A Date With Israel’s Startup ‘Matchmaker’
JNS.org – In 2003, Jeremy Lustman began working at the Washington, DC metro area’s DLA Piper law firm. Young and motivated, he could have never predicted the market crash that arrived in 2007. By 2009, Lustman had seen many of his colleagues laid off. While he was still gainfully employed, he too had a lot more time on his hands.
Rather than sit around and wait for his name to come across the chopping block, Lustman decided to pitch his way to success.
“I researched the prospect of trying to create an Israeli practice,” says Lustman, describing his game plan at the time. “Israel seemed to be a market that was growing dramatically, it was about the time it was admitted into the OECD (Organisation for Economic Co-operation and Development), and a lot of Anglos were doing business there. As a law firm, we were growing internationally.”
A tough US market, a stronger Israel and no existing organized or proactive law practice revolving around investment in the Jewish state — all elements were aligned. Lustman moved his family to Israel.
Since then, Lustman has been doing what Maryland/Israel Development Center (MIDC) Executive Director Barry Bogage calls “making matches” — or in Hebrew, being a shadchan (matchmaker).
Bogage explains that, indeed, the deal flow of a merger, acquisition or investment starts with matchmaking, a time-honored Jewish tradition. Just like soulmates, two companies find one another — whether it’s through professional networking by the company executives, brokering through investment bankers, or matchmaking by organizations such as the MIDC (which promotes bilateral trade and investment between Israel and Maryland to help create jobs in both economies). Or, the match just happens serendipitously.
“Then, just like dating, even if on paper it looks like a perfect match, the two [companies] need to click. That’s the big intangible,” says Bogage. If the chemistry is good, other people need to be brought in to structure the deal and make it happen, including financial consultants, a legal team, accountants, and sometimes regulatory consultants (like in the case of medical devices or pharmaceutical drugs). Then, akin to a Jewish groom breaking the glass, the deal is inked. Mazel Tov!
So how does Jeremy Lustman make these matches? Over a series of three start-and-stop phone calls, usually interrupted by call waiting or paused so he could step out of a meeting, Lustman gave this reporter the lay of the land.
He says he started out in Israel with a list of 25 or 30 “random people” — and a lot of motivation. He knocked on doors; attended professional networking conferences; and tried to meet with local lawyers, investors, and venture capitalists.
“I caught a couple of breaks that first year,” Lustman tells JNS.org.
Since then, business has snowballed. In just the first half of 2015, Lustman helped facilitate seven M&A (merger and acquisition) transactions that collectively exceeded $1.5 billion, brokered several real estate acquisitions (public and nonpublic deals), and helped enable three fund investments for Israeli institutions that total approximately $255 million. Among those were Comverse’s acquisition of Acision; Amdoc’s acquisition of Comverse’s business support systems unit; Nova Measuring’s acquisition of ReVera Incorporated; Japan’s Kurita Water Industries’ acquisition of ICL’s APW; and China’s Fosun International’s acquisition of Israel’s Phoenix Holdings Ltd.
What’s Lustman’s secret sauce? Proactivity, he says.
“Many lawyers might wait for the client to call with a project.…I look at the practice more proactively. My client might not need something in Japan right now, but I say, ‘Let me introduce you to see if we can make a shidduch,” Lustman explains, noting how he has successfully leveraged old and new global relationships to show clients how invested he is in their success.
“The value I bring is not simply in the closed box realm of being a lawyer, but leveraging relationships by making introductions and finding different ways of adding value,” he says.
Mark Lesnick of the Israel-based Fortissimo Capital Fund says he cautioned Lustman against trying to penetrate the Israeli marketplace, arguing that it was already saturated with longtime experts in the field. But he recalls that Lustman insisted he could focus on other areas and do it better. Soon after, Lesnick leveraged Lustman and DLA Piper to help Fortissimo invest in an Israeli company with a large American subsidiary that had contracts with the US Department of Defense.
“They were able to get the deal done efficiently,” says Lesnick. “Jeremy remains involved throughout the process. He first locates the expert in the field in the relevant local office.…He makes sure the local lawyer is serving us in the best and most efficient manner. Having someone in Israel as a point person…is very helpful in ensuring a smooth process.”
Lesnick continues, “Now that we are spoiled, I cannot imagine what it would be like without his (Lustman’s) presence.”
The other part of Lustman’s success has little to do with Lustman, and more to do with Israel’s growing high-tech marketplace.
“2015 was the strongest year yet for Israeli high-tech fundraising and mergers and acquisitions,” says the MIDC’s Bogage. “Israel is uniquely situated with all the necessary components to make a sustainable high-tech economy, what people are calling an entrepreneurial ecosystem.”
According to Bogage, that ecosystem includes top-tier universities, which generate knowledgeable graduates with a knack for innovative thinking; a flourishing venture capital community; strong governmental support and investment; a culture of entrepreneurialism; and a worldwide reputation for quality.
“When you talk to anyone and say, ‘Israeli high-tech,’ it is taken for granted that it is first-rate,” Bogage says.
Lustman says that lately, Israeli tech companies are seeing investment not just from the standard private entities, but from corporate funds. These are corporations that invest in early-stage technologies they think might be worth partnering with or acquiring later on.
“They get in on the ground level, invest some money, and help shape the company, and then prime it for potential acquisition,” says Lustman.
This does not mean that deals go through without challenges. Bogage says cultural differences between Israelis and Americans often plague potential agreements.
“Everyone is Western and dresses the same and speaks English, so the assumption is that we’re alike. But we’re not,” he says, noting the simple generalization that Americans want everything planned out far in advance and Israelis wait until the last minute. Other challenges are distance and the violence of the Israeli-Palestinian conflict, which Bogage says sometimes “scares away foreign travelers or, at a minimum, delays travel.”
Lustman isn’t deterred. He says Israel is becoming a global leader in commerce. His work is not only paving inroads for US-Israel collaboration, but business deals in Japan, Australia, the United Kingdom and India.
Israeli startups can globalize if they are careful to stay on the radar for deal flow by making sure the right players are aware of who they are, explains Lustman. For American companies interested in discovering Israeli technologies, Bogage recommends attending Israel’s major trade shows, such as the Biomed and Cybertech conferences, and reading Israeli business news from outlets such as Globes, The Marker (in Hebrew), No Camels and Israel21c.
Lustman says the Israeli market is primed for American talent right now, and that aspiring immigrants to Israel (olim) like him can successfully make a living in the Jewish state. Given conditions including a record number of Western olim coming to live in the Holy Land, increased job opportunities for English speakers in global firms with offices in Israel, and technology enabling employees to keep their American jobs while working remotely from abroad, Lustman says it is “totally, absolutely the right time to be in Israel.”
“Israeli companies have a challenge attracting talent from abroad,” he says. “Aliyah has increased over the years, and as a result Israeli companies have become stronger….Being able to enhance the pool of stronger executives — that would enhance the companies here (Israel) and the deals over there.”