Israeli VC to back Russian startups in $100 million fund

Israeli VC to back Russian startups in $100 million fund

Amir Ben-Artzi
EE Times Europe
06/11/2008 3:56 PM

NETANYA, Israel — Israeli investment house Tamir Fishman & Co has won a Russian government tender to create a venture capital fund that will manage $100 million in investment in Russian technology startups. The fund was established with the help of Russia Venture Company (RVC), a $1.25 billion fund of funds, which is owned by the Russian government and invests in venture capital funds. Tamir Fishman's local partner in Russia is Central Invest Group.

The Russian government will put up 50 percent of the investment through RVC. The investors of the other 50 percent received an option to acquire the government's part at the price of the fund plus 5 percent or the rate of the consumer price index.

In 2007, Tamir Fishman and other investors said they delay their participation in the tender, after businessman Oleg Shvartsman, who was Tamir Fishman's business partner in venture capital, told the Russian newspaper Kommersant that his company, FinansGroup, enjoyed connections with the Russian administration.

Tamir Fishman's involvement with Russia is related to the fact that Russia aims to copy the Israeli model for venture capital. For that purpose, it is involving Yigal Erlich, founder and managing partner of the Israeli Yozma Group, who is considered one of the founding fathers of the Israeli venture capital industry and one of the most prominent figures in the Israel high-tech arena.

Under the Yozma initiative, ten venture capital funds were formed in partnership with foreign venture investors. The total capital of each fund was $20 million to $25 million of which the government's share was 40 percent and the foreign investors' 60 percent. A major attraction of the Yozma program was the foreign investors' option to buy out the government's share at a pre-agreed price for a period of five years. In addition, Yozma was allowed to invest a certain portion of its capital directly. This initiative proved to be extremely successful: 10 VC funds were formed with a total of $210 million under management and 15 direct investments that were made by Yozma itself.

At a recent meeting in Russia, Erlich urged investors in the room to lobby their governments to invest in innovation and education in technology. "You have to hurry up and invest now or foreign companies will take over and your countries will lose markets," he advised.