A new funding company seeks to marry Israeli high-tech startups with investors in South America’s fast-growing economy.
By Rivka Borochov
Brazil has the seventh largest economy in the world. And its rate of growth at seven percent – faster than Canada or the United States – has economists predicting Brazil will soon be one of the top five richest economies.
Looking to tap into unexplored and potentially lucrative opportunities there, Israeli entrepreneur Elad Cohen has started up a high-tech investment company to merge his passions for Israel and Brazil.
Getting a jumpstart on making his next fortune, Cohen joined forces with an Israeli marketing expert Roi Carthy Israeli and Brazilian Daniel Carneiro da Cunha in the form of Initial Capital. With an office in Tel Aviv and another in Sao Paolo, the partners plan on wearing sneakers to work, doing serious business all the same, while adding the flavor and spice of Israeli high-tech startups to the Brazilian market. The trio has already invested in three Israeli startups through Initial Capital, and expects to make them commercial in Brazil.
Starting up a new startup nation
The three men don’t see the Israel-Brazil pairing as strange at all, given the high-tech entrepreneurial expertise in Israel and the untapped Brazilian market. And Israel is really the only major high-tech hub in the world outside of Silicon Valley in California. Connecting the dots, explains Carthy, Brazil represents huge business potential.
The idea started with Cohen, who fell in love with the South American country after buying a home there. A successful entrepreneur, Cohen founded the company Playtech, which made the largest IPO (Initial Public Offering) in Israeli history. The company develops online gambling software and is worth an estimated $1.5 billion.
Carthy, a high-tech personality known for his coverage of the Israeli scene on the blog Techcrunch, agreed that the union makes perfect sense. The launch has received considerable interest from entrepreneurs aware of Israel’s role in the startup community, Carthy notes. The startup space in Brazil is in motion lately, with new money flowing in.
Backed by private funding from Cohen, Initial Capital is not a VC fund, but a firm, says Carthy. That gives them more flexibility and control over their investment, he explains.
Initial Capital’s founders will play an active role in the development of the seeds they plant in young companies. Seed funding can be anywhere from $100,000 to $300,000, although they haven’t put any cap or limit on when or how often they will invest.
Based on business intuition, an investment offer can be put in as little as hours after seeing a presentation, Carthy says. "We are going on an opportunity-by-opportunity basis. When we find an opportunity we are fairly quick to act upon it."
Since its founding earlier this year, Initial Capital has seeded the Israeli companies Evoz, which is developing a remote baby monitoring system; Wibbitz, which will convert images into interactive videos; and POSE, a cloud-based cash register and point-of-sale system for small businesses. A fourth deal is pending.
While the categories are fluid, in general they want to fund niche companies such as payment processing and billing firms that would target and support the local ecommerce industry in Brazil, Carthy explains. He reports that Brazilians are enthusiastic about Israel’s high-tech achievements, and the three men plan on bringing their own skill sets to this potentially explosive new market not known for its startup entrepreneurs. "We will help as best we can to capitalize on local opportunities and will provide support not only with money, but will consult with the help of our network to create compelling businesses in Brazil," says Carthy.