“Reduce exposure to the shekel”: the Giant Fund’s recommendation to Israeli entrepreneurs

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The Bessemer Foundation publishes from time to time financial recommendations concerning the holding of foreign currency, and until recently advised the financial managers to transfer cash from abroad to Israel due to the interest rate differences in favor of the local banks. The recommendations in Bessemer are usually given a year in advance, here this is no different or unusual from other recommendations, except for the fact that the forecast was shortened to a period of six months due to the economic uncertainty in Israel due to legal reform.

“Our recommendation is to hold exposure to the shekel for a period of no more than six months (short-term deposits), and seriously consider transferring the money to a foreign bank, or to several foreign banks if significant amounts are involved.”

Bessemer, one of the largest venture capital funds in the US, manages approximately $20 billion in 315 portfolio companies, including 44 active Israeli investments and a similar number of local exits. Among its notable historical investments – the companies Wix, Faber Mellanox and Intocel. Today, Bessemer manages investments in unicorns such as Papaya Global, which was one of the pioneers of high-tech companies to transfer funds abroad, Melio, Haibov and Axonius. The fund is managed in Israel by Adam Fisher, who was apparently behind the formulation of the recommendation, and Amit Karp. Despite the local initiative, there is no doubt that such a recommendation required the consent of all the fund’s managing partners before its release.

“Israel is entering an area of ​​instability characterized not by the unstable coalitions as it was in the past, but by the unpredictable policies of an unbridled government,” the circulated email reads. “In the first six weeks of its existence, the government routinely ignored reports and warnings from industry experts, including economists, bankers, investors and business owners, and instead voices from within called for the imprisonment of its critics and an attack on the media. Already today, the government is pointing the finger of blame at the business community with the claim that any economic damage caused will be the fault of its actions and statements – and not of the policies and statements of the members of the government.”

“You will have to carefully examine the feasibility of the move”

“We are aware of the significant gap in dollar deposits between banks in Israel and banks in the US or Europe, but we do not believe that this gap embodies the above risk,” the email reads. “We also recognize the fact that some of your deposits are closed for long periods in the Israeli banks, so you will have to carefully examine the feasibility of the move.”

“We trust in the durability of the Israeli high-tech industry considering the very limited exposure to the local economy, but at the same time fear that in the current atmosphere there is a chilling effect for investments in Israel that are not related to technology and local consumption. The fear is that the shekel will continue to weaken while foreign currencies will strengthen at its expense, with the continued withdrawal of funds from Israeli banks. While both of these phenomena may sound exaggerated these days, the perception of investors and the public may make them a reality. This requires the formulation of a different risk management policy.’

It should be noted that for high-tech companies and venture capital funds, a high dollar exchange rate benefits them due to the fact that most of them raise their capital in dollars and pay salaries in shekels.


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