Google backing Israel cos amid funding gap

Written by Bloomberg | Updated: Dec 31 2011, 07:26am hrs
The Google (GOOG) executive with his bright yellow vest was impossible to miss in the middle of the Israeli startup owners seeking cash in a rusty boathouse at Tel Avivs Jaffa port.

David Lawee, Googles mergers and acquisitions chief, used the early November session, called Garage Geeks, to round out his contact list. Ive met about 100 Israeli companies in two days and thats, like, super-efficient, he said between conversations at the corporate speed-dating-style event arranged by startup promoter Yossi Vardi that introduced local businesses to multinationals. Google set up a funding program two weeks later for Israeli entrepreneurs, part of an acceleration in US technology companies backing in late 2011 that has included Apple (AAPL) buying a company in the country for the first time, according to business newspaper Calcalist.

The foreign investments are important to Israel, where the high-tech industry accounts for 47% of manufactured exports, and could be a new source of innovation for giants like Google because of the Mountain View, California-based companys strength in technology startups. Money from Google and others is making up for a decline in local financing that Avi Sasson, Israels state research-grant provider, says could hurt industry growth. The minute the Israeli venture-capital funds arent helping in the early stage, there wont be a new generation of companies for the foreign investors to invest in three or four years down the road, said Koby Simana, head of the Israel Venture Capital Research Center, in an interview. Israeli startups wont exist if there is no Israeli venture capital.

Of the $522 million raised by Israeli technology companies in the third quarter, $96 million came from domestic venture- capital funds, a drop of 40% from the second quarter and 12% from a year earlier, according to the research center.