It's no secret that the war has brought about significant turmoil and uncertainty in Israel's high-tech industry, even if according to current data the damage so far has not been too severe, and foreign investment continues to stream in – even if perhaps more reluctantly than before.
No such reluctance can be detected in Justin Borus, head of Ibex Investors. His firm, a Colorado-based alternative investment manager with almost $1 billion in assets under management, has increased its investments in Israel during the war with gusto, fueled by his unshakeable belief in the strength of Israeli high-tech and wealth of opportunities he sees here. The fund was founded as recently as 2003, and has only been investing in Israel since 2012, and according to the latest SNC report was the second most active foreign fund in Israel during 2024, with 14 investment rounds.
We sat down with Justin to hear what brought him to take the daring leap to invest in Israel after a single trip, without any prior connection to Israel, and how he has steadied the ship since the upheaval brought about by October 7th.
"Like so many Americans, I came to Israel 13-14 years ago on a four-day trip, after having read the Startup Nation, to visit startups, VCs, and founders. Immediately, I was just blown away," explains Borus, "I could not believe how innovative the companies were here. In America, I see a lot of startups which we might call "Me Too" businesses, like LinkedIn for babies. Here, the visions were much grander." After his visit, he returned to the US sure of his desire to invest in Israel, and just needed to find the best way to do it.
What stood out that made you so enthusiastic about investing here?
"Each company was more innovative than the next, and secondly, that I felt as though the US startups that I was seeing were making very incremental improvements - They were hammers in search of nails. The common thread among Israeli startups, and I met with probably a couple dozen when I was here, is that they were solving major problems."
Israel, of course, is a much more complex business environment than the US – challenges such as wars and political turmoil abound. On this, Justin says that: "We did a lot of research on the front end. We looked at every war and conflict in Israel going back dozens of years. On average, if you looked at the TASE, it's up about 28% in the 12 months after a war or conflict. And it's up about 37% two years after that war or conflict."
He concludes "so, while it scares a lot of people away from investing in Israel, all that conflict is already priced in. And we came to the conclusion that all this conflict and war fuels the innovation in the first place. The biggest innovations always happen as a direct result of war and conflict."
October 7th's effect
Naturally, our conversation can't help but turn to the events of October 7th and the current war. Nonetheless, he thinks from an investor's perspective, nothing has changed. "I think Israelis are their own worst critics. An outsider has real perspective, and we focus on the bigger picture and we see how innovative and how much potential and excitement there is surrounding Israel, the startups and the entire ecosystem."
He goes on to add that "When we started investing in Israel there were maybe 25 or 30 multinationals with offices in Israel. Today there's over 300 multinationals. So, the smart money, the biggest companies in the world, they're not scared at all.
Perhaps surprisingly, Justin hopped on a plane to Israel shortly after October 7th. "Like anything else in life, I think you have to see it for yourself. The news media in the U.S. and around the world was painting a picture of this as if it were downtown Baghdad in the middle of the US invasion." He remarks that "I was struck by how normal everything was, despite visiting only a couple weeks after October 7th. It was simply 180 degrees from what we were seeing in news media."
His keen business instincts soon brought him to see the emerging opportunity. "I remember saying to our team, this is a real opportunity. The perception was that this is a war-torn country with nothing left to offer. This was a really hard image to reconcile with what I had experienced. I remember having calls with our investors and telling them how normal everything was and how galvanized the people were and that the startups were more intent than ever to succeed."
It wasn't all easy though. Justing received calls from worried investors, and some of them even decided to pull their investments. "I would say it split three ways. One third, said I don't care what you tell me, or what the data says – I just turned on CNN, I'm scared, and I don't want to invest in Israel anymore.
The second third understood that this was a huge buying opportunity, but wanted the dust to settle even though it potentially meant missing a huge opportunity. And the last third was convinced, you want to invest when things look the bleakest. Those people wanted to double down. They were betting, as we were, that Israelis wouldn’t be down on the mat for long."
As part of his effort to steady the nerves of his investors, he joined the national effort to defend Israel. "It's a challenge for foreign investors to convince certain people because all this noise in the media is coming from others and Israel is saying very little in their defense. Israel needs a complete PR makeover include a mascot, new colors, a whole new branding exercise."
New funds raised in 2024 for investing in Israeli companies
Ibex raised two Israeli funds in 2024, a $106M early-stage fund and a $40M secondary fund. "The $106M early-stage fund is our second Israel VC fund - we call it a return of capital fund. The idea is that any single investment is a big swing and, if the stars align, should be able to return the entire $106 million all by itself.
Obviously, Israel is very good at cyber and enterprise software. But we'll also look at things a little off the mainstream like industrial companies, fintech companies, perhaps consumer, we try to cast a wide net." He then expands on the $40M secondary fund, which he says they raised "because the IPO markets have been closed, in general, for a few years now. For Israeli companies particularly, there's a lot of opportunities for late-stage pre-IPO companies that are very well-established and we have an opportunity to buy stakes at fairly significant discounts."
Looking ahead, Justin says that Ibex Investors has long-term ambition in Israel. "I believe we're at the very early stages of a really exciting period for Israel. We have a view that U.S. assets are quite expensive at the moment, and Israel is one of the only markets where you can find both public and private companies at really compelling valuations on a risk-adjusted basis."
"Moreover, there are a few really exciting potential catalysts for the Israeli market including a likely peace agreement with Saudi Arabia which would open the door to many more countries. Investors are under appreciating the financial and economic catalyst that could be. Also, with the trillions of dollars worldwide that are going to be spent on military and defense, Israel should be a large beneficiary as the world will be buy just the kind of stuff that Israel is good at making."
Beyond investments, Justin has also served on the board of the Anti-Defamation League, but his perspective for how Israel can improve its image is still business-oriented. "Sometimes the best PR you can do for a country is make people a lot of money. I'm pleased that over half of our investors are not Jewish.
Many of our investors have never been to Israel, even though we host investor trips here on a regular basis. So, if their experience with Israel can be that we're among the best performing fund or funds in their portfolio, they're going to have a very positive impression of the country."
"I love the energy"
We finish up with Justin discussing what he loves about Israel. "I love the energy. I don't know how you guys do it, but people will be at restaurants until 11 o'clock, or midnight and they'll go to a club or a bar and somehow, they're at work early the next morning creating some exciting new technology.
But Israelis do it all the time and there's always an excitement when you walk into cafes or restaurants. People are smiling and they're talking loudly and they're leaning into the conversation. I've been fortunate to travel to many places, but I don't see that energy really anywhere else."