Israel Investment Advisors (IIA) at 10: Why We’ve Made It Our Mission to Bring More Investment Capital to Israel
Israel’s tech firms have given the country a reputation as the “Start-Up Nation.” But Israeli firms often have difficulty scaling up to the next level, largely because of limited liquidity on the Tel Aviv Stock Exchange (TASE). As Brian Friedman notes, private venture capital in Israel far outpaces public investment in the stock market, which is the opposite of capital flows in the United States. As Brian puts it:
“People in America don’t fully appreciate that in the last decade, $650 billion was raised in venture capital but $2.2 trillion was raised on the stock market here in the U.S. That’s the normal relationship. But in Israel, there was $22 billion raised on the stock market and $39 billion in venture capital, and that doesn’t even include private investment from Google, Microsoft, and the like. When we think about the ‘Start-Up Nation,’ we must also think about the ‘Scale-Up Nation.’ However, Israel will not become a ‘Scale-Up Nation’ without bigger and more robust capital markets. Back until 2010, Israel had a decent presence in the MSCI Emerging Markets Index, which attracted foreign capital to the Israeli Stock market, however, the upgrade to the MSCI EAFE Index caused foreign capital to exit.
“And who are the most logical investors to make it their mission to bring that capital back into Israel? If pro-Israel Americans and philanthropic organizations commit a fraction of their capital to this purpose, they would bring more foreign portfolio investment into Israel than currently flows from all foreign countries combined. Pro-Israel Americans, by ourselves, could transform foreign participation in the Israeli stock market, boosting liquidity, helping startups to scale up, and preventing early exits. There is a massive payoff for everyone in this possibility.”
“So there is a mission here, but not just love for Israel. There is also a real opportunity. As with any investment, the goal is to earn reasonable returns for the risk taken. Investing capital in the stock market, however, has a multiplicative beneficial impact on the Israeli economy. Few people think about how these dots connect, but we are hoping that more and more do.”
For more about matching philanthropic capital with a pro-Israel mission, read here.