Israel - the top foreign source of deal-flow in the US

Straight From the Jerusalem Boardroom #120, December 07, 2007

In spite of the 2006 Lebanese War, in defiance of sustained Palestinian terrorism, irrespective of no progress in the "peace process" and independent of Israel's political uncertainty:

 

1. Israel is ranked as the top foreign source of deal-flow, ahead of Canada, China and India, by US VC funds managers. The survey, conducted by Delloite Touche, has also ranked Israel as the second (to Canada) most attractive source of entrepreneurs. 46% of US VC funds invest abroad (The Marker, Dec. 6, 2007).

 

2. Standard & Poor raised Israel's credit ratings, for the first time since 1995, to A (long-term foreign currency rating), to AA- (long-term local currency rating) and to A1+ (short-term domestic rating). S&P based its decision on Israel's economic indicators: GDP growth, shrinking budget deficit, reduced public debt per GDP (2000-87%, 2001-92%, 2002-100%, 2003-102%, 2004-101%, 2005-97%, 2006-88%, 2007-80%), low inflation, balance of payment and balance of trade surplus, tax decrease, continued market reforms, etc. Improved rating is expected to attract more overseas investments and lower interest on loans (The Marker, Nov. 28).

 

3. Israel leads the world in civilian R&D per GDP - 4.5%, compared to 3% expected by the EEC by 2010. Israel was 5th in the world in GDP growth - 5.2% in 2006 (Globes, Dec. 5). Israel's GDP grew 6.1% during the 3rd quarter of 2007, the 17th quarter of straight growth since mid-2003, the longest growth streak since 1948 (2001 - minus 0.4%, 2002 - minus 0.6%, 2003 - 2.3%, 2004 - 2.5%, 2005 - 5.3%, 2006 - 5.2%, 2007 - projected 5.5%-6%). Overall investments rose 24% during the quarter (Globes, Nov. 26).

 

4. Israel has the second largest concentration of startups per capital next to Silicon Valley. Israeli startups developed crucial flash drive, call center and instant messaging technologies. According to Jon Medved, both share energized entrepreneurial spirit, informal work atmosphere, pioneering risk-taking ethos and a large number of high-quality immigrants. 400 Israeli start ups emerge annually, more than any European country. The number of funded startups has doubled since 2000. Next to the US, Israel has more stocks traded on NASDAQ than any other country. High tech (which is minimally vulnerable to terrorism and political instability) accounts to 50% of Israel's exports - about $15BN annually. Israeli companies have easier access to Asian markets, since they are not perceived as a commercial threat (Washington Post, Dec. 5, 2007).

 

5. SAP and McCaffee expand their R&D operations in Israel, hiring additional personnel (both) and constructing a new site (McCaffee) (Globes, Nov. 14).

 

6. Israel's Telematics is acquired by Singapore's St. Electronics (Globes, Nov. 20). Israel's Esther Neuroscience was acquired by Britain's Amarin for $15MN and additional $17MN per milestones (Globes, Dec. 6). Israel's Oridian was acquired by India's Ybrant for $15MN (Globes, Dec. 5).

 

7. GE Medical participated in a $30MN round by Israel's InsighTech (Nov. 30). US-based Radius Venture participated in a $27MN 2nd round by Israel's Mendigo (Globes, Nov. 21). Varburg-Pinkus participated in an $8MN 3rd round by Israel's NuLens (Globes, Nov. 21). Sequoia invested $8MN in the 1st round of private placement by Israel's DensBits (Globes, Dec. 3). Taiwan's CIDC VC fund led a $6MN 3rd round by Israel's AdvaSense (Globes, Nov. 22).