US giant Blackstone sets up Israel office to fund fast-growth tech firms

Office will be run by Yifat Oron, who will be writing ‘big checks’ to select Israeli firms from the US company’s new $4.5 billion growth equity private fund

Shoshanna Solomon was The Times of Israel's Startups and Business reporter

A sign for The Blackstone Group L.P. investment firm in front of its offices, October 15, 2018, in New York. (AP Photo/Mark Lennihan)
A sign for The Blackstone Group L.P. investment firm in front of its offices, October 15, 2018, in New York. (AP Photo/Mark Lennihan)

Blackstone, a New York City-based investment giant that manages $649 billion in assets, is setting up an office in Tel Aviv to tap into the nation’s growing tech firms.

The office will be run by Yifat Oron, the former CEO of LeumiTech, the tech banking arm of Bank Leumi Le-Israel. As senior managing director and head of Blackstone’s office, Oron will set up a team to vet companies for investment from the US firm’s recently raised, inaugural $4.5 billion growth equity fund Blackstone Growth (BXG).

Blackstone Growth in March completed the final close of its inaugural fund, touted as the largest first-time growth equity private fund ever raised.

Israel — which is undergoing a transformation from Start-Up Nation, in which entrepreneurs set up companies and sell them quickly to the highest bidder, to Scale-Up Nation, in which entrepreneurs hold on to their firms in a bid to grow them into multi-million or multi-billion-dollar firms — is “ripe enough” to be a recipient of the “big checks” Blackstone is looking to write to help these sorts of firms grow even faster, Oron said in a phone interview.

Yifat Oron, senior managing director and head of Blackstone’s office in Tel Aviv (Courtesy)

“You have companies that are Israeli originated, with Israeli management and founders who become global leaders and they are worth billions and hopefully tens of billions,” Oron said. “All of a sudden Israel is ripe enough to be a relevant partner for an entity like Blackstone. The stars are aligned to have Blackstone on the ground here.”

Israeli tech firms are raising record amounts of money at multi-million and over a billion-dollar valuations, as entrepreneurs seek to grow their firms.

To be a significant local player, you need to have senior leadership on the ground that can lead the deals, and not do it from afar, Oron said. Setting up an office in Israel says: “We mean business, we want to do business with Israel,” she added.

Dan Gillerman, a former Israeli ambassador to the UN, has served as a senior adviser to Blackstone in Israel since 2013. Now, with the establishment of Blackstone’s new office, Gillerman will become chairman of Blackstone Israel, continuing to serve as an adviser to the firm and the Israel-based team, the statement said.

“We are big believers in Israel, which is one of the most dynamic and innovative markets in the world. I’m delighted to welcome Yifat, an outstanding technology executive and leader, to help us bring the full power of the Blackstone platform and our resources to the country’s entrepreneurs,” said Jon Korngold, global head of Blackstone growth, in the statement.

Blackstone’s activity typically has focused on private equity investment, in which the firm sought control or bought up appropriate targets. With the new $4.5 billion fund, the company is expanding its activities to investing in later-stage startups, not necessarily for control of the firm, Oron explained.

“We don’t intend to compete with anybody on the ground,” Oron said, referring to VC and other funds active in Israel. “We want to collaborate with every fund here.”  The growth of Israel’s tech firms into later-stage companies “exactly fits” with Blackstone’s strategy, she said.

The amounts invested by the fund will typically be “tens of millions of dollars or even hundred of millions, and if needed more. It is big checks, “the amounts of which have not been seen in Israel previously, she said.

Oron said the pool of money at her disposal will be the global fund. “We are not capped,” she said. “If we find tons of interesting companies, we will invest in all of them.”

The fund plans not just to invest in the firms but also to add value to them, by helping them recruit specialists in the US and use the vast networking apparatus available to the Blackstone executives, Oron said.

BXG has already made investments in tech firms, including in US firm Bumble Inc., an online dating company that earlier this year held an initial public offering of shares on the Nasdaq; Sweden’s Oatly, a maker of oat milk; Dallas-based software enterprise business ISN; and Sweden’s Epidemic Sound, which provides restriction-free music to internet content creators across the world.

Stephen A. Schwarzman CEO Blackstone speaks during the session ‘Shaping a New Market Architecture’ at annual meeting of the World Economic Forum in Davos, Switzerland, Tuesday, Jan. 22, 2019. (AP Photo/Markus Schreiber)

Blackstone was founded by CEO and chairman Stephen Schwarzman in 1985. The firm’s business activities include private equity investments, hedge funds, real estate holdings, and credit and insurance businesses, according to its website.

Prior to joining Blackstone, Oron was the CEO of LeumiTech, an Israeli technology banking platform, servicing and financing several thousand technology companies and supporting their global expansion.

She spent most of her career as a partner at Israel-based VC fund Vertex Venture Capital, where she invested in and served as a board member of companies across the tech ecosystem.

Before joining Vertex, Oron was a technology investment banking associate at JPMorgan Chase & Co. in New York. Previously, she spent three years at the directorate of R&D of the Israeli Defense Ministry, where she achieved the rank of Lieutenant in the Economics, Budget & Control Department.

She holds an MBA from Tel Aviv University and a BSc in Economics and Management from the Technion-Israel Institute of Technology.

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