LONDON -- As SoftBank Group's Vision Fund looks to invest in Israel's cybersecurity startups run by military veterans, it has turned to a former chief of the country's legendary spy agency to navigate the scene.
Yossi Cohen, who had retired as director of the Mossad, joined the fund in July in an advisory role. The Vision Fund is counting on Cohen's extensive connections cultivated through his years leading the intelligence agency to identify promising technology companies, many of which have links to Israel's military.
The world's top venture capital fund is turning its sights to Israel's booming tech industry as the value of its holdings in Chinese companies plunge amid Beijing's crackdown on tech companies. The fund is also counting on Cohen's intel on the Middle East as it looks for more investors.
In particular, Tokyo-based SoftBank seeks to expand its cybersecurity portfolio. Securing online connections has become crucial with the rise of the Internet of Things and self-driving technology.
SoftBank is already ramping up investments in Israel. IoT startup Wiliot said in late July that it received $200 million in a Series C funding round led by the Vision Fund 2.
Wiliot's sensor tags run on radio frequency energy from their surroundings instead of batteries. The tags can collect such data as temperature and humidity, and they have already been shipped for use in pharmaceutical and retail logistics chains.
AnyVision, a developer of artificial-intelligence-based facial recognition technology, has raised $235 million in a funding round co-led by the Vision Fund 2. The fund is also set to buy into online investment platform eToro when the Israeli company lists on Nasdaq this year via a special-purpose acquisition company.
Various companies demonstrate delivery drones in Haifa in March 2021. Israel is home to many cutting-edge ventures.
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Israel is a hotbed of technology startups. Veterans launch new businesses based on technology developed by the military, cultivating fertile ground for the semiconductor and software industries. The high number of auto-related enterprises -- such as autonomous-driving company Mobileye, which was acquired by Intel in 2017 -- has spurred Japanese and European automakers to establish a presence there.
CB Insights' list of unicorns, or privately held startups valued at $1 billion or more, includes 18 Israeli entries -- triple Japan's tally. Among these are cybersecurity companies Transmit Security and Orca Security, respectively worth $2.74 billion and $1.75 billion.
The Vision Fund rush into Israel has been driven by not only the merits of that market, but also uncertainty surrounding existing investments, particularly in China.
SoftBank's initial $100 billion Vision Fund turned heads with big, splashy investments in the likes of top U.S. ride-hailing company Uber, where it was for a time the top shareholder. It has also targeted fast-growing companies in China, such as leading ride-hailer Didi Global and freight platform Full Truck Alliance.
This came after the WeWork debacle of 2019 that led to SoftBank's largest-ever loss. Mitigating risk by diversifying into markets beyond the U.S. and China has become more important than ever for the company.
Saudi Crown Prince Mohammad bin Salman, third from right, and SoftBank Group Chairman and CEO Masayoshi Son, second from right, attend a conference in Riyadh in 2017. Much of the funding for the original Vision Fund came from a Saudi sovereign wealth fund.
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But the Chinese government moved in July to tighten restrictions on U.S. listings of Chinese companies. Didi shares plunged that month after regulators ordered app stores to remove its apps, and the Vision Fund racked up $4 billion in paper losses on its Didi bet, according to the Financial Times.
There may be more to Cohen's appointment than tapping Israel's startup scene.
While the Saudi Arabian and United Arab Emirates sovereign wealth funds that invested in the first Vision Fund have not joined the sequel, which is funded with SoftBank capital alone, the possibility of future involvement has not been ruled out.
Relations between Israel and the UAE have been improving, with Israel opening an embassy in Abu Dhabi. Having a former Mossad chief on board could help SoftBank keep tabs on the Middle East situation while feeling out the potential for future investment in its funds.
