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High Tech Features: Have Money, Will Invest
From Israel's Business Arena - Globes
April 4, 2000
"For me, it doesn't matter if the company is in
the US, Israel, France, or anywhere else",
Canaan Partners senior partner James C.
Furnivall says. Furnivall is currently visiting
Israel. "We're interested in large capital gains.
We invest in companies we consider valuable,
and the fact that a company is Israeli is
irrelevant, although Israel definitely has a
growing number of internationally successful
high tech companies".
"Globes": What attracted you to invest in
Business Layers?
James C. Furnivall: "When I met the Business
Layers management team, I identified them as
being likely to belong to this category. When I
examine companies for investment, I first of all
examine the management team - the people
themselves and the degree of their motivation for
success and hard work.
"Technologically speaking, the solution they
provide is appropriate for the problems existing
in any large organization with an extensive data
infrastructure, which needs to be made available
effectively to employees. The market is therefore
large, with serious profit potential. Business
Layers has also created a market for itself at an
early stage, ahead of the competition. The
combination of all the factors - good
management, large market potential, and being
first in the market - made the company
worthwhile for venture capital investment".
To date, investors in Business Layers include
venture capital funds Gemini, Israel Seed
Partners, and Formula Ventures; companies
Garage.com and Novell (previous investment of
$2 million); and private entrepreneurs from
among the founders of Check Point. Canaan's
current $4.5 million investment has closed a
capital raising round of $11 million.
Canaan's investment in Business Layers is part
of the fund's widespread activity in various
instruments, mostly in Internet. The fund raised
$500 million last October. Furnivall, who handles
the fund's investments in the Internet
infrastructures, software, and networks services
and applications fields, says that Canaan
intends to invest that sum during the next
eighteen months.
That is a large sum for investment in a short
time. How do you intend to invest it?
"We will invest 80% in high tech, mostly in
information technology. All these investments
are Internet-related in fields such as Internet
technology applications, communications, B2B,
etc. The remaining 20% will be invested in
biotechnology and medicine".
What brings you to Israel now?
"When we invested I told Izhar (Business Layers
founder and president Izhar Shay, D.Y.) that I
want to come to Israel in order to get to know
the management team and the employees. I
think it's important to know the company, the
engineers, and anyone involved, in fact. It's
important to me that people in the company
know who is behind the investment and who
their partner is. We therefore decided that there
would be at least one board of directors meeting
a year in Israel".
Are you trying to achieve some kind of
integration between companies in which
you invest?
"Our holdings in companies are 10%, and that
applies to Business Layers also. We don't
control companies, but we try to make
connections between them. If Business Layers
wants to purchase software or any product, it
has to decide according to what is good for it.
Commerce One, for example, is an example of a
connection that is likely to prove fruitful for both
companies, but they have to decide for
themselves concerning the quality of their
partnership. Our role is more one of creating
connections and opportunities, while examining
how they work out, than of trying to achieve
integration between companies".
And what is the general picture that you see
for Business Layers and its possible
partnerships?
"It's still too early to tell, but Commerce One is
setting up systems connecting buyers and
sellers in specific industries. Concerning
Business Layers, many people are in contact
with these systems, and they have to be
provided with access to some of the systems. If
Commerce One has no solution for this,
Business Layers may be able to provide one for
them".
How will the connection with Canaan help
you?
Izhar Shay: "We decided to contact Canaan,
because it is one of the leading US venture
capital funds, with proven successes and
connections in our field. We have at most a year
or two, because the window of opportunity is
getting shorter; connections which can help us
advance quickly are consequently important".
So it's not just a matter of money, but also
time-to-market.
Furnivall: Investment money is available in both
the US and Israel. A very large proportion of the
companies get financing, and there are many
places from where you can get this money. As
experienced investors, we believe that we
provide more than just money. Since time is a
valuable item in short supply, we can help find
shortcuts and prevent time-wasting errors. This
"a little faster" is worth a great deal of money".
How does the connection between you take
place in practice, beyond the financial
aspect?
"There are three areas in which we intend to
help: recruiting additional human resources and
management for work in the US, future business
partnerships, and strategic thinking. We can
contribute strategic ideas, because we see
hundreds of business plans, and we have a
different opinion on the market and what is going
on in it. In any case, the practical application
has to be solely by the company".
Are you planning additional investments in
Israel?
"It's a definite possibility. We choose our
investments by two criteria: how it fits in with our
general plan and our fields of interest and the
stage at which the companies are ready to
establish a presence in the US market.
Business Layers fulfills these two criteria, and
there may be others".
How do you see the Israeli high tech
industry today? Has there been a change in
the attitude of Israeli companies, compared
with what we've seen in the past?
"For years, Israeli high tech was known for its
high level of technological capability. The
challenge was to turn the technological potential
into something that could be effectively brought
to market. In the last year or two, we are seeing
the maturing of the Israeli high tech market. It
continues to base itself on the technology and
the people creating that technology, but the
greater experience and successes of companies
testify to the maturing of the business aspect.
Today, for example, you see understanding of
the fact that there are businesses requiring a US
presence. A company remaining in Israel, even
a large one, does not have the potential to
achieve a high value. You now see many more
internationally successful Israeli companies than
there were five years ago".
Published by Israel's Business Arena on April 4,
2000
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