Venture capital funds to raise $1.5b. this year

VC industry is still optimistic about Israel's startup potential, but concern abounds that gov't is not doing enough to support hi-tech.

The venture capitalist industry is still optimistic about Israel's startup potential, forecasting that the country's venture capital funds are poised to raise as much as $1.5 billion in 2006, but there is concern, nevertheless, that the government is not doing enough to support the hi-tech industry. "In the first quarter of 2006, 101 companies raised $316 million. At this rate of investment, we expect companies to raise $1.5b. by the end of this year," said Yoram Oron, chairman of the Israel Venture Association at the Israel Hi-Tech Conference in Tel Aviv on Monday. "However, government incentives in the support of the Israeli hi-tech industry and the private sector have gone down substantially." Also speaking at the conference, Dr. Eli Opper, chief scientist at the Ministry of Industry, Trade and Labor, said that although the government was doing a lot, this was not enough. "The government invests only 1 percent of Israel's GDP (gross domestic product) into Research & Development. This is far away from what we need." Erel Margalit, founder and managing partner of Jerusalem Venture Partners said there was a need for R&D centers in the periphery. "The government needs to support company project plans in Jerusalem, the Galilee and the Negev," he said. In agreement with Margalit, Dr. Jacob Sheinin, CEO of Economic Models, added that without an aggressive government policy, partly into R&D and more specifically into supporting the low-tech industry, Israel would not be able to fulfill its full potential. "Previously the success of the hi-tech industry was driven by developments in the defense sector. Now, however, we need more investment into R&D and government support as a substitute." Speaking on the panel "Areas of Interest for Venture Investing for the Coming Year," Drew Clark, Director of Strategy at IBM Venture Capital Group, said that as Chinese companies were becoming world class, much attention should be delegated into how to channel Israel's technology into China's market. Clark pointed to three hot VC investment spaces: business performance management, security and broadband mobile computing. Mathew I. Growney, Managing Director of Motorola Ventures, meanwhile, said that the investment focus was on seamless mobility solutions, while trends for 2006 and 2007 focused on Voice Over Internet Protocol, or VoIP, technology and an end to the segmentation of data, voice and other services. "For 2009, access is the name of the game over any network or device," Growney said. Motorola Ventures, Motorola's global venture capital arm, which has actively invested in seven early-stage companies and one venture fund in Israel since 2000, this year made a strategic investment in Israel's Extricom Ltd., a designer of wireless local area network (WLAN) technology.