After spending months on a comprehensive evaluation of its venture capital investments, Bezeq has decided not to sell off its high tech holdings. However, Israel's largest communications company has decided that it will concentrate on its core businesses from now on and stop investing in new venture capital funds or Israeli high tech startups.
In the past two years Bezeq has attempted to stick to its core telephony and Internet businesses in the face of a serious threat from mobile-phone competitors. But the investments study also said there was no reason to sell off Bezeq?s high tech holdings now at a loss.?
Bezeq has invested tens of millions of dollars in venture capital funds and startup companies. According to IVC-Online, Bezeq put about $7.5 million in the Eurofund venture capital fund in 2000 and invested $20 million in StageOne. It later invested a few more million dollars in a StageOne annex fund.?
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Bezeq also placed $2.3 million in BRM Capital, but after the fund became embroiled in a legal battle with the Barkat brothers and Nir Barkat left to run for mayor of Jerusalem, Bezeq demanded its money back.?
Bezeq also has holdings in four startups: Exent, Num4Net, FiberZone and Personetta. It had invested in Compuware, but has sold off these holdings.?
Bezeq?s decision to invest in high tech was made back in 1999, but final approval was given only in February 2000. Then-CEO Ilan Biran was the force behind the board?s approval, and in practice Bezeq adopted the common practice of global telecom companies locating advanced technologies through venture capital funds.?
Since then Bezeq has had to write off three investments: Celvibe, AnNet and Infogate.?
On the other side of the ledger, Bezeq has had a few successful exits: It made a $5.7 million capital gain on its share in Passave when it was sold to PMC Sierra. Two other exits were the sale of Atrica to Nokia-Siemens for $100 million and the sale of Expert to One1 for $10 million.?
But if we look carefully at Bezeq?s venture capital investment policy, we can see that it has avoided investing in Israeli funds since Eurofund, though it did put up additional funds for StageOne. Its startup investments have also slowed down. In fact, its last such investment was in FiberZone in 2006.?
There are two ways to view Bezeq?s latest decision to stick to its core operations. On one hand, Israelis will benefit from its concentration on the communications field. Bezeq is not a financial institution and understood years ago that establishing a corporate venture capital fund would not give it any advantage. On the other hand, there is now one less source of financing for Israeli high tech entrepreneurs.?
Idan Angel, who heads Bezeq?s business development and venture capital investments, refused to comment on the report, as did Bezeq?s spokesman.
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