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| Home - Venture Profile - Jul 04 Issue |
Venture Profile: Rami Kalish, Pitango Venture Capital |
By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
Angel Mehta: Israel seems to have a burgeoning venture capital industry; how did it come about?
Rami Kalish: At the end of ’92, perhaps near the beginning of ’93, the Government of Israel initiated an incentive program called YOZMA, to stimulate private venture capital...I don’t know if you’ve ever heard about it?
Angel Mehta: Never…
Rami Kalish: YOZMA, in Hebrew, stands for “Initiative“ and it may be one of the few cases that I know that a government-founded business initiative was actually successful. Prior to ’92 you had maybe one or two investment firms, and you wouldn’t call those venture capital firms. What the government did in order to encourage entrepreneurs to start a new industry in Israel was actually provide them a program for loans or investments that you could repay over 5 years with normal interest and small upside. It was a great incentive to raise money.
They did it for only ten funds, but one of the funds that received approval was mine. The first fund of the Pitango Group was Polaris. We started Polaris in July of ‘93 together with Dovrat Shrem Group, a private investment house, and the total size of the fund was $20 million, out of which $8 million came from the government. The fund was very successful so of course we happily paid back the loan that we got plus all of the interest and the portion of the upside. This is how we started and really it’s the story of Venture Capital in Israel. Most of the leading venture capital funds were financed by the same program in the beginning.
Angel Mehta: Why do you think that the Technology sector has blossomed so much in Israel? It seems like a number of Silicon Valley-based venture capital firms have setup shop over there….
Rami Kalish: Some are setting up shop, but most are co-investing with us and other Israeli funds. But to answer your question, I think Israel is one of the key hubs for technology innovation outside the U.S. There are just a lot of good ideas that seem to be flowing here, feeding the venture capital industry.
Secondly, there is an entrepreneurial spirit within the people here. They have the guts to try and aren’t afraid to fail.
Angel Mehta: A key personality trait for entrepreneurs anywhere, I suppose…
Rami Kalish: Yes. If you to compare the average Israeli engineer to the average European engineer – I’m just using Europe as an example right now – I think you’ll find that a higher percentage of the European engineers are more likely to be happy going to work for siemens or Nokia… they’re very happy with their standard of life, the time they have for themselves, the family and vacations etc., and that’s fine. However, Israelis tend to be more aggressive and ambitious about the targets they set for themselves.
Angel Mehta: You mentioned the strong flow of ideas… where does the technology innovation come from?
Rami Kalish: Three sources, I’d say. First, Israel has a strong focus on Science and Academia. Second, many of the technologies that were developed for the Defense Industry were later spun-off and are being commercialized. Of course, it’s never the same application but many times it’s the same underlying technology. Third, the immigration flow of Jewish people from Russia, or the ex-Soviet Union, is quite high. Many of them were highly educated in science and technology and they brought a lot of know-how in physics, basic science, optics, materials and all those are very relevant to different industrial sectors.
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