Venture capital funds disclose, with some pride it should be said, their investment portfolios, especially large investments and investments in attention-drawing companies. The funds, however, are tight-lipped about their own investors.
The reason why the list of investors in venture capital funds is such a closely guarded secret has less to do with the investors' wishes for discretion, and more to do with the funds' own interests. They fear that if an investor's name becomes public knowledge, it will be approached by other venture capital funds and the investor may make further investments with the fund's rival.
Evergreen Venture Partners and Pitango Venture Capital are two prominent Israeli venture capital funds that raised new funds in 2007. Evergreen raised $200 million for its fifth fund and Pitango raised $330 million for its fund. Except for a few known longstanding investors, neither fund disclosed their investors.
"Globes" has now reported, for the first time, the list of investors in these two funds. In addition to investors, whose names appear in almost every venture capital fund, the lists below is of interest in light of the current financial market crisis, which has almost completely wiped out some large potential investors in private equity funds. Since both Pitango and Evergreen closed their latest funds last year, their list of investors includes institutional investors that would not now invest even one dollar in venture capital.
There are almost no Israeli institutional investors in either Evergreen or Pitango. This is nothing new; few Israeli institutional investors invest in Israeli venture capital funds. Nonetheless, there had been an impression, mostly from outside the industry, that Israeli institutional investors were becoming more open to investment in venture capital.
Among Israeli institutional investors, Evergreen raised money for its fifth fund from Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Israel Discount Bank (TASE: DSCT), Bank Leumi (TASE: LUMI) and its Teuz Provident Fund. Pitango raised money from Bank Leumi and Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL). Although the amount of the investments is not known, they definitely did not comprise the bulk of the money the two venture capital firms raised for their fifth funds.
Evergreen and Pitango have a connection that goes beyond operating and competing in the same industry; it is in their choice of investments. Evergreen invested in the Pitango V Fund. This investment was apparently not made with funds raised from investors or in its management company.
Evergreen denied that its management company had ever invested, only stating, "It is possible that secondary funds or fund of funds hold Pitango funds, just like they have holdings in other Israeli funds." It cannot be ruled out that similar situations would be uncovered if the investors' lists of other venture capital funds were disclosed.
Over the years, a growing number of corporations have been investing in venture capital funds. The reasons are varied. Some investors are high-tech companies that want to make strategic investments in start-ups in order to be the first to know what's going on in their industries. In other cases, companies make financial investments by corporate funds, or the investments are made by corporate venture capital funds.
Both Evergreen and Pitango have corporate investors. Pitango's investors include Eastman Kodak Company (NYSE: EK), Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), Rupert Murdoch controlled Time Warner Inc. (NYSE: TWX), Dow Chemicals Inc. (NYSE: DOW) through Dow Venture Capital, Novell Inc. (Nasdaq: NOVL), Eurocom Group, Shrem Fudim Technologies Ltd. (TASE:SFKT), and Alfred Akirov's real estate company Alrov (Israel) Ltd. (TASE: ALRO).
Evergreen's investors include IBM Corporation (NYSE: IBM). Nochi Dankner has invested in both Evergreen and Pitango through Koor Industries Ltd. (TASE:KOR) unit Koor Corporate Venture Capital.
Investors in both Evergreen V and Pitango V include top-tier US pension funds. The Pennsylvania State Employees Retirement System, California Public Employees' Retirement System (CalPERS) through Grove Street Advisors, Teachers Insurance and Annuity Association, College Retirement Equities Fund (TIAA-CREF), and the YMCA Retirement Fund are investors in Pitango.
The Ontario Municipal Employees Retirement System (OMERS) and the Teachers' Retirement System of the State of Illinois have invested in Evergreen.
Published by Globes [online], Israel business news - www.globes-online.com - on September 28, 2008
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