The Partners at Canaan

Eric Young

One of the founding partners of the fund from 1987. Responsible mainly for investments in the CleanTech field

Dr. Maha Ibrahim

Joined the fund ten years ago. Invests mainly in the communication and digital media fields

Dr. Seth Rudnick

A doctor specializing in oncology. Has been with the fund for twelve years, lead investments in the field of medicine

Izhar Shay

Manages the fund’s activity in Israel. An electronics engineer by profession and a serial entrepreneur in his past

Canaan Partners believes in the local industry

“Israel is Silicon Valley East”

Quick development, entrepreneurial creativity, gathered together in a small geographical area, with activity in the world arena. Three senior partners in the Silicon Valley venture capital fund Canaan Partners explain to Calcalist why Israel is a good investment target / Meir Orbach
When the partners at Canaan Partners are asked about Israel, something in them changes. Canaan Partners, one of the veteran venture capital funds in Silicon Valley, sees in Israel of 2009 the Silicon Valley of the past. The fund’s commitment to the Israeli market expressed itself in the last Journey convention, which was held on Tuesday in Tel-Aviv. Three senior partners from Canaan were present at the conference together with the Israeli partner Izhar Shay, who manages the fund’s activities in Israel.
Eric Young, one of the most experienced partners in the fund, and responsible for CleanTech investments, thinks that the key word is creativity. “Israel has a rare entrepreneurial engine”, he says, “The rate of services and technologies created here, in the high-tech and in the life sciences, does not exist in any other country. The Israeli richness extends into a variety of areas – communication, digital media, chips, software and more, and cannot be compared to any other place where we operate”.
Maha Ibrahim, a general partner in the fund, tells us that the Israeli advantage is not only in variety, but also in the professional capability. “Time after time I am amazed to see how Israeli companies advance their technology in giant steps, way beyond the development capabilities of similar American companies that we have invested in”. And Young adds: “When I am asked what is it like to invest in Israel, I say that Israel is Silicon Valley East. The Valley and Israel work in the same manner”.
Canaan Partners does not invest only in Israel, it invests in India too. The decision was taken four years ago, when the fund decided to expand its activity outside of the USA. India and Israel were chosen to be the only foreign countries in which the fund opened offices. As opposed to what is common in other funds, China was not chosen as a base for Canaan Partner’s activity.
Young says that the reason for operating in India stems from the fast development of the local market. “The population there is growing and the number of people who can afford to purchase products and services is increasing very rapidly”, he says.
Between India and Israel
Naturally, the partners at Canaan have many insights about the differences between Israel and the other markets in which the fund is active. According to Dr. Seth Rudnick, who specializes in investments in life sciences, the difference between Israel and the other countries in which the fund is active, is the local focus on the international market. The entrepreneurs in Silicon valley want to establish large companies and outsource as much activity as possible”, he explains. “The market size enables them to rely on local activity. In the Indian market, the situation is similar, but the maturity is different. Most of the Indian companies choose to perform the work internally. In Israel the situation is totally different. The Israeli market is irrelevant; therefore most of the business activity of the Israeli companies is outside the country’s borders. Israel is perceived as a development and knowledge center, but the customers are abroad. This situation creates Israeli startups of a totally different kind, since they have to search the world in order to sell their products, right from the early stages. They have no market at home”. And Young adds: “The companies we establish in India answer the local needs, as opposed to the companies in Israel which clearly answer international needs”.
Two areas in which the fund focuses in addition to IT are the Life Sciences and Clean-Tech. Dr. Rudnick sees great potential in the life sciences field in Israel, and adds that the fund may consider recruiting an Israeli partner in this field sometime in the future. “One of the advantages of Israel in the field is the accumulation of all the services in a small geographical area. You can find an advanced hospital, a University and skilled manpower, all in a small area. That is exactly how Silicon Valley started”.
According to Dr. Rudnick, the life sciences field has gone through a lot of changes lately. “As opposed to the Clean-Tech industry, we have a regulatory body that creates equality between the companies, which is the FDA. Both large and small companies need to follow a similar path and get FDA approval. The change is that the motivation to acquire companies that have not received FDA approval has gone down significantly. Another change which I can see is that if in the last 30 years, what was important to the companies was to create innovative medication; the demand for the next ten years is for improvements in making efficient medication. As an example, we have invested in a company that managed to reduce the cost of a certain medication that deals with migraines by tens of percent.  The medication is just as effective, but it costs a lot less, for the consumers too”.
The Future in Clean-Tech
The Clean-Tech industry has also changed in the last few years, say the partners at Canaan Partners. “In the past, when I was offered opportunities to enter this industry, I was very negative, Young says, “I didn’t see that it suited the venture capital model. We are looking for companies that will be able to produce value for us within 10 years at the most, i.e. that we can take them public or sell them.  In the past two years my opinion has changed completely. The demand for alternative energy and for energy saving has risen significantly, and companies suitable for venture capital investment have been founded. I believe that this industry is here, and will be here to stay for a very long time”.
Seth Rudnick: “The Israeli market is irrelevant; therefore most of the business activity of the Israeli companies is outside the country’s borders. This creates startups of a totally different kind”

Canaan Partners
• Founded: 1987
• Managed capital: 3 billion dollars
• Investment fields: Digital Media, Communications, Enterprise software, Clean-Tech, Medicine and medical equipment
• Exits: 70 mergers and acquisitions, 53 stock issues
• Investments in Israel: Peer39, LiveU, Efficient Finance, EnStorage, N-Trig, Prime Sense
• Active in Israel since: 2006