Growth Capital vs. Venture Capital

In 2006, when we began speaking about a growth capital fund in Israel, people had no idea what we meant. Invariably the response was, "Like a VC Fund, right?" Wrong.

What we, and other growth funds like us, target are:

• Already successful businesses which can be made more successful;
• Management teams building real businesses and focused on old fashioned things like profit and loss; and
• Businesses for whom technology is a barrier to entry, not an way to create a new market.

Five years later the Israeli market now understands what we've been talking about. We see a steady stream of companies for whom growth capital is the right fit. And the VC-style companies tend to stay away.

The growth capital market is still in an expansion phase. But it isn't a huge market, and we don't expect it to become huge. VC will remain the predominant private funding market in Israel - and I expect that market to heal itself through a combination of reduced capital supply and a trend from consumer tech back to enterprise tech. But the growth market is a great niche market and an important addition to the private funding landscape in Israel.

Dodgy going ons in Italy!

Very very interesting. Indeed. Something smells rather fishy here. Earlier today Italy sold €5 billion in 1 year Bills at an average yield of 6.087%, the highest since September 1997, and almost 3% higher compared to a month ago, when it prices at 3.570%. However, what really catches the eye, is the fact that just before the auction, the 1 year was trading at a huge 7.75%, almost 200 bps ABOVE the auction. Who is prepared to receive a 6.09% yield in a new auction when they can receive a juicy 7.75% in the secondary market? Unless someone (read ECB) had alternative interests in forcing the yield lower. Now that certainly would be interesting, as the ECB is prohibited by law from intervening in the primary, auction market.