Looking in Asia

SINGAPORE - The suicide bombing in Rishon Letzion Tuesday night provided an opportune background for the press conference the Israeli Embassy held in Singapore to mark Israel's hi-tech achievements.

The conference grouped the managers of the four most active Israeli venture capital funds in Singapore - Yoram Oron of Vertex, Zeev Holtzman of Giza, Shuki Gleitman of Platinum and Rami Kalish of Pitango. The journalists were impressed with the financial figures presented by the managers. But they were more interested in learning how the managers planned to convince Singaporean and foreign investors to put their money in Israel in the shadow of the terror attacks.

The VC fund managers came with answers to the most burning questions. Gleitman, who also serves as honorary Israeli consul to Singapore, noted that the investments of foreign enterprises did not actually reach Israel, but were invested in Israeli companies that had some of their operations, primarily in research and development, in Israel, while the firms themselves were, for the most part, registered in the United States.

At the end of the three-day conference, which was organized by the Singaporean VC fund TIF Ventures, it appeared that the Singaporean investors have not lost faith in Israel. Their key criteria are return on investment, and whether the companies and the technologies developed in Israel ultimately reach Singapore. They do, concluded dozens of managers of Singaporean companies.

Almost 200 Israeli firms are active in Singapore. Some 25 of them maintain permanent facilities there. Yet the Israeli VC funds attract most of the local interest. Four Israeli VC funds - Giza, Vertex, Vitalife and Platinum - have permanent representations.

Vertex sets the pace
The close ties between the Israeli hi-tech industry and Singaporean investors began in 1996, with the establishment of Vertex - the last fund to be set up by the government-initiated Yozma project as a partnership between the State of Israel and World Vertex, which is based in Singapore.

The fund's founder, Yoram Oron, convinced the global VC firm, Vertex Venture Holdings - one of the investment arms of the giant government corporation, Singapore Technology - to consider the potential of the Israeli technology market. Vertex invested $25 million on a trial basis. At a reception for the Israeli VC industry last week, guest of honor Lee Khang Nam, the president of Vertex, said that the fund's early investments in Israeli technology had proved themselves from all points of view.

The investment strategy of Singaporean enterprises in various parts of the world is divided into stages. First comes the investment of a small sum to check whether the region is suitable; and thereafter, investments are expanded and other investors are brought in based on the results. This process took three years in Israel. In 2000, Singaporean investment firms began expanding their stakes in Israel, mainly via state-investment organizations. In Vertex's new fund, for example, which closed in 2001, the Singaporean investment was tripled, to $75 million.

Apart from Vertex, nine other Israeli funds have since received large investments - Giza, Concord, Genesis, Jerusalem Venture Partners (JVP), Star, Platinum, Vitalife and Cedar. Industry sources estimate that these investments total $200-250 million. Some of the funds raised this capital in 2001, the most difficult year so far for the VC industry.

Singaporean investments in Israeli VC funds in 2001 reached an estimated 10% of the total of $1.2 billion raised that year. Giza, which set up its office in Singapore two years ago, raised close to $30 million there, as did Platinum and JVP, which raised most of their funds in 2001.

Industry sources feel that these investments will not suffer in the future from conditions in Israel. The representatives of most of the government bodies that have so far invested hundreds of millions of dollars in Israeli companies view themselves as long-term investors. "We have invested in four Israeli funds," said the manager of Temasek Capital , a state-owned investment company and one of the largest business enterprises in the world, managing billions of dollars.

Tan Kit Jong, acting CEO and director of TIF, which has invested in six Israeli VC funds till now, said Wednesday that because TIF's investments were for the long term, he chose his partners carefully. "We will continue to seek investments in Israel," he told the conference. "It is important for us to know that there is economic strength even in troubled times like now; and so far, we have encountered no weakening of that strength."

Strategic investment
Singapore's investments in Israel are primarily strategic. In recent years, the country has been establishing itself as the central base for companies and trade in Southeast Asia. Till now, some 6,000 international companies have set up their regional headquarters in Singapore, and this small country hopes that via its investments in VC funds, it will attract hundreds of additional startups from Israel.

Oron, who has been trying for years to push Israeli companies toward China and Singapore, claims that the global economic changes make it imperative for Israeli companies to enter the Chinese communications market and others as soon as possible, by establishing subsidiaries in Singapore. "Israeli companies have to start creating strong joint ventures in the region with Singaporean companies, which serve as the gateway to many countries in Southeast Asia," he said.

The Israeli hi-tech industry, which has always viewed the United States as its main target market, followed by Europe, is now discovering the Far East. "The only market that is growing for Israeli companies is the Asian market," said Kalish. "There is no reason for Israeli companies not to take advantage of this immense market, which could be bigger than the American one."