By Lucian Schönefelder Mar 10, 2017
The name of the city Tel Aviv (literally "Spring Mound") was chosen in 1910 based on the Hebrew title of Theodor Herzl’s book "Old New Land". The name represented the idea of a fresh start in an ancient land with thousands of years of history.
From today’s vantage point, the founding fathers of Tel Aviv were incredibly prescient when choosing this name. Tel Aviv has established itself as one of the largest and most innovative technology hubs in the world. This is reflected in one of the highest global venture funding amounts per capita. According to IVC Research Center, Israeli high-tech companies raised an all-time annual high of $4.8 billion in 2016, 11 percent above the $4.3 billion raised in 2015. This compares to $2 billion raised in Germany for example, a country with ten times more inhabitants.
The drivers behind these astounding figures are manifold. Israel boasts a strong education system in which top talent gets a world-class practical education in the technical units of the military and thereafter an outstanding academic education in universities like the Technion. Israel also benefits from a deep venture capital funding ecosystem. Combine a wealth of very well educated engineers and strong funding with an incredibly entrepreneurial culture that puts a big premium on risk-taking, and you understand the reason behind the success of “Start-up Nation.”
When we started our technology growth equity effort in early 2014, Israel was thus one of the first countries where we started to spend meaningful time. This lead to KKR’s first ever investment in Israel in early 2015: Clicktale, a Digital Customer Experience analytics SaaS company. We made a second investment with Optimal+, a global provider of data analytics and automation solutions for the semi-conductor and electronics industry, in late 2015. My team and I are now going to Israel regularly to look for new opportunities and to build KKR’s relationships with the local eco-system.
Our presence in Israel was an important element in the thesis for our KKR Next Generation Technology Growth Fund (“NGT”), which is focused on investments in software and internet companies, where KKR’s enterprise-building experience and resources can play a meaningful role in helping them reach scale.
KKR has a truly global presence covering all of Asia, Europe and the Americas, which allows us to provide tech companies with strong local access. We, for example, helped Clicktale with the build-out of their presence in the U.S. and Europe, after which the company won Adobe’s Marketing Cloud Innovation Partner of the Year Award. Our network of 120 KKR portfolio companies provides an opportunity to develop either clients or strategic partners for tech companies. Optiv, a recent large cap U.S. cyber security investment for example, is very keen to partner with Israeli’s cyber security companies and distribute their products in the U.S. and elsewhere.
We are very excited about the opportunities that KKR can offer to Israeli tech companies and will do our share to help transform Israel from “Start-Up Nation” to “Scale-Up Nation.”
The views expressed reflect the current views of the writer as of the date hereof and neither the writer nor KKR undertakes to advise you of any changes in the views expressed herein. Opinions or statements regarding financial market trends are based on current market conditions and are subject to change without notice. References to a target portfolio and allocations of such a portfolio refer to a hypothetical allocation of assets and not an actual portfolio. The views expressed herein and discussion of any target portfolio or allocations may not be reflected in the strategies and products that KKR offers or invests, including strategies and products to which the writer provides investment advice to or on behalf of KKR. It should not be assumed that the writer has made or will make investment recommendations in the future that are consistent with the views expressed herein, or use any or all of the techniques or methods of analysis described herein in managing client or proprietary accounts. Further, the writer may make investment recommendations and KKR and its affiliates may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this document.