Oren Fuerst: “The more Israeli companies we can help, the happier we will be.”When Udi Gordon, co-founder and CEO of Misgav-based Virtual Ports, began his search for investors in order to bring his medical technology company’s two FDA-approved surgical devices into mass production, he wanted more than anything to break into the US capital market.
“Of course we wanted to tap into this market,” says Gordon, whose two-year-old company’s medical instruments could take laparoscopic surgery to the next level. “But in my experience, you cannot get investors via cold email or phone call.”
According to Gordon, there is a litany of other challenges facing Israeli start-ups in search of US investors, besides access. Oftentimes, investors want to be geographically close to the companies in which they invest; familiarity with local regulations, language, and culture; and the sheer number of start-up ventures in the US, are major competitive factors. “It’s an uphill battle to get American capital,” says Gordon.
There is nevertheless a significant pool of American investors interested particularly in Israeli entrepreneurship. Just ask Oren Fuerst and Oren Heiman, founders of New York’s new Tevel Angel Club, the only US-based angel investment club that focuses exclusively on investment in early-stage Israeli technology companies.
Established in spring 2007, the Tevel Angel Club is Fuerst and Heiman’s response to what they perceived as a growing mutual appetite among American investors and Israeli technology start-ups, for access to one other.
“As far as we know there is no angel club that is focused only on Israeli companies; we are very happy to have created a non-profit organization to fill that void,” says Fuerst, a former professor at Columbia Business School and Yale University’s School of Management, and current managing director of BioVance Medical, which focuses on the development of life sciences technology. “Our aim was to create a vibrant community of promising Israeli technology companies and accredited American angel investors with a desire to invest in Israel.”
In addition to filling a void in the market, the ex-patriot Israeli businessmen were motivated to establish Tevel in order to help promote the growth of the Israeli economy. “We decided we wanted to do something constructive for Israel’s economy during the second Lebanon war,” says Heiman, a managing partner at Shiboleth, Yisraeli, Roberts & Zisman, one of the largest Israeli law firms in New York.
“But it wasn’t just about helping Israel. We could sense that there was a real market for this – not just of investors who love Israel, but of investors who believe very strongly in Israeli ingenuity and technology,” he adds.
Heiman and Fuerst couldn’t have been more right. Since they launched Tevel, dozens of young Israeli companies – in various fields including life sciences, Internet, electronics, telecom, software, clean-tech, homeland security, medical devices, new media, and software – have found American investment, ranging from a few hundred thousand dollars, to millions, via the Tevel network; among them, Virtual Ports.
“Tevel gave us the opportunity we needed to attract two new US investors,” says Gordon, whose company’s two devices are now bound for the assembly line.
Gordon was one of the first crop of Israeli start-ups whose business plans were selected from among some 30 submissions, to pitch at the organization’s first ever bimonthly session at the Harvard Club in Manhattan in January, which attracted the attendance of more than 50 angels.
His company was chosen by Tevel’s 17-member executive committee, which consists of top New York-based entrepreneurs, including Yaron Galai, whose company Quigo was acquired by AOL this past year for $350 million; Alon Geva, whose XMPie sold to Xerox for $55 million; and Nimrod Lev, who sold JCupid to Spark Network for $10 million.
Good ideas alone are not enough, notes Fuerst. In addition to having R&D operations based in Israel, with intellectual property owned by Israeli institutions, prospective companies must have a business plan, prototype, and/or must already be working with customers in order to qualify to pitch.
“The companies being screened have to be economically viable, and must possess the ability to impact their field,” explains Fuerst. “They must have significantly large markets, or promise to generate significant profits in the near future.”
Prior to meetings, Tevel’s executive board members help pitching companies navigate the US capital market, craft their strategies, and coach them on presentation skills. “The industry in the US is very large and investors are more specialized than they are in Israel,” says Fuerst. “This pre-pitch education is really essential.”
Angels who find interest in one or more of the presenting companies are then invited to a follow-up meeting the next morning at the Tevel Angel Club offices. The intimate two-hour meetings may lead to commitment to an actual investment. If not, angels are free to approach the company and negotiate an investment directly.
Two pitching sessions later, with an upcoming one scheduled for late April-early May, the Tevel network has already grown to attract some 200 to 300 angels. Not all of these attend the pitching sessions; some become members in order to gain access to Tevel’s growing online database of start-ups that apply to participate in the forums. “Lots of business is taking place outside the meetings,” says Fuerst. “That’s the beauty of it. We are creating a real community with a life of its own.”
The pitching sessions are, however, important events. Each features a guest speaker, a business specialist of some sort. In addition, says Fuerst, the investors use the opportunity to share their expertise with the pitching companies. “Investors express their opinions openly and offer tips,” explains Fuerst.
The pitching sessions are also important for Israeli non-profits, one of which gets the opportunity to present at each meeting, in order to elicit charitable donations. In the past, Larger than Life, an organization that funds trips to Disney World for kids with cancer; American Friends of Sheba Medical Center at Teleshomer; and Dor Chadash, presented.
Of course, the sessions are also important for investors. “People know they will see great technologies from Israel,” says Heiman. “That’s why they come.”
The million-dollar question, of course, is why Israeli companies? What accounts for their unique ingenuity? According to Fuerst, a few factors come into play. Historically, Israelis were under pressure to come up with smart technological military solutions, in a short time frame and on small budgets. “The army has had a huge impact on the development of the technology industry in Israel,” he says.
A second contributing factor is the mass immigration of scientists and engineers to Israel from the former Soviet Union. “These people took Israeli technology a giant leap forward,” he says. “Israel has a very high concentration of technological talent.”
The diversity of the country’s immigration may also play a role. “Everyone in Israel is second or third generation immigrants,” he says. “This cultural mixing triggers people to have an open mind.”
On top of this is the country’s market size. “Everyone knows everyone,” says Fuerst. “It’s much easier for people in a particular field to gain access to other people in that field. Israel’s sense of community is a tremendous advantage.”
Tevel’s goal is to bring a new element into the mix; namely, the exposure of Israeli start-ups to the biggest capital market in the world. It is with this in mind that the club, “Tevel”, which means “world” in biblical Hebrew, is named.
In future, Heiman and Fuerst plan to expand their operations to include a formal day of coaching for companies selected to pitch. They are also in the midst of designing separate, industry-specific pitching events; assisting Jewish organizations outside of New York to start their own local angel clubs aimed at investing in Israeli companies; and collaborating with other angel clubs outside of New York to organize “mini pitching road shows” for visiting Israeli start-ups.
Tevel is also looking to expand its pool of investors and to refine its online community to include video clips of pitches, in order to open up the Tevel network to more and more investors who cannot make it to sessions.
“It’s a very simple goal,” says Fuerst. “The more Israeli companies we can help, the happier we will be.”