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The number of venture capital funds seeking attractive investments is increasing, and successful funds must offer their partner companies "added value" and not just money. This strategy, which has been embraced by Concord Venture Management Ltd., has turned Concord into one of the top funds in Israel.
Concord manages a limited portfolio of companies, and is thus able to play an active role in each company’s development.
"We maintain a small portfolio of companies, and can thus give each individual attention, and attain high returns," said Matty Karp, a managing partner at Concord.
Earlier this year, the company raised $180 million for its new fund, Concord II, a successor to Concord I and Nitzanim.
Concord focuses on early-stage ventures in communications, optical networking, software, the Internet, and the life sciences.
Nitzanim, the first fund managed by Concord’s team, was the first investor in Galileo Technology (NASDAQ: GALT) and ESC Medical Systems (NASDAQ: ESCMF), two of the most successful Israeli start-ups. It also invested in Accord Networks, which went public in June (NASDAQ: ACCD). WaveAccess, a developer of wireless data communications products and one of the Nitzanim companies, has been acquired by Lucent Technologies.
"Nitzanim was established in 1994. In that vintage year for venture capital funds, Nitzanim was the highest ranking Israeli fund, with an annual internal rate of return of 120 percent. In a list of US funds that year, it would be among the top 25 percent," Karp said.
Concord’s aim is to help start-ups get off the ground and, at a later stage, introduce them to US co-investors, such as Advanced Technology Ventures, Charles River Ventures, US Venture Partners, NEA, and Coral Ventures.
Concord is unique in that it not only assists young and inexperienced entrepreneurs – who need help in everything from setting up a company to enrolling a management team – but also experienced entrepreneurs, who have access to funding, but need a sounding board for their ideas, and help in drawing up a business development plan.
"To add value to experienced executives and entrepreneurs is a challenge," Karp said. Concord’s management team, which includes four general partners – Matty Karp, Yair Safrai, Batsheva Elran and Avi Domoshevitzki – successfully meets that challenge, thanks to its extensive experience in marketing strategy, business development and general management.
In the US, the fund targets two segments of Israeli entrepreneurs. "The first is young Israelis who, though not experienced executives, want to develop an idea, and find it difficult to gain the attention of top US venture funds. We understand them and can help them get started. At a later stage, we guide them in their approach to US funds," said Karp.
The second segment comprises Israeli executives working in the US who want to set up their own start-up, with an R&D center in Israel. "They know the industry and have access to US venture capital, but need help in establishing and maintaining their R&D center in Israel. We help them establish their Israeli operation," Karp said.
In addition to the general partners, Concord has established a broad personnel network in Israel and the US, which supports the portfolio companies in important areas such as recruiting. Concord’s venture partners, like Avigdor Villenz, founder of Galileo Technology, are a very valuable asset of the company.
Concord II, a fund backed largely by leading US institutional investors, already has a portfolio of eight companies, and is studying others. The fund identifies and invests in areas, deemed to have high-growth potential – the Internet, optical networking, and wide-band and cellular technologies.
"We do not limit ourselves to these fields," Karp said. "We try to identify areas that will be attractive in the coming three to five years, and invest in companies that may revolutionize their industry or develop a new market."