In a bid to help the next generation of Israeli start-ups, the Tel Aviv Stock Exchange and the US NASDAQ exchange have teamed up to help local firms grow before going public. This includes providing pre-exit services such as strategic counseling and mentoring, exclusive networking, a secondary market for liquidity events and debt financing services.
It’s a way for both, said NASDAQ Vice Chairman Sandy Frucher, to reach more companies, giving Tel Aviv firms a foothold in the wider world of finance. “Building a private market to support regional growth companies will also enhance Tel Aviv as a capital markets hub,” he said.
Working together with the NASDAQ, added Frucher, the TASE will have limitless opportunity to expand their product and business offerings to the domestic and international markets.
TASE CEO Yossi Beinart hailed the deal, saying it is great news for the Tel Aviv Stock Exchange and the Israeli economy.
“There is a gap in the financial market,” Beinart told The Times of Israel in a recent interview. “Today, it takes companies about a decade to get to the point where they are ready to raise money on capital markets like NASDAQ, in terms of size and market cap. On the other hand, after five to seven years, most start-ups have gone the venture capital route, and are not finding any new funding there.”
It’s at that point that many companies decide to go for an exit – selling themselves to a foreign firm for less than they are really worth, and eliminating yet another opportunity to build its own tech firms into multinationals.
The new deal provides an alternative that gives Israeli firms a choice, Beinart said last week, when announcing the new deal with Frucher.
“For the first time we can offer Israeli companies a real solution to challenges in their growth and give them a real alternative to an exit, so that they will continue to operate as independent companies with significant operations in Israel. The new joint market will offer various models for raising capital to companies not yet ripe to go public and to be a bridge for their desire to continue development in Israel and later in markets worldwide.”
Part of the deal includes the implementation of NASDAQ’s INET technology, a super-fast system that is capable of handling over 1 million messages per second at an average speed of sub-250 microseconds, the fastest of any exchange or alternative trading system in the world. The system will enable investors in Tel Aviv to invest in assets including equities, derivatives, bonds, fixed income, as well as commodities, both in Israel and abroad, opening up new alternatives for investors as well.
According to Beinart, the new platform is the cutting edge of trading technology. “It will help us to stand as equals with the leading markets facing rapid changes in the global world,” he said.
But the bottom line for Beinart is keeping companies Israeli longer – and the new deal lets that happen. For many companies, the only alternative seems to be going for a buyout offer, but that means Israel loses out on the opportunity to grow its own tech into a “unicorn,” the kind of company that can compete in world markets – as an Israeli company.
“If we can get involved with some of these companies, we can save them from that and encourage them to continue to develop their tech, with help from local investors,” added Beinart. “The TASE can be a great vehicle for that.”