LOCAL venture firm BlueRed Partners has raised US$75 million for its inaugural US$100 million fund, which aims to connect the bustling deep-tech scene in Israel to South-east Asia's prominent business families.
The BlueRed Capital Fund, launched a year ago this month, is "on track" to reach the US$100 million target in Q3, Daniel Harel, co-founder and managing partner of BlueRed, told The Business Times.
BlueRed now has under 10 limited partners (LPs), including family offices in Singapore, Indonesia and Australia, and an Asian institutional investor.
Mr Harel, a dual French-Israeli citizen, has been based in Singapore for over two decades; he previously worked for the global bank UBS. Among other high-level roles, he headed UBS Wealth Management's Ultra High Net Worth and global family office business for South-east Asia from 2009 to 2015.
Working closely with Asia's well-heeled, he noticed their appetite for venture investing in Israel's burgeoning startup scene, but that they lacked the connections for access to good deals.
"Besides going to visit the Holy Land, many families don't actually do business in Israel. It's very difficult for them, (but) they hear so much about the technologies and want to bring it to their (family business) products - whether it's foodtech or cyber security."
Mr Harel himself has deep roots in Israel, where he grew up. He read aeronautical engineering at Tel Aviv University and served as a captain in the military for five years.
Sensing the opportunity to be a bridge to both sides, he and Yishai Klein, former head of Asia and partner at Israeli venture firm Giza Venture Capital, incorporated BlueRed in 2017. The name "BlueRed" references the blue of Israel's flag and the red of Singapore's.
The firm is not just returns-oriented, but also offers a unique proposition to Israeli deep-techs: BlueRed's LPs could potentially open doors for the firms in South-east Asia if they wish to scale in this region.
Mr Harel said of the firm's strategy: "I think we are quite a rare animal, if you will. Many Israeli startups think about scaling up in the West, but there's a great opportunity in Asia."
Its portfolio companies thus far include foodtech player DouxMatok and medtech firm EarlySense. BlueRed is set to finalise another deal involving an Israeli cyber security startup, potentially by end-June.
EarlySense develops contactless health monitoring sensors that track vital signs. These devices can be placed under beds or in chairs for use by the medical industry or end-consumers. BlueRed was drawn to the startup because of its "proven product" and clear scalability, said Mr Harel.
BlueRed invested US$4 million in it in January, alongside hospital bed manufacturer Hill-Rom and Wells Fargo Capital Solutions, in a US$39 million round. Prior to that, EarlySense had raised about US$106 million, going by information from startup data platform Crunchbase.
BlueRed's other investee, DouxMatok, has developed a proprietary sugar product that cuts the sugar content of foods like cookies and chocolate spreads by over 40 per cent, while retaining taste and texture.
In July last year, DouxMatok entered a partnership with European sugar giant Sudzucker to commercialise the startup's product in Europe.
Rather than being a seed investor, BlueRed favours growth-stage investments in startups with a clear path to commercialisation, as long as "the valuation is still something we can bite", said Mr Harel.
"Normally we invest only in products that are commercial, so that we can talk to customers for due diligence. If DouxMatok told us years ago that they have this great idea, we would say, not yet for us. We want to see that it's working beyond the laboratory."
BlueRed's entry comes as other players step in to meet investor demand for Israeli tech deals. For instance, in April, BT reported that Israeli equity venture crowdfunding platform OurCrowd plans to raise between US$30 million and US$50 million with an Asian partner for its first Asia fund.
Mr Harel said he is unfazed by the prospect of competition for deal flow, given the collective experience of his team.
His co-founder Mr Klein brings over a decade of experience from Giza VC, one of the first Israeli VCs with an Asian presence, managing US$600 million in assets. He was later an advisor to property player OUE, introducing proptech and smart-building startups to the firm.
BlueRed's business development head Laurence Harel, Mr Harel's wife, has worked closely with Asian family offices through marketing and business development roles with The European Season, which runs arts and culture programmes in Singapore, and the Prince Albert II of Monaco Foundation, a philanthropic body.
Mr Harel also cites his time in the Israeli military, which has also bred the country's top tech talent, as one of his best sources of connections. "When you come from outside (of Israel), and you want to understand a founder... the only way is to look for somebody you know in the army who definitely knows the founder," he said.
With a niche focus and a lean team of six, he said he believes BlueRed can make its mark. "We may not be a multi-billion dollar fund, but we can pinpoint what exactly we want to do," he said.