Nazareth-based venture capital fund NGT3 is looking to sell three of its portfolio companies to strategic investors in the first half of 2018 to create a return for investors and boost the motivation of other potential entrepreneurs, especially from the Arab sector.
“During the first half of 2018 we are targeting three of our companies for an exit in the form of a merger or acquisition,” said Zohar Gendler, the managing partner of the fund, in an interview in Tel Aviv earlier this month.
The first three candidates for an exit are: Aqueduct Medical, which is developing a product that enables cervical dilation in a short, three- to five-minute process without a need for general anesthesia; Guide In Medical, a medical device company that has developed a guided intubation system that enables a clear identification of the trachea and allows safe intubations even in challenging situations; and ParaSonic, which has developed a home device to kill lice and their eggs in a single combing treatment that takes three minutes.
“We are preparing these companies for M&A and working with investment bankers to try to sell them,” he said. “I need to bring a return to my investors, for the future of my fund. The companies we invest in also need to know they can get to an exit.”
“We intend to approach some 25 target buyers. As an alternative, we will look for a strategic partnership to support these companies with their marketing and sales efforts,” he said.
Set up in 2013 within the framework of the 15-year-old NGT incubator, NGT3 is a venture capital fund with European, American and Israeli partners who share the vision of investment in early-stage technology-based startup companies with a social agenda of increasing collaboration in the technology sphere between Israel’s Arab and Jewish populations and encourage Arab and Jewish entrepreneurs.
Based in Nazareth, the largest Arab city in Israel’s Galilee, NGT3 funds early-stage companies, primarily in innovative medical devices and life sciences, supporting them with legal and financial assistance, marketing, business development and partnerships, fundraising, and product development. NGT3 companies operate within the framework of an Israeli government-licensed technological incubator.
“A sale of our companies would make waves,” Gendler said. “If we have several companies that have succeeded and made an exit, it will help us create an example ecosystem for the Arab society. Success and exits will bring us more entrepreneurs but also more investors, also from the Arab sector.”
There are very few Arab investors in the high-tech scene, he said. “They are risk averse and have concerns. They need to be educated about the industry sector and they also need to set up a network of people they can consult with.”
NGT3’s target is to invest in 30 companies in eight years. The fund has raised a total of $32 million from the Israeli government and from its investment partners, including the Spanish entrepreneur Salvador Pascual, US investor Gary Jacobs and Israeli investors such as Mori Arkin and IBI Investment House.
The fund, which also got an eight-year incubator license from the Economy Ministry, has invested in nine companies to date. Three additional companies are set to get investments by April this year, he said: one of the companies can analyze the therapeutic impact of anti-cancer medicines on people within 48 hours; the second is developing a laparoscopic device for the removal of large organs; and the third company is working on improving the technology that enables to insert stents in bile ducts more quickly and efficiently.
The value of the portfolio of investments held by NGT3 rose 695 percent in 2016, based on the funds raised from investors by its portfolio companies, said Gendler.
Forty-four percent of NGT3’s and NGT’s projects have been set up by Arab entrepreneurs, 44 percent by Jewish ones and 12 percent through joint Arab-Jewish cooperation, he said.
“The social agenda is important, but we also need to give our investors a return on their investment, hence the necessity to diversify our portfolio with different kinds of companies,” he said.
The fund has a commitment to give one percent of its profit to the Arab communities in the north of Israel. It is also the only incubator for the Arab community.
“We work to actively attract Arab researchers and entrepreneurs, but the typical Arab researcher has a good technological grounding but lacks the networking, market and funding channels for his technology,” said Gendler. “We want to bridge that gap. We want to actively support them from the initial stage up to an investment commitment. The more successes we have, the more will follow.”