Start-up Nation Israel 2014 – Israel Japan Investment Funds meeting on March 4, 2014 at the Hotel Okura in Tokyo
Israeli Venture funds introduce Israeli ventures to Japanese investors
Acquisition of Viber by Rakuten draws attention in Japan to Israeli ventures
The recent acquisition of the Israel-based OTT (over the top) communications company Viber by Rakuten for US$ 900 Million has drawn attention in Japan to Israel’s innovative power, however many Japanese companies are already cautiously investing in Israel while keeping a low profile, we learnt at the “Start-up Nation Israel 2014” Israel Japan Investment Funds meeting on March 4, 2014 at the Hotel Okura in Tokyo.
Most of the companies presented at the conference were highly sophisticated computer security, medical equipment, and similar “mono zukuri” type ventures, but also included a “selfie” app for auto-portrait or group photos using iPad or iPhone.
By the way: our company is currently working to sell an Israeli venture company to Japan as an exit for investors, and to accelerate business development in Japan for this company.
Her Excellency, Ambassador of Israel to Japan, Ms Ruth Kahanoff opened the conference:
Economic Minister of Israel to Japan, Mr Eitan Kuperstoch explained that while there is substantial investment in Israel’s ventures by many major Japanese corporations, there is much scope for increases. Japan’s investment added together are on the order of 1% of foreign direct investments to Israel:
Pitches by Israeli Venture Funds
- BRM Group: actually a privately held fund, strictly speaking not venture capital
- Vertex Venture Capital: Japanese investments by Hitachi, Fujitsu, Murata, NTT-Soft, Muratec, Advantest, NTT-Finance, Nomura, SMBC, SII, JAFCO, SEIKO Electric, Monex, Toyo Ink Group, Aizawa Securities
- CHIMA Ventures: medical devices, minimal invasive surgery tools.
- TERRA Venture Partners: Terra invests in about 16-20 (4-5 per year) for a 1-2 year incubation period, followed by a “cherry picking” process. Terra VP invests in companies surviving the “cherry picking”. Veolia, GE, EDP, Clearweb, Enel are partners.
- Giza Venture Capital: 5 funds, US$ 600 million under management, 102 investments, 20 active, 38 exits. Examples are: XtremIO, Actimize, Telegate, Precise, Plus, msystems, cyota, Olibit, Zoran, XTechnology. A particular success story is XtremIO: the team of 21 people (including secretary) turned US$ 6 million investment into a US$ 435 million cash sale to EMC.
- StageOne Ventures: Early stage US$ 75 million fund, 17 investments.
- Gillot Capital Partners: seed and early stage. Focus: cyber security.
- SCP Vitalife Partners: 2 funds, US$ 230 capital under management.
- Magma Venture Partners: focus on information and communications sector. Created over US$ 2 billion in acquired company value. Biggest success story: waze (crowd sourced location based services), return on capital investment: 171-times.
- OrbiMed Healthcare Fund Management: largest global healthcare dedicated investment firm.
- Nielsen Innovate:
Presentations and Panel discussion
Arik Klienstein: Driving innovation in Israel – the 8200 impact
8200 is a unit within the Israeli Defence Forces similar to the US NSA – technology based intelligence collection. 8200 veterans lead many Israeli start-ups including NICE, Verint, Check Point, paloalto.
8200 and the start up culture:
- Select the best people out of high school or college
- Short first formal training. Most of training done on the job
- Flexible dynamic organizational structure
- Direct and constant relationship with the end user
- “Think out the box” mentality – no assumptions. Hierarchy-less flat structure
- Must win attitude!
Tal Slobodkin (Talpiot 18 Graduate): The Talpiot program
Talpiot is Israel’s elite Israel Defense Forces training program, dedicated to create leading research and development officers for the various branches of the Israeli Defence Forces. Program was created in 1979, about 1000 graduates today.
- starts with 15,000++ high school seniors
- 100-150 attend next level of leadership assessment
- 50-75 reach final selection committee
- 30-40 enter the program
- 25-35 graduate
Training and assignment:
- three full academic years
- full dual degree in Maths and Physics, most graduate additionally in Computer Science or other subjects
- military training
- significant exposure to all cutting edge military and non-military innovation
- develop management skills
- graduates pick own final assignment
- minimum assignment is additional 6 years, average tenure in Israeli Defense Forces is 10 years
- Yoaf Freund: Professor at UC San Diego, Goedel Prize winner
- Elon Lindenstrauss, Professor of Mathematics at the Hebrew University and winner or 2010 Fields Medal
- Marius Nacht, co-founder of Check Point Software
- Eli Mintz, Simchon Faigler, Amir Natan, founders of Compugen Ltd
- Founders of XIV, sold to IBM for US$ 400 million
- Eviatar Metanya, head of National Cyber Bureau
- Ophier Shoham, head of Israel’s Defence R&D Agency (Israel’s DARPA)
Elchana Harel (Harel-Hertz Investment House): Japanese investments in Israel
94 Japanese investments in Israeli High-tech during 2000-2014:
- ICT: 41 investments
- Semiconductors: 25 investments
- Life sciences: 11 investments
- VC funds: 17 investments
- Most investments are strategic, not financial, not exit driven
- Most investments are direct into target companies, and relatively small by global standards: up to US$ 3 million
- In many cases “silent investments”: e.g a Japanese electronics company does not want their Japanese competitors to know that they invest in Israel
- Japanese investors mostly follow Israeli or US lead investors. Japanese investors seldom lead.
Japanese acquisitions in Israel:
- Nikken Sohonsha: NBT
- Yasukawa Robotoics: Yasukawa Israel (Eshed), Argo Medical Robotics
- Sun Corporation: Cellebrite
- SBI: Quark Pharma
- Rakuten: Viber
Japanese presence in Israel:
- R&D Centers: Hitachi Data, SONY, Toshiba
- Service centers serving Intel: Tokyo Electron, Nikkon, Daifuku
Japanese-Israeli Joint Ventures:
- Altair – SoftBank/Willcom
- Given Imaging – Suzuken / Marubeni
- Toshiba – CMT
- Takeda – J&J – Orbimed (joint incubator)
David Heller: cooperation of Israeli investment funds with Japan
Israel’s venture capital fund industry was created by Israel’s Government creating the Yozma Fund of Funds: Israel’s Government invested a total of US$ 100 million in 10 VC funds (US$ 10 million per fund) under the condition that these funds had to attract much larger non-Government investment. In total the Yozma Fund of Funds invested US$ 100 million and resulted in a VC fund industry with a total of US$ 17 Billion of VC funds raised since 1993.
There is a relatively large number of Japanese investments in Israeli funds, however, the combined total investment is rather low, approximately 1% of all foreign investments in such funds. Thus there is much scope for increased Japanese investments in Israeli funds and ventures.
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