Businesshala News Exclusive | U.A.E. Sovereign-Wealth Fund Invests $100 Million in Israel Venture-Capital Firms

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A year and a half after the deal that normalized relations between Israel and the United Arab Emirates, trade is closing

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Israeli companies are investing in new offices in Dubai and Abu Dhabi and relocating employees from Tel Aviv. Emirati sovereign-wealth funds are making direct investments in Israeli technology companies, and UAE firms are positioning themselves as partners for Israel’s expansion into the rest of the Middle East.

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Abu Dhabi’s Mubadala Investment Company, which manages $250 billion in assets, has invested up to $20 million in six Israel-based or focused venture capital firms, including Mangrove Capital Partners, Entry Capital, Aleph Capital, Viola Ventures , Pitango and Mizma. a spokesperson.

Mubadala’s investments, which were not previously reported, were based on the financial performance of each venture firm and the personal relationship built between the two teams, a person familiar with the fund said after the Abu Dhabi Fund met about 100 investors.

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The fund was originally set up by Crown Prince Mohamed bin Zayed, a leading proponent of the Abrahamic Agreement, and while Israeli investments are small in comparison to Mubadala’s size, they are strategic to Abu Dhabi, which is home to its oil- Huge hopes to attract startups to diversify. Economy

The sovereign-wealth fund, which has been one of the world’s most active in the pandemic and is an anchor investor in SoftBank Group. of the corporation

The Vision Fund now hopes to begin direct stake investments in Israeli tech firms, the person said.

Avi Eyal, Managing Partner of Entre Capital, said he spent years developing a relationship with Mubadala’s head of venture capital, Ibrahim Ajami, before receiving an investment from the Emirati fund. Following the first meeting at a dinner in London, the two executives co-invested in startups and Mr. Ajami invited his Israeli counterpart to be a panelist at a conference in Abu Dhabi in February 2020, ahead of the agreement, when the two shake hands in public. Forum.

“It has all evolved from relationships, getting to know people and not chasing a dime,” said Mr. Eyal, whose fund has now invested nearly $15 million in UAE-based startups.

Israel’s deal in the summer of 2020 to normalize relations with the United Arab Emirates, Bahrain and later Morocco and Sudan was initially met with enthusiasm in the business community. Israelis visited the United Arab Emirates, and Israeli and Emirati companies signed agreements to work to develop technology and defense ties. Israel’s vibrant technology sector was seen as ripe for investment from deep-pocketed Emirati government funds.

But there were some really solid deals in the beginning. Business leaders say the pandemic has limited travel and companies in the two countries – once hostile foes – take longer than usual to understand each other.

“The headline business is happening,” said Israel-based Dorian Barak, founder of the UAE-Israel Business Council. “It’s happening slower than people expected.”

Momentum changed last year when the fund’s oil and gas arm, Mubadala Petroleum, bought a nearly $1.1 billion stake in one of Israel’s largest energy companies offshore natural gas-fields. In November, state-owned defense company Israel Aerospace Industries Limited signed an agreement with Dubai’s Emirates Airline to convert four passenger liners into cargo planes and an agreement with Emirati defense company Edge for the production of drone ships. Did. Another Abu Dhabi sovereign-wealth fund, ADQ, also led a $105 million investment in Aleph Farms, an Israeli firm that grows lab-grown steak meat.

Aleph Farms chief executive Didier Tubia said the deal matches the long-term goals of both sides. Aleph plans to build a production facility in the UAE over the next few years to sell to the wider Middle East and ADQ is interested in technologies that help the UAE manage food security.

“Sometimes Israelis think they can just go to the UAE and do business,” he said. “You need to find ways to bridge the gap.”

Samuel Shay, a member of the UAE-Israel Council and a consultant that aims to link Israeli tech firms with Persian Gulf development projects, said some Israeli companies have struggled to navigate the UAE business environment. As home to the regional headquarters of hundreds of multinational companies, the United Arab Emirates is also dominated by Emirati family or state-owned businesses that traditionally take a stake in the local operations of foreign companies.

The message from those firms, Mr. Shay said, “give us your best services, technologies, we’ll pay for it.” But, he added, “they don’t want to partner with the Israeli man.”

An Israeli technology firm that has signed a joint venture with an Emirati family company is RR Knowledge Systems and Technologies Ltd., a medical record software developer. Its CEO, David Santer, met with an Emirati doctor through an online forum organized by the Chambers of Commerce in Dubai and Israel. The doctor introduced her to her brother, Khalaf al-Falasi, who, after months of discussion and due diligence, including a social trip to the UAE desert, decided to form a partnership with the Israeli firm.

The UAE joint venture, called ezMedSoft, sold the Israeli firm’s software to a dermatology clinic in Abu Dhabi and plans to market other private hospitals and medical centers. “We knew it would take a long time to build a relationship,” Mr. Falasi said.

Write Rory Jones at [email protected]

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