MONTREAL — American venture capitalist David Anthony has $125 million in capital under his management, and more than $80 million of that is invested in start-up technology companies in Israel.
David Anthony, centre, managing partner of 21 Ventures, is seen with Monette Malewski, president, and Lewis Dobrin, past president, of the Montreal chapter of the Canadian Friends of the Hebrew University. [PBL photo]
And, yes, he sleeps very well at night.
Anthony, the managing partner of New York-based venture-capital fund 21 Ventures, told a Montreal audience that Israel is “the single best place in the world to invest in technology ventures.”
Anthony was the guest speaker at the inaugural Albert Einstein Business Forum, co-sponsored by the Canadian Friends of the Hebrew University of Jerusalem and the Government of Israel’s Economic Mission to Canada. The guests came largely from Montreal’s financial and investment sector.
He founded 21 Ventures four years ago when even high risk-tolerant investors were shying away from Israel after the tech bubble burst and the intifadah was still being waged.
He has investments now in 20 seed and early-stage technology companies in Israel and the United States, mainly in the physical security, clean energy and mobile software fields, and is actively seeking more.
“By the end of the year we expect the fund to be worth $200 million, and by the end of next year, between $250 and $300 million,” he said.
Anthony and three other investors began with $5 million in 2004.
In the future, Anthony says, he expects to invest exclusively in Israel, describing it as a place of “tremendous opportunity in multiple fields.”
If you don’t believe him, Anthony notes that every major U.S. tech company does research and development in Israel. Israel is a bargain, he said. “Israel has the most mispriced assets in the world.” Investors are, in effect, getting a 30 per cent discount because people think Israel is a dangerous place.
“I don’t believe that. In the worst case scenario, Iran bombs Israel, and in that event we all better have gold bullion,” said Anthony, because the entire world economy would collapse.
21 Ventures (so-named for the century, not its portfolio size) initially invests $250,000 to $2 million in the companies it selects. Its limited partners also have a direct hand in the development of those companies. The fund has yet to pick a loser, he said.
Israel’s economy will continue to be driven by technology for at least another 60 years, no matter where its borders are ultimately drawn, he said.
There are 3,000 start-up tech companies in Israel at any given time, and only California’s Silicon Valley, Boston, and possibly Austin, Tex., are attracting more venture capital, he said.
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Part of the explanation for that is that the Israeli government itself is investing heavily, he said. Anthony got a chuckle when he asked his audience what they would think if the government of Quebec, which has a similar population to that of Israel, put $400 million a year into tech start-ups.
That’s the sum the office of the chief scientist, part of the industry ministry, budgets for such projects each year and it is happy to work with foreign investors. The incubators can receive grants of up to $500,000, which are renewable if they show progress.
Israel has the highest per capita number of PhD holders in the world, and of electrical engineers by a factor of three, in large part because of the influx of several hundred thousand Russian immigrants in the 1990s.
“In every one of my companies, there is a Russian scientist,” he said.
More patents are filed in Israel than in most European countries or Canada, he said. It also has some of the finest research universities.
Israel is also well located to do business with emerging economic giants such as China and India, and, although it’s done quietly, there is a lot of business conducted between Israel and its Arab neighbours. Anthony said one of his own companies deals with the Bin Laden Construction company in Saudi Arabia.
“The Arabs will [trade] as long as the invoice comes from New York or London or Toronto,” he said.
Because they are so concentrated, “you can visit 100 companies in five days,” something Anthony has managed to do despite being legally blind due to premature macular degeneration.
Doing business is easy. “If every cabbie in Los Angeles is an aspiring actor, everyone driving a taxi in Israel has a business plan or a ‘finder’ for someone else,” he said.
There are other less obvious factors for Israel’s becoming a technological powerhouse, according to Anthony. Its strong adherence to the rule of law is important to an investor relying on protection of intellectual property. “Some say the court system is slower, but it’s as good as that of the U.S.,” he said.
Israel’s mandatory military service is another. “Every 18-year-old gets to spend time in the most technologically advanced military in the world,” he said.
Moreover, all recruits are assigned to a unit of four to five people, which fosters communication, trust and the delegation of responsibility – all essential qualities in creating a successful company as well.
Israelis also grow up with a “war mentality,” he said, which may account for their highly competitive nature. “They feel they are going to war against some of the largest companies in the world.”
Anthony also attributes the Jewish people’s millennia-old struggle against the odds as a fundamental explanation for Israelis’ remarkable scientific and business acumen.
“To survive, Jews had to improvise; inventiveness is ingrained in the culture,” he said.
Anthony is also an adjunct professor at the New York Academy of Sciences, where he teaches technology commercialization to PhD candidates, post-doctorates and faculty from such prestigious institutions as Princeton, Yale and Columbia Universities, as well as the Sloan-Kettering Institute and the Albert Einstein College of Medicine.
