Index Ventures of Switzerland has completed a 350-million euro round of fund-raising for its new Index 4 fund, and is expected to invest 15-20 percent of that sum in Israeli startups.
This is Index's largest fund yet, and it's managed to attract capital just two years after raising 300 million euros for Index 3 in 2005.
"We managed to raise the money for the new fund so quickly because we are very active," Bernard Dall?, a general partner at Index told TheMarker. "Since 2005 we have invested in 24-25 companies. We invested swiftly and have made several new investments. The rest of the money from Index 3 will be allocated for continuing investments, with all new investments now being made through the fourth fund."
Index was founded in 1996 by Neil Rimer and Giuseppe Zocco. Its first fund totaled just 20 million euros, but since then many hundreds of millions of euros have been raised, and the continuing funds have grown from year to year. Index began investing in Israeli startups back in 2003 (including B-hive Networks, Zend, FilesX, Serendipity Technologies and LaserCom, which has since closed down). The fund made the headlines thanks to its investments in Skype, MySQL and Netvibes.
Dall? relates that despite the fund's initial focus on Europe alone, as it began to grow its activities were expanded to the United States - and Israel.
"Our investments in Israel began after a window of opportunity opened during the post-bubble period, when American funds were neglecting Israeli companies," explains Dall?.
"Israeli companies and venture capital funds had difficulty raising money. They turned to us, and we gained exposure to investments in Israeli companies. We began to present Israeli startups to European investors and to interest other European funds in Israel. Now there is more optimism, but back then few foreign investors were visiting Israel."
Index's main competitor in Europe is Excel Partners, which also invests in Israeli companies. What prompts these funds to invest in the crowded Israeli market? Why not keep their investments in Europe, in familiar territory? Dall? explains that Index has offices in Geneva, Britain and New Jersey, such that there is little difference between investments in Israeli or European companies.
"In Israel, you can set up an office in Herzliya and invest within a radius of 20 kilometers," says Dall?, taking a jab at Israeli funds. "In Europe, the distances are different. If investing in Israel is similar to investing in any country in Europe, why rule Israel out?
"There is a lot of innovation here and a mature market. The distance from Europe is reasonable, too. The only reason to refrain from investing in Israeli startups is that there are more VC funds here. The Israeli market has become competitive. The American companies are reopening offices here: Greylock has opened an office here; Benchmark has a branch and Venrock has a fund manager here [Ohad Finkelstein - G.G.]."
Index has so far not made a great many investments in Israel, and Dall? does not expect this situation to change. "Our strategy is global. We are not a fund that focuses on Israel," he explains.
Even so, Dall? notes that the fund is managing to maintain good connections with local entrepreneurs, and he, as one of the few fund managers who communicates regularly with entrepreneurs from different cultures, can offer a profile of his Israeli contacts.
"Israeli entrepreneurs are different from the others," he continues. "Here everyone knows everyone, probably because of the army. It is a small community, and I think that, in a unique way, Israeli entrepreneurs are survivors who are very focused on solving problems."
Index traditionally invests 60 percent of its capital in Information Communication Technology (ICT) startups and 40 percent in the life sciences industry. Dall? notes, however, that there are strict rules and the fund does not limit itself to these two areas.
Like other fund managers, he talks about his fund's good returns and performance rankings. He invites Israeli entrepreneurs to apply to Index, as the fund has operations in both Europe and America, and considerable experience in escorting developing startups. Index's new fund is expected to invest tens of millions of euros in Israeli companies, mainly in ICT startups.
"If a biotechnology company approaches us, we will consider investing in it, but at this stage we are concentrating on IT," explains Dall?. "We are excited about the new fund. The speed with which we were able to establish the fund shows that our investors are eager to invest in European and Israeli companies."
In conclusion, he says, sending a message to local entrepreneurs: "We are open for business and come to Israel frequently."