Still Rockin' in Israel
China, India, China, India…seems those are the only two foreign countries we hear about from U.S. VCs these days. But, as David Chao at DCM-Doll Capital Management recently told us, China, in particular, can be a crapshoot for foreign investors (this from the guy who funded 51job). Though the opportunities are tantalizing, China is still developing business laws and infrastructure that westerners take for granted.
One country where such infrastructure already exists is Israel. U.S. VCs have been investing there for several years, though some of them slowed down after the dot-com bust. In a sign of renewed activity, Greylock, a 40-year-old Boston-based VC firm, just hired two venture partners to focus on Israeli deals. (The term “venture partner” typically means a VC who works only on investments he or she brings to a partnership.) The new recruits are Erez Ofer, former executive VP at EMC Corp., and Yoram Snir, former investment and M&A manager at Cisco Systems Inc. in Israel, Asia, and Europe.
Under the direction of general partner Moshe Mor, Greylock has been investing in Israel since 2001. “Over the last three years, Israel has become for Greylock the third most important area after the Bay Area and Boston,” Mor says. The firm has funded at least five companies with Israeli ties, including business-software makers ClearForest and HyperRoll.
VC activity in Israel has picked up in the past 18 months just as it has in the U.S. More start-ups are getting funded, and more VC-backed companies are getting bought. Last year, Cisco snatched up three Israeli outfits: security-tech company Riverhead Networks (for $39 million), storage-software developer Actona Technologies (for $82 million), and network-software developer P-Cube (for $200 million). Snir oversaw all of the deals at Cisco.
Greylock typically hunts for companies that are headquartered in the U.S. but maintain research and development operations in Israel, which turns out lots of engineering talent from academia and the military. U.S. accounting and law firms with offices in Israel help Greylock kick the tires on potential investments, and the terms of deals are similar to those in the U.S.
Will Greylock set up shop in China or India? “We believe those regions are very important, but at least in the first phase, their importance is as potential markets for our companies,” Mor says. Let others have the first-loser advantage.
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