Sources inform "Globes" that Pitango venture capital fund is setting out to raise $350 million for what will be its sixth fund.
Most Israeli venture capital funds have been given the cold shoulder by investors but Pitango hopes to succeed in raising its sixth fund through its team of partners who are as skilled in marketing as they are in investing in companies that yield results. Pitango declined to comment.
Pitango is one of Israel's largest, oldest and best-known venture capital funds, and currently has $1.3 billion under management in five funds. 2011 is looking good for Pitango, which has had some handsome exits over the past two years, mainly in the life sciences.
The annual meeting of Pitango's investors is being held this week and representatives of the investors will meet in Provence to hear about the funds' portfolios and future plans. Participants will see a movie in which the CEOs of Pitango's portfolio companies talk about the good situation that their companies are in while praising the fund - this will assist the fund raising efforts.
Pitango invests in a range of companies in communications, Internet, mobile technology, cleantech, semiconductors, and life sciences, in a range of the start-ups phases. Through the endeavors of general partner Ruti Alon, biomed has become one of the fund's leading investment fields. Half of the Pitango IV Fund was invested in life science companies, and this policy has proven itself with successful exists such as ColBar Life Science Ltd., Disk-O-Tech Medical Technologies Ltd., Ventor Technologies Ltd., and , and BioControl Medical Ltd..
However, California Public Employees' Retirement System (CalPERS), one of the investors in Pitango's funds, reports that Pitango's III $500 million fund, which was raised in 1999, has recorded negative returns of 6%. Pitango IV from 2004 has a positive yield of 2%. Few funds raised in 1999 were profitable and Pitango IV still has time to show improved returns.
Pitango was ranked second in "Globes" 2011 list of quality venture capital funds, and its managing general partner Rami Beracha was chosen as Israel's best venture capital fund partner for 2011.
The fund is managed by six managing general partners: founders Rami Kalish and Chemi Peres as well as Aaron Mankovski, Isaac Hillel, Beracha and Zeev Binman who is also CFO. The firm has three general partners: Rona Segev-Gal, Alon, and Bruce Crocker.
The founding partners are both in their fifties and like other venture capital funds in Israel, one of the challenges they face is to raise a young generation who will one take over the reins from them. No venture capital fund has currently fully met this need.
Pitango is setting up its new fund at a challenging time. In 2010, only the Israel Cleantech Fund raised new capital - a fact which raised concerns throughout the industry. A large number of other Israeli venture capital funds, who haven't raised capital for three or four years, are now sitting on the fence, and these are likely to be next in line to set up new funds. These funds include Evergreen, Genesis Partners, Giza Venture Capital, Vertex, JVP, Gemini Israel Funds, and Magma, and they will follow the fortunes of Pitango's new fund with great interest.
In the past few years it has been difficult, and even impossible to raise new funds both in Israel and worldwide. Consequently, some fund managers feel under great pressure today. After putting off raising new funds again and again, they have to raise new funds, otherwise their funds will be considered dead.
One interesting question is whether Pitango's sixth fund will be the first ever Israeli fund to attract an Israeli institutional investor. So far only foreigners have been prepared to invest in Israeli venture capital funds.
Published by Globes, Israel business news - www.globes-online.com - on May 16, 2011
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