Japanese giant to invest millions in Israeli industries

Japan's leading venture capital firm to invest $130m in Europe, Israel as part of newly diverse investment policy. 'The time to invest in Israel is now', says firm's president
Assaf Gilad 06.04.08

Japan's Alternative Investment Capital, an investment advisory company which specializes in private equity investments, announced recently it will be investing some $130 million in various companies in Europe and Israel.
Israel has never before been perceived as an attractive investment by the Japanese, but the innovative technologies emanating from the Israeli industry have now caught their eye: A.I. Capital's investment stands to be a test-case for the company, considered one of Japan's largest venture capital firms, with $2.9 billon in assets to its name.

 A.I. Capital President and CEO, Kazushige Kobayashi, visited Israel in May. The time to invest in Israel, he told business magazine Calcalist, is now.

"We don’t plan to invest in Israeli companies directly, but rather through local funds, in what is called the 'funds־to־fund' method," he said. "We'll be starting out with some tens of millions of dollars and then we'll see if the time is right to increase the investment.

"The technologies we are most interested in now have mainly to do with IT and medical equipment developments. As a member of the Japanese Venture Capital Association I will see my way to encourage more investors to invest in Israel. There is room to increase cooperation, especially compared to the minor one we enjoy now," he said.

'Great potential to be realized'

The attraction, said Kobayashi, is in the technological innovations: "Israel is a long way away from Japan, both geographically and culturally, but we were able to find (in Israel) technologies which we couldn’t find anywhere else.

"If you ignore the political situation and focus on the financial aspect, you show exceptional success. We want a part of that."

Backed by the Mitsubishi Corporation, A.I. Capital is not the first Japanese firm to invest in Israeli industries. Giants such as Fujitsu and Hitachi have million of dollars invested in Israeli companies such as Asocs, Wisair and Airspan.

The deal signed between Israeli startup Altair and Japan's largest wireless provider Willcom is another example of the budding cooperation, as is the newfound interest of the country's financial players, such as Japan's third largest investment bank, Nikko.

"Japan's creative resources are dwindling, which is why it is willing to invest a great deal in breakthrough technologies found elsewhere, even in Israel," said David Heller, a senior partner in Vertex Venture Capital. "Japan is experiencing a deep recession and it has to find creative solutions to a variety of problems.

"The Japanese are rushing to invest in Israel in order to search for technologies that can compliment their innovations. The combination between Israeli entrepreneurship and creative engineering and Japanese perfectionism plays in everybody's favor."

"The last two years have seen a growing trend of big Japanese investors looking to invest all over the world. Israeli companies have benefited greatly from that," added Eran Harel, of Harel-Hertz Investment House.
"Trade between Israel and Japan amounted to $1.7 billion in 2006, and has grown to $2.6 billion the following year. There is great market potential still out there to be realized."