High On High Tech

American venture capitalist David Anthony invests in Israel.

August 7, 2009

Janice Arnold
Canadian Jewish News

Question: What do you think about Israel being so technically advanced?

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.

Mr. Anthony, the managing partner of New York-based venture-capital fund 21 Ventures, said that Israel is “the single best place in the world to invest in technology ventures.”

Mr. 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.

He founded 21 Ventures in 2004 with three other investors and $5 million. He now has investments 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.

He is actively seeking more investments. By the end of 2008, he expected the fund to be worth $200 million; byt the end of 2009, between $250 and $300 million.”

In the future, Mr. Anthony said, he expects to invest exclusively in Israel, describing it as a place of “tremendous opportunity in multiple fields.” As proof, he pointed out that every major U.S. tech company does research and development in Israel.

Moreover, he declared, Israel is a bargain, with the “most mispriced assets in the world.” Investors are getting a 30 percent discount because of security issues in the Mideast.

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.

Israel’s economy will continue to be driven by technology for at least another 60 years, no matter where its borders are ultimately drawn, Mr. Anthony 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, Texas, are attracting more venture capital, he said.

Part of the explanation for that is the Israeli government, which is investing heavily, putting some $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,” said Mr. Anthony.

More patents are filed in Israel than in most European countries or Canada, he continued. It also has some of the finest research universities.

Israel is well located to do business with emerging economic giants such as China and India and, although it’s done quietly, a lot of business is conducted between Israel and its Arab neighbors.

Mr. 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.

There are other, less obvious factors for Israel’s becoming a technological powerhouse, according to Mr. Anthony. Its strong adherence to the rule of law is important to an investor relying on protection of intellectual property.

Israel’s mandatory military service gives young people the opportunity to spend time in advanced technological settings.

Mr. Anthony, who is legally blind due to premature macular degeneration, is 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.