The relatively low ratio of domestic Israeli investment in the often lucrative high-tech scene, with some estimates as low as 10 percent, has bothered both the industry and policymakers in recent years. When Intel, for example, bought Israeli autonomous driving start-up Mobileye earlier this year for $15 billion, some of the joy at the country’s high-tech achievement were tempered by the realization that most of the investors profiting from this windfall were foreign and that local institutional investors such as pension funds were not involved.
Pension funds usually will not go through the complex due diligence process for such investments if the amount involved is under $100 million, said Laor. “Those (new) funds are a great solution for that problem. The pension fund can look at this as a fund that puts together a portfolio that is balanced and is run professionally and invest in that.”
Apart from opening up the high-tech and start-up markets to regular Israeli and institutional investors, the funds also aim to keep companies in Israel in the long term by facilitating domestic start-up financing. Right now, said Laor, too many R&D (research and development)-based companies leave.
“At some point they either close or move abroad. So the Israeli market does not benefit from their success,” he said.
The ISA and the Ministry of Finance is aiming for four high-tech funds with a minimum each of 400 million Israeli shekels in investments, currently some $113 million. The government is making a total of 200 million Israeli shekels available in investment guarantees, 50 million Israeli shekels per fund, and another 100 million Israeli shekels per fund in backing for credit. The ISA and the ministry announced on Sunday that they’re looking for managers for the funds.