Fund nets USD 150m for start-ups in Israel

The Boston Globe reported that even as Hizbullah militants were firing rockets into Northern Israel, a Boston area venture capital firm said it has raised a USD 150 million fund to invest in Israeli technology start-ups.

According to the Globe, Greylock Partners of Waltham, which had invested in eight Israeli companies through previous funds, said its new Greylock Israel fund, closed June 30, is its first dedicated exclusively to investments in Israel, a global center for technology innovation. Other venture capital firms, like Benchmark Capital and Sequoia Capital of Silicon Valley, also have made extensive investments and based partners in Israel, the report said.

"Clearly no one wants to have a situation where their interests are at risk," the Globe quoted Mary Kae Marinac, a spokeswoman for Greylock Partners, as saying. "On the other hand, venture capital is a business about measured risk. Greylock still believes that Israel is a hotbed of entrepreneurship and will remain so for the foreseeable future."

The report said that as it begins scouting for Israeli start-ups to fund, a pair of Greylock partners, Moshe Mor and Yoram Snir, have moved to Israel from Greylock's office in San Mateo, Calif. They will join Erez Ofer, a former EMC Corp. executive vice president for technology strategy, who has worked for Greylock in Israel for the past 18 months.

The three Greylock partners have opened a new venture capital office in the Israeli technology hub of Herzliya, outside Tel Aviv. As of late yesterday, that area had not been hit by rockets fired from Lebanon into Haifa and cities in Northern Israel over the past week.

The Globe said many large US-based technology companies, including chip maker Intel Corp. and software giant Microsoft Corp., have set up or expanded operations in Israel over the past decade to tap into the engineering talent of a country whose labs have generated innovations ranging from instant messaging to microprocessor technology.

Yesterday, employees at an Intel research and development center in Haifa, closer to the Lebanese border, were forced into bomb shelters during a barrage of rockets, according to the Reuters news service. Intel's employees continued working on laptop computers using wireless underground connections, the news service reported.

'When has there been a quiet time in Israel?'

Marinac said the Israeli partners want to put Greylock's money to work in early-stage companies in fields like information technology, communications, consumer and Internet content and digital media. The firm's previous investments in Israeli companies included Red Bend Software, database aggregator HyperRoll, and Siliquent Technologies, a networking company acquired by Broadcom last year.

Even with the tensions in the Middle East, venture capital investment in Israeli start-ups in the second quarter increased 12 percent over the first quarter and 4 percent over the second quarter of last year, the Israel Venture Capital Research Center reported yesterday.

The center said 109 high-tech companies raised a total of USD 404 million in the April-to-June period from Israeli and global investors. Israeli technology companies raised USD 360 million in the quarter ended March 31, and USD 387 million in the quarter ended June 30, 2005.

While many Israeli start-ups in the past moved their headquarters to the United States, keeping research and development labs in Israel, more are now keeping their home offices there as well so executives can be closer to growing markets in Europe, India, and China, said Mark G. Heesen , the president of the National Venture Capital Association in Arlington, Va. Recent violence in Israel and India may deter venture investors inexperienced in those markets, but firms that have invested there in the past will probably continue doing so, he said.

"Anything that disrupts the normal flow of things is a concern," the Globe quoted Heesen as saying. "But when has there been a quiet time in Israel? It's part of life there that there's some strife going on. Still, many would say if there's going to be another Silicon Valley anywhere outside the United States, Israel would be the ripest place."