How Did Israel Seed Eight Venture Funds?

Oren Zeev walked through a program that sponsored eight funds of $20 million each. The sponsor put in $8 million and gave the other LPs an option to buy the $8 million five years later at basically cost, which leveraged the investment. Managers still had to raise $12 million from LPs. People needed the initiative to raise a fund, and market forces decided who could do it.

The design created a positive effect without distorting the free market. No bureaucrat decided who would be a venture capitalist, and no corruption was involved. The eight funds are the basis of the industry today, and some still exist in later incarnations. They started operating in late 93, a great vintage with time to benefit from the bubble of the 90s and exit before the bubble burst. The cohort did really well. Most of them raised a second fund of 50 to 100 million around 96, 97, without any government help, and the flywheel was in action.

He entered the industry in 94 and was hired not by one of the eight funds. He guesses the first fund after the program was Apex. Apex, a global firm, decided to start something in Israel and hired him and someone else to start the operation.