General Atlantic doles out $1 billion to maturing Israeli startups
New York investment firm, among the global leaders in private equity, looks for next Mobileye while dipping into Mideast climate tech
When Max August was a Harvard undergraduate, he scraped data from about 8,000 startups and 11,000 of their founders to complete a senior thesis on Israel’s fast-maturing tech scene that was supervised by former U.S. Treasury Secretary Lawrence Summers.
Three years later, many of those same Israeli entrepreneurs are vying for the attention of the young investor, who has helped distribute close to $1 billion on behalf of General Atlantic, one of the world’s biggest private equity funds. Most prominent of nine companies in the firm’s Israel portfolio is Mobileye Global, the Intel-controlled maker of self-driving technology that held an IPO in October and is currently valued at about $25 billion.
After starting as an intern at the Park Avenue firm, August was sent to Tel Aviv as an associate last year to scout investment opportunities, opening an office in the 61-story Azrieli Sarona Tower where he can gaze over the Mediterranean coast. Alongside Alex Crisses, a managing director from New York who shuttles to Israel to close deals, General Atlantic last month recruited Yoram Teitz, who was managing partner in Israel at accounting powerhouse Ernst & Young, as a senior adviser. The team is overseen by Anton Levy, the firm’s co-president and chairman of its global technology group.
“Israel is moving from a venture-capital-only market to a later-stage market, where you’ll find bigger companies [and] entrepreneurs who have bigger visions,” Crisses told The Circuit in an interview. “As a global investor, we wanted to pick the locations that over the next five years will have the most innovative technology. And we really do believe that Israel will be that.”
With $73 billion in assets under management and 16 global offices from London to Shanghai, General Atlantic came late to the game in Israel, a tiny Middle Eastern country that has spawned the greatest number of technology startups per capita in the world. Termed a growth equity firm, General Atlantic held back until it saw a growing pattern of Israeli companies raising $100 million and more in a funding round, an indicator of business strength. Similar criteria have drawn other global investment leaders including Blackstone, SoftBank and Koch Disruptive Technologies.
According to the Tel Aviv-based IVC Research Center, the number of Israeli companies valued at over $1 billion – dubbed “unicorns” in Silicon Valley – rose from two in 2018 to 42 in 2021.
And if Israel was once known primarily for being a powerhouse in cybersecurity and software, Crisses said General Atlantic is looking at the next generation of entrepreneurs in fields ranging from financial services and healthcare to climate technologies.
In 2020, the firm led a $210 million fundraising round for AppsFlyer, which uses data analytics to help marketing firms grow. It led two $150 million rounds for HiBob, which assists midsized companies in managing human resources. In 2021, it co-led a $543 million funding round for Transmit Security, which authenticates users without employing passwords.
Mobileye, which Intel bought for $15.3 billion in 2017, is a model for what brought General Atlantic to Israel. It’s “really defining the next chapter of the maturation of Israeli technology,” August said. The firm agreed to buy $100 million of Mobileye shares as part of the IPO.
General Atlantic also sees opportunity in Israel’s growing connections with Arab countries, paved by the 2020 Abraham Accords that were signed with the United Arab Emirates, Bahrain, Sudan and Morocco. “Israel has amazing technology to export,” making it “a real beacon in the area,” Crisses said in the joint interview with August on Zoom.
The arrival of General Atlantic and other world-leading firms reflects the “evolution of ecosystem” in Israel’s investment market and gives it credibility as a country with a greater number of large tech firms, said Avi Hasson, CEO of Start-Up Nation Central, a nonprofit group that promotes the country’s innovation industry.
“Ten years ago, that list would have been very, very short… whereas now there are dozens of such companies in multiple sectors,” Hasson, who was previously Israel’s chief scientist, told The Circuit. Funds such as General Atlantic bring with them financial knowledge, operational expertise, best practices and international networks, all of which are “critical to the growth” of Israeli companies, he said.
August, 25, who grew up in New York City and attended Horace Mann, an elite, college-prep school in the Bronx, developed a connection to Israel at Harvard, where he studied economics. While there, he co-founded the “Israel Summit at Harvard,” an annual campus event that connects students from more than 100 universities with the Jewish state. Summers, who was previously Harvard’s president, and economics professor Paul Gompers served as advisers on August’s thesis: “The Impact of Experience on Israeli Entrepreneurial Success.”
General Atlantic is looking for further investments in Israel and will put money into companies that demonstrate a market growth opportunity and “real product-market fit,” August said. Financial technology, life sciences, biotechnology and climate technologies are the firm’s target areas for Israel.
General Atlantic closed on its BeyondNetZero fund last month, allocating $3.5 billion to support entrepreneurs who deliver innovative environmental solutions while creating durable growth businesses. “We’re deeply focused on climate in Israel,” August said. “We define climate fairly broadly, and so if you think about food tech, ag tech,” and reusable materials, there are “a lot of companies that are already reaching a growth stage” and become ripe for investment.
General Atlantic does not divide its global investment budget by region. Funding for individual companies ranges from $25 million to $1 billion. A single investment committee decides which companies will receive the money, Crisses said. “We have a lot of confidence that… a number of those will come from Israel.”
Politics in Israel and criticism of its new government under Prime Minister Benjamin Netanyahu are unlikely to affect General Atlantic’s investment plans, Crisses said. He also takes in stride the economic shakeout that has cut venture capital funding in Israel almost in half from 2021. Crisses pointed to the General Atlantic’s steadfastness through political and economic turbulence in India, China and Latin America.
When the firm enters a region, it does so with “a lot of thought, a lot of preparation and with the desire to stay long-term and be part of the fabric of the community,” Crisses said. “That’s what we do in all the geographies we enter, and we’re really passionate, personally and institutionally, about making that in Israel.”