The UAE just invested $100m in Israel’s tech sector as the two countries grow closer
A major sovereign wealth fund in the United Arab Emirates has invested around $100 million in venture capital firms in Israel’s tech sector, according to people familiar with the investments, a further sign of deepening trade and investment ties between the countries at the forefront of the Abraham Accords.
A year and a half after the deal that normalized diplomatic relations between Israel and the UAE, business is booming, with trade between the two countries expected to hit $2 billion this year, from around $250 million a year before the agreements, according to the UAE. -Israel Business Council, a business body representing 6,000 Emirati and Israeli businessmen.
Israeli companies are investing in new offices in Dubai and Abu Dhabi and moving staff from Tel Aviv. Emirati sovereign wealth funds invest directly in Israeli tech companies, and UAE companies are positioning themselves as partners for Israeli expansion in the rest of the Middle East.
Abu Dhabi’s Mubadala Investment Co., which manages $250 billion in assets, has invested up to $20 million in six Israel-based or targeted venture capital firms, including Mangrove Capital Partners, Entrance Capital, Aleph Capital, Viola Ventures, Pitango and MizMaa, according to a spokeswoman.
Mubadala’s previously unreported investments were based on the financial performance of each venture capital firm and the personal bonds forged between the two teams, after the Abu Dhabi fund met around 100 investors, said a person familiar with the fund.
The fund was originally established by Crown Prince Mohammed bin Zayed, a key supporter of the Abraham Accords, and although Israeli investments are small relative to Mubadala’s size, they are strategic for Abu Dhabi, which hopes to attract startups to diversify its oil. economy.
The sovereign wealth fund, which has been one of the most active in the world in the pandemic and an anchor investor in SoftBank Group Body
Vision Fund, now plans to start investing direct stakes in Israeli tech companies as well, the person added.
Avi Eyal, the managing partner of Entree Capital, said he spent years developing a relationship with Mubadala’s head of venture capital, Ibrahim Ajami, before receiving an investment from the Emirati fund. After a first meeting at a dinner in London, the two leaders co-invested in startups and Mr. Ajami invited his Israeli counterpart to be a panelist at a conference in Abu Dhabi in February 2020, before the agreements, when the two publicly shook hands. stage.
“It all grew out of relationships, knowing people, not chasing money,” said Eyal, whose fund has also invested around $15 million in UAE-based startups.
The agreement reached by Israel in the summer of 2020 to normalize relations with the United Arab Emirates, Bahrain, then Morocco and Sudan, was initially met with euphoria in the business world. Israelis have flown into the UAE in droves, and Israeli and Emirati companies have signed agreements to work on developing technology and defense ties. Israel’s vibrant tech sector was seen as ripe for investment from deep-pocketed Emirati government funds.
But there were initially few meaningful concrete agreements. The pandemic has limited travel and businesses from the two countries – once apparent enemies – have taken longer than normal to understand each other, business leaders say.
“The headline is business is on,” said Israel-based Dorian Barak, founder of the UAE-Israel Business Council. “It’s happening more slowly than people would have hoped.”
The momentum changed last year when Mubadala Petroleum, the fund’s oil and gas arm, bought a roughly $1.1 billion stake in an offshore natural gas field from one of the biggest energy companies. of Israel. In November, the public defense company Israel Aerospace Industries Ltd. signed a deal with Dubai’s Emirates airline to convert four ocean liners into cargo planes and struck a deal with Emirati defense firm Edge to produce drones. Another Abu Dhabi sovereign wealth fund, ADQ, also led a $105 million investment in Aleph Farms, an Israeli company that grows lab-grown steak meat.
Didier Toubia, managing director of Aleph Farms, said the deal fits the long-term goals of both parties. Aleph plans to build a production facility in the UAE within the next two years to sell to the wider Middle East and ADQ is interested in technologies that help the UAE manage food security.
“Sometimes Israelis think they can just go to the UAE and do business,” he said. “You have to find ways to fill in the gaps.”
Samuel Shay, a member of the UAE-Israel Council and a consultant who aims to connect Israeli tech companies to Persian Gulf development projects, said some Israeli companies have struggled to navigate the UAE’s business environment. Although it is home to the regional headquarters of hundreds of multinational companies, the UAE is also dominated by Emirati family or state-owned companies that traditionally take a stake in the local operations of foreign companies.
The message from these companies, Mr. Shay said, is, “Give us your best services, technology, we’ll pay for it.” But, he said, “they are not looking to be partners with the individual Israeli.”
One Israeli tech company that has signed a joint venture with an Emirati family business is RR Knowledge Systems and Technologies Ltd., a medical records software developer. Its CEO, David Santar, met an Emirati doctor through an online forum organized by the Dubai and Israel chambers of commerce. The doctor introduced him to his brother Khalaf al-Falasi, who after months of discussions and due diligence, including a social visit to the desert in the United Arab Emirates, decided to form a partnership with the Israeli company.
The UAE joint venture, called ezMedSoft, has sold the Israeli company’s software to a dermatology clinic in Abu Dhabi and plans to market it to other private hospitals and medical centers. “We knew it would take a long time to build the relationship,” Falasi said.