-OpEd-
TEL AVIV — Israel’s high-tech industry has experienced a major boost in recent years. The 2014 numbers are notable: a record $3.4 billion in investments and mergers and acquisitions valued at $7 billion. There was also an increase in venture capital funds raised, totaling approximately $914 million.
None of this is by chance. The forces at play are tightly linked, reflecting a willingness among entrepreneurs and investors to take greater risks. This requires patience and the ability to resist early acquisition offers that might reap immediate profit but that don’t reflect potential maximum value.
It’s important to note that in the world of business, those who enjoy the most success are the investors who risk their money, time and energy to launch companies and guide their subsequent development.
The chain of investors in the high-tech world starts with venture capital investors who raise their money from institutional investors such as pension funds that can include taxpayer money. Profit-sharing policies and pension funds will benefit most from subsequent exits and from the rising value of companies.
Unfortunately, the numbers show that a significant number of Israeli institutions have chosen not to invest in local high-tech companies in the past. They are therefore not profiting from today’s boom.
It’s logical
The point is that we must take into account other considerations at the national level when deciding whether to invest in public funds in the local high-tech industry or in other investment channels abroad.
We must understand that when we invest our money abroad, we basically fund other economies — in Europe, Asia or elsewhere. Our money supports endeavors that create jobs somewhere else, and taxes that people pay in other countries. That money goes to buying goods and services from foreign companies in different markets. All of this happens there instead of here.
This way of thinking could be called patriotic, but the fact is that buying and investing locally is really just simple financial logic. It is better not only for the state and the population of a country, but also for its investors.
*Kobi Shimna is the CEO of the Israeli IVC research company specialised in High-Tech and Venture Capital.
