Israeli merchant bank makes 1st payout to Phoebus

Asquith Israel Merchant Bank: A year after opening its first fund, it has paid out its first investment – into Phoebus.

Tel Aviv skyline 370 (photo credit: Thinkstock/Imagebank)
Tel Aviv skyline 370
(photo credit: Thinkstock/Imagebank)
Ronen Botzer, CEO of the young clean-tech firm Phoebus Energy, wanted more than just capital when it came time to grow his business. The award-winning company had already installed its smart pumps – which cleverly coordinate heating and cooling systems to wring out inefficiencies, save money and limit environmental impact in one stoke – in major facilities in its home country.
In just one week at the Tel Aviv University sports club, the largest in Israel, Phoebus’s system cut 1,300 kilograms of carbon dioxide emissions, and saved NIS 9,000 in LPG costs. But because Israel is a small country, and the potential international market for their product was huge, when it came time to raise funds, it turned to another Israeli start-up: Asquith Israel Merchant Bank.
“It’s not really a bank; it’s a fund with some bolts and whistles on it,” says Asquith executive director Michael Freedman, who launched the company just over a year ago with CEO Eial Diskin.
A year after opening its first fund, it has paid out its first investment – into Phoebus.
The fund’s raison d’etre is to fill a funding gap for small and medium-sized enterprises (SMEs) with the hopes that they will stay rooted in Israel.
Whereas so many of the leading investors are “firm believers that what Israel is good at is starting up and selling out” to companies abroad, says Freedman, the Asquith team thinks there is more potential for profit and local economic benefit for firms that stick around.
“How is this helping to grow the SME sector in Israel? Because in the end, SMEs are surely where the jobs are,” says Freedman.
An investor, he adds, “will pay even more money if you show that you can grow the company out on the five-year scale, rather than on the six-months scale.”
As a result, Asquith’s process involves more than just putting money in and getting money out, but providing advice, building relationships and getting its investors actively involved in the companies.
Both its immigrant connections and its particular legal status make Asquith a lifeline to international funding; to avoid Israel’s costly regulatory process, Asquith is domiciled in Jersey, which also precludes it from raising funds within Israel itself.
But that’s one of the things that attracted Phoebus to it.
“Part of our strategy for the world market was to look for investors that could develop us in regions of interest,” says Phoebus’s Botzer. “That’s what Asquith has.”
“What they do is very unusual, rather unique,” he continues. “Sometimes you have an investor and they put in money and that’s it.”
The relationship-focused Asquith, he says, has a staff that understands business in general and his company’s goals in particular, which will need more global investors as it continues to grow.
Freedman points out another unusual aspect of the fund.
“We think we’re the only fund in the world to have a negative management fee. We pay our investors.
It keeps us honest. It has the effect of demonstrating to your investors that you’re serious.”
Indeed, Asquith is very selective about which companies it invests in. It limits itself to buying equity and debt in firms that fall in what it calls the investment “sweet spot” – growth businesses that are already established, have some investment and are bringing in revenues.
Among the other companies it has found that fit that description are CartaSense, which produces sensors that help regulate shipping conditions to reduce waste; Gamasec, a cloud-based Internet security company; and Aqua Era Farms, which developed fish farming technology that helps raise saltwater fish.
Though Asquith’s process of vetting the company was laborious, Botzer says, in the end it was worth it, though not just for the money.
“We also met good people and we had good chemistry with them, which I think is important for every business,” he concludes.