The European Investment Fund (EIF), part of the European Investment Bank group that delegates finances to small and medium-sized enterprises (SMEs) through private banks and funds, announced on Thursday that it would make its first equity investment, worth $20 million, in Israeli cleantech fund Israel Cleantech Ventures (ICV) under the European Commission’s InnovFin program.
Israel Cleantech Ventures is a specialized venture capital fund based in Ra’anana that focuses on providing growth capital to Israel cleantech initiatives, including in the energy, water, environmental, and industrial technology sectors.
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While the European Investment Fund has partnered with Israel in the past in a number of ways, including a signed agreement with Israel’s Bank Leumi in 2016 to increase lending so the Israeli bank can provide $100 million financing to innovative companies in Israel, this is the first-ever equity investment of the EIF in an Israeli venture capital fund.
The EIF is making the investment as a limited partner in ICV III, the firm’s third fund, currently raising $75 million. This investment is a direct benefit of Israel’s participation in Horizon 2020, the EU Framework Program for Research and Innovation from 2014-2020.
ICV III will invest in Israeli seed and early-stage companies developing software, hardware, and infrastructure innovation that enhance resource efficiency and sustainability.
Delegations from both the EIF and ICV, as well as members of the European Commission, the Israel Innovation Authority, and ISERD, the Israel-Europe R&I Directorate, Israel’s national contact point with the EU promoting joint Israeli-EU R&D ventures under a EU R&D framework, were on hand for the official announcement of the deal.
“ICV has been recognized as a key player that sets it apart from other companies,” Pier Luigi Gilibert, Chief Executive of the EIF said at the event. Later, in a statement, he said “Israel offers a strong early-stage market opportunity and ICV III is an attractive first investment due to its sustainability focus. EIF’s participation in ICV III is an opportunity to support innovation through a fund with an established presence in Israel and unique access to high-quality deal flow.”
Ramona Samson, deputy head of unit at the European Commission, the organization responsible for proposing legislation and upholding treaties for the EU, called the investment as a “historic deal” in risk financing.
“The deal with ICV is proof of Israel’s drive to be leaders of innovation,” she said.
More than just cleantech
ICV has been making early-stage and seed investments in Israel since 2006, and with the support of Horizon 2020. ICV’s third fund will aim to continue backing emerging leaders with $75 million of capital. To date, ICV has invested over $150 million in over 25 companies from its first two funds.
Speaking with NoCamels after the signing ceremony, ICV partner and co-founder Meir Ukeles said this investment and partnership was at least a year in the making after ICV was introduced to EIF as the European organization was looking more closely at Israeli research and innovation.
“The timing worked out really well because it was right when we were starting to raise our third fund,” he says. “They want to know that the strategy of what we’re doing is very much aligned with what they’re interested in.”
Ukeles clarifies that although investment in cleantech was of great interest to the EIF, he believes ICV was chosen for reasons beyond the cleantech aspect.
“If it had been cleantech only, I don’t think we would have made it,” EIF Investment Manager David Dana tells NoCamels, “The fact that it was a bit broader and also looking at what ICV has done in the past,” he said, noting the companies ICV backs are performing well. “It was the right fit for us,” he adds.
“There are a lot of things we do in the portfolio that have to do with resource efficiency, but aren’t necessarily in energy or water or agriculture,” Dana says, noting that companies in the portfolio range from a firm that uses drones to pick fruits from very tall trees to a local firm that provides a suite of cybersecurity products for industrial networks.
“If it hadn’t been us, there would be other Israeli venture funds and I think it is the case that the sort of emphasis on resource efficiency and sustainability is a good fit for what the EIF is interested in,” he explained.
ICV III will benefit from the InnovFin Equity Facility for Early Stage with financial backing from Israel’s participation in Horizon 2020, the EU research and innovation program from 2014 to 2020.
Israel’s contribution to industrial development in Horizon 2020, through the Israel Innovation Authority, will total EUR 1.1 billion (almost $1.3 billion) in seven years.
According to Nili Shalev, managing director and national coordinator of ISERD, Israel is currently involved in about 3,500 projects under Horizon 2020 ranging from recycling programs to collaboration with Israel Aerospace Industries (IAI), Israel’s prime aerospace and aviation manufacturer.
One of the important benefits of this contribution is the involvement of European financial institutions in Israel via investments in venture funds, equity as well as to provide guarantees to the local banks for loans to grown companies.
In the future, InnovFin Equity investments, deployed by the EIF, aims to invest in other sectors covered by Horizon 2020 including communications tech, medical technologies, biotechnologies, green tech, nanotech, among others.
“This is a great opportunity to highlight our research and development,” Israel Innovation Authority CEO Aharon Aharon said at the event.