies and is not interested in the social networks trend. He said, "We're looking for electronic components and systems companies, enterprise software, for end-users or small businesses. It services and services generally."
Riverwood is represented in Israel by Israeli, Ben-Zvi Attorneys-at-Law, which specializes in high-tech, cleantech, and life science consultancy.
How do you explain the flow of foreign investors?
Adv. Eitan Israeli said, "The number of venture is not small but the number of Israeli funds has fallen. Slowly the vacuum is being filled. Pro-seed stage companies have plans to grow rapidly and develop to the stage when they can raise capital, perhaps from angels or micro-funds. There are many family firms in Israel that often invest in companies and there are also foreign funds coming in at the seed stage. At later stages there are venture capital and US private equity funds. The world believes in Israel's R&D capabilities. There is fertile ground here especially among technology ventures."
Adv. Omer Ben-Zvi said, "We are focused on technology because we believe that this is Israel's limitless resource. The engine of innovation is working but the change in financial models is already another matter. The difficulties venture capital funds are having raising money for funds does not change the fact that people are still inventing things here all the time and that is the reason that foreign investors are coming here and doing deals."
Published by Globes, Israel business news - www.globes-online.com - on December 20, 2011
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