Red Dot completes first close of $250m early growth fund

In the shadow of the Swords of Iron war, which has led to a substantial decline in both local and foreign investment in Israel’s technology industry, venture capital firm Red Dot Capital Partners announced the first closing of its third fund today. The fund, which is planned to total $250 million, is intended for investment in Israeli startups at stages A to C, that is, in early growth rounds.

The firm says it has commitments from investors of over $200 million, and that it is already examining potential initial investments in local companies. It invests in companies with revenue of $1-5 million, in almost all areas of technology, apart from healthcare, medical devices, pharmaceuticals and biotech.

Red Dot Capital Partners raised its first fund in 2016, amounting to $151 million. The second fund was raised four years later, in 2020, and amounted to $217 million.

Among the firm’s significant exits are Global-e, floated on Nasdaq in 2021 and currently traded at a market cap of $6.5 billion; Armis, bought by Insight Partners and the investment arm of Google at a valuation of $1.1 billion; and Granulate, which was acquired by Intel for $650 million. Among the current portfolio companies are Travelier, Coralogix, Paragon, Quantum Machines, and Trigo.

“This is the first close of the current fund, and we are continuing to raise money. We are very happy to continue investing in the Israeli ecosystem at this time,” founding partner Yaniv Stern told “Globes”. “There are challenges in the local ecosystem that we will have to deal with over a long period, but in the end I see growth in the number of high-quality companies, I see very successful companies that have developed and reached the stages at which our fund invests.

“I also see companies in which I didn’t think I would invest, but they have returned to areas in which we are comfortable investing,” Stern added.

Despite the challenging current reality, Stern says that there are still attractive investment opportunities. “At the end of the day, I am responsible for the investors’ money, some of it from financial institutions, and we take every investment seriously. Our standard has even risen in the current period. Our expectations of companies have become higher in the past few months, and we have found a fairly large clutch of very interesting companies.”

Stern founded Red Dot Capital Partners with Yoram Oron. The other partners are Barak Salomon, Atad Peled, and Danielle Ardon Baratz.

On foreign investment, Stern says, “In the past few years we have built significant business ties in markets in Asia, including in countries without official relations with Israel. We believe that these ties are more important than ever, and can provide a strong backing wind to Israeli tech companies. The fund also has investors from the US, Latin America, and Europe, who enable us to help the companies in additional markets.”

Published by Globes, Israel business news – en.globes.co.il – on January 22, 2024.

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