Davidi Gilo planned for his investment firm, Gilo Ventures, to launch operations in Israel in early 2001. But then Michael Dell, founder of Dell Computers (Nasdaq:DELL), said he found the political situation a deterrence against investing in Israel. That did it. On October 11, 2000 Gilo convened a press conference to proclaim the inauguration of offices in Israel, funded by $100 million of his own money.
The fund's philosophy is simple. "We believe people are the key to all successful endeavors. This is especially true of rapidly-developing hi-tech," Gilo said, adding that the business sought people with experience in building businesses, or who showed potential to become star entrepreneurs.
"We also work with people we like," he said: given the long range with intense involvement, what choice is there?
Unlike other venture capital funds, which tend to diverge from their original investment philosophy, Gilo Ventures fulfilled expectations. It quickly put together a promising team of investment managers and a promising portfolio that allows Gilo to work with people he likes. He was expected to be a new daddy for Israel's promising community of hungry startups.
Yet somehow the dream seems to have gone awry, at least for said startups. Somehow he seems not to be investing less in Israel's fledgling firms, and more in companies affiliated with him or his family.
These were the people helped him turn into one of Israel's richest entrepreneurs, by selling DSP Communications to Intel Corporation (Nasdaq:INTC) for $1.6 billion in 1999.
Gilo Ventures manager Emiko Higashi served as a consultant to Gilo for the DSPC deal. She brought vast experience in mergers and acquisitions during her 15 years as Merrill Lynch's banking division manager.
Advocate Avi Fischer, chairman of Gilo Ventures, is a childhood friend of Gilo. He is a managing partner at the Fischer, Bahar and Chen law offices, and has advised several of Gilo's companies since 1985. Fischer served as a director at DSP Group, and served for seven years as a director at Vyyo (Nasdaq:VYYO), another of Gilo's companies. He also serves as co-chairman of the Ganden Holdings investment company, which is controlled by Israeli businessman Nochi Dankner.
Ilan Judkiewicz, a high-ranking official in the Gilo group, will be running Gilo Ventures' operations in Israel. But he doesn't work out of the company's offices in Daniel Frisch Street of Tel Aviv. He's moved to Cupertino, Califonia.
A short list has to include Shira Computers of Kfar Saba. It was established in 1987 by former employees of Scitex Corporation (Nasdaq:SCIX) - a company that Gilo tried and failed to take over. It develops data transfer and verification solutions for the graphics art industry. Two weeks Vyyo signed an agreement to acquire Shira for $560,000 in shares.
As for Vyyo, it specializes in broadband communications solutions and trades on Nasdaq at a company value of $38 million, or less than $1 per share. At its peak, it commanded a share price of $44. Gilo himself has taken the reins at Vyyo and is trying to expand its field of operations.
Gilo founded London-traded Zen Research (LSE:ZEN) and holds 26% of its shares together with family members. He plans to delist the company. Last week he published a buy-back tender offering 10 pence per share, which values the company at $26 million. It has $50 million cash in hand, though.
Zen had raised $80 million in its IPO in April 2000. Within months its valuation soared to almost a billion dollars. But when the PC market slowed, the company had to refocus its business and trim down. Today it basically consists of Silicon Value, a Jerusalem-based startup it bought in April 2001 for $22.25 million from Tioga Technologies (which itself paid something like $140 million for the company). Silicon Value develops semiconductors for communications networks and is also hurting from the telecommunications crash.
Then there's Cycle Group Israel - which Gilo and his brother Yechiel founded in the early 1990s. That company is engaged in developing ¿ cat litter. Environmentally friendly cat litter from recycled wood waste, that is. Davidi himself is the company's chairman and holds 35% of its shares. Avi Fischer also holds a chunk, as does Tel Aviv-listed Orlite.
In the past, Judkiewicz stated that Gilo Ventures would be spreading its largesse among Israeli startups of all stages, from seed to settled, and including troubled companies too.
Gilo has quite a reputation for salvaging sorry endeavors on the brink of bereavement. Take Vyyo, which he resurrected from the dying body of Phasecom.
Yet the Israeli offices of Gilo Ventures seem to be bereft of life. The office was supposed to employ three or four people. But its chief job seems to be maintaining the troubled companies Gilo is busy reviving.
Gilo Ventures' website quotes Fischer as saying, "Gilo Ventures is unique in that we never stop finding strategic and creative ways to solve problems". Yet it seems not to have found a solution to creating value for its shareholders, except for Davidi Gilo.