Gaon and Bank Austria in scientific experiment

Whereas in the past, the Israeli venture industry has tended to look first to the US, both as a source of capital and alliances and as an exit route, Israeli investment company Gaon Holdings (Gaon) has joined forces with Bank Austria to launch a venture fund which aims to open the door to and from Euroland’. The Tech Science Fund has a target of euro 40 million.

Aimed at non-US investors, the fund will invest in Israel-based, Israeli-related and European investment opportunities, deploying at least half its capital in the health sciences sector. The Tech Science Fund’s secondary focus is on the IT sector, particularly Internet, telecommunications and software ventures, but it may also invest in high-growth opportunities in other sectors. As much as 30 per cent of the fund will be invested in start-ups.

Gaon’s founder and president is Benjamin Gaon, one of Israel’s most prominent businessmen. Within three years of assuming the roles of president and CEO of Koor Industries, Gaon had turned around a conglomerate with $1.4 billion of debt and annual losses topping $400 million (euro 385 million) into the flagship of the Israeli economy with a market value of $2 billion (euro 1.9 billion). During his career, Gaon has built and acquired numerous companies and launched several IPOs both within Israel and abroad.

Gaon is active in Israel, the Middle East and other markets worldwide; its Gaon Asset Management subsidiary will act as adviser to the Tech Science Fund. The fund will benefit from deal flow channelled through Gaon’s extensive contacts in Israel and beyond. Bank Austria, the fund’s sponsor, will use the network and resources of its CAIB investment banking subsidiary to identify industrial and financial partners for the fund’s investees and will also provide support to facilitate exit strategies.

The creation of joint ventures and alliances with European partners to add value is a key plank of the Tech Science Fund’s strategy. The vehicle’s promoters expect this feature to reinforce the attractions that access to Israel’s renowned science base holds for investors. Israel has more scientists and engineers per capita than any other country and also ranks first worldwide in terms of research and development spend, currently running at three per cent of GNP. The market currently boasts an estimated 2,500 technology start-ups, ranking it second only to Silicon Valley in terms of concentration of technology-based enterprises.

Gaon Asset Management’s CEO, Dan Gilat, heads the fund’s management team. Gilat was previously a partner in Clal Venture Capital, which achieved a 49 per cent IRR, and its follow-on fund, Omega (Israel Infinity).

The fund, structured as a British Virgin Islands company with additional LPs to accommodate differing investor requirements, will have a seven-year term extendible by two one-year periods.