Asquith Israel Merchant Bank, a newcomer to the Israeli banking scene that aims
to strengthen small- and medium- sized businesses, has opened its maiden fund,
it told The Jerusalem Post this week.
Asquith is promoting itself as the
first true merchant bank in Israel, following in the footsteps of famous Jewish
families like the Rothschilds and Warburgs who pioneered the field in the 18th
and 19th centuries.
Merchant banks are different from other investment
banks in that they typically provide capital to private companies, usually in
the form of equity, alongside advisory services on corporate finance and
In Series I, the fund launched this week, Asquith
expects to raise between $1 million to $5m., which will be funneled immediately
into four existing technology-focused Israeli small- and medium-sized enterprises
(SMEs). Series I will act as a trial before the launch of the full merchant bank
later in the year.
The companies selected for the first round are:
Gamasec, a developer of a cloud-based service that identifies security
weaknesses in websites; Aqua Era Farms, an operator of recirculation systems
that enable production of quality, ecofriendly fish; VideoCells, a developer of
low-cost video surveillance technology; and CartaSense, a provider of a system
for real-time monitoring of goods through disposable wireless
Once the merchant bank becomes fully operational, investors will
vote on which companies receive their financial backing, Asquith executive
director Michael Freedman told the Post
The investors who have already
indicated their support have embraced the idea of sitting on the bank’s advisory
board, he said.
“That is our classic investor: somebody who is passionate
about helping Israeli companies expand,” said Freedman, who made aliya from
England in 2009. “What they don’t want is to have to do it on their own. The
idea that they can make a professional hobby out of it, where through an Anglo
institution they get to play with Israeli innovation, is something that excites
them. They can see right through to the bottom line: where we create jobs and we
create a good name for Israel.”
Asquith’s management team includes
individuals who are already well-known in the Israeli business
The chairman is Shmuel Ben- Tovim, a former economics minister
at the Israeli Embassy in London and a nonexecutive director of Bezeq, Israel
Chemicals and Bank Leumi. The CEO is Eial Diskin, who also heads Israeli
corporate financier IBDC.
The merchant bank’s model will work in three
stages, Freedman said. First it will invest in selected companies from its own
fund. Then it will raise more funds as corporate financiers. (Asquith’s own
funds will never provide more than 20 percent of total investment in any single
company, he said.) Finally, the bank promises to assist its clients with
business development, using its contacts in the UK, North America and elsewhere
to help the company expand.
“A very big part of our philosophy is that we
are not an exit-driven fund at all,” Freedman said. “The big difference between
us and VCs [venturecapital funds] is that they are always looking at where the
exit is, and most Israeli entrepreneurs are naturally very exit-driven as a
result. We are very different to that.”
He likened Asquith’s model to
that of “slow food,” a concept invented in the 1980s as an alternative to “fast
The model aligns the interests of investors, the companies who
receive the money, and Asquith as the manager, Freedman said, as everybody can
see what is happening, which leads to greater trust and to the various parties
finding new ways to help each other.
The 2007-08 global financial crisis
provided the impetus for merchant banking’s rebirth, he said, as it exposed
investment banks for lacking interest or understanding for the products they
sold. The key words in the post-crisis environment are “transparency” and
“liquidity,” he added, meaning that if you can demonstrate transparency and
investors deem you sophisticated enough, you essentially become a private
investors club, in regulatory terms.
Because Asquith’s investors are
wealthy enough, and because investment activity takes place outside of Israel,
even though it is directed toward Israeli companies, the bank was able to reach
an agreement with Israeli regulators to remain unregulated here. It maintains
its official headquarters in the British Channel island of Jersey and is obliged
only to keep Israeli regulators informed of its activities.
One of the
bank’s main aims is to promote SMEs, which are not funded well in Israel, where
heavy amounts of capital are directed toward startups and where a large portion
of the market is dominated by big business, Freedman said.
The idea for
Asquith came long before the emergence last summer of a public protest movement
raising awareness of socioeconomic problems, he said, adding that growth in the
SME sector would create jobs for the middle class and provide a solution to many
of the hardships they face.
“We created Asquith for all the same reasons
that [protest leader] Daphni Leef pitched her tent,” Freedman said, “although
with completely different ideas on what the solutions are, because our view is
that solutions don’t lie with government, but rather in the private sector.”