Dealflow | July 3, 2018

Bridges Israel emphasizes the social in new $50 million impact fund

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, July 2 – It’s the opportunity to deliver healthcare and housing to Israel’s underserved, not the potential of its hot tech sector, that is drawing capital international investors to a new $50 million fund.

The potential in such social opportunities is the impact investment thesis of Bridges Israel, a sister fund to U.K.-based Bridges Fund Management, chaired by industry veteran Sir Ronald Cohen.

That said, the fund’s first investment is in Venn, a tech-powered startup working to strengthen underserved communities. The service connects residents to co-living and public spaces, social resources, classes, and events. Venn is currently being used across 323,000-square-feet of property in the Shapira neighborhood of Tel Aviv, which is a known hub for immigrants, refugees and elderly residents. The startup is looking to replicate its model in underserved communities outside of Israel—in New York and Berlin, for example.

“They look at a neighborhood as a whole and want to create a [stronger] sense of community—by making streets safer, by making neighbors conscious of [others’] well-being,” Bridges Israel’s Sandrine Montsma told ImpactAlpha.

Bridges Israel’s focus on affordable housing, health and wellness, and sustainable living mirrors that of Bridges Fund Management. Bridges funds, which have collectively raised over $1 billion since 2002, target communities in the U.K. and the U.S. Bridges Israel will focus on Israel’s underserved Orthodox and Arab-Israeli communities. 

Serving the underserved

Israel ties the U.S. for the highest poverty rate in the OECD. In the Orthodox and Arab-Israeli communities in particular, which collectively represent almost 30% of Israel’s population, the poverty rate can run as high as 50%.

Israel’s reputation as a high-tech hub, however, often overshadows these statistics. Most of the estimated $600 million in annual impact dealmaking is focused on the high-tech sector. Advancements in sustainable meat and dairy, compostable packaging, precision irrigation and other agriculture technologies can improve sustainable living well beyond Israel.

Impact initiatives that are less tech-heavy and which focus on Israel’s domestic social needs are less common. The country has experimented with healthcare and education social impact bonds and a senior care startup incubator.

Bridges Israel approach aims to bring more opportunities like these to investors. “We will invest in the Israeli tech sector and companies with potential for global impact,” Montsma says. But the firm’s key focus will be Israel’s underserved and low-income communities that haven’t seen the attention from impact investors that communities elsewhere have.

To ensure it is identifying appropriate opportunities, the fund has recruited influential members and leaders of both the Arab-Israeli and Orthodox communities for its advisory board.

Global investors

Investors—both Israeli and international—have responded. Bridges Israel’s fund’s lead investor is Discount Capital, an Israeli bank. Two other Israeli institutional investors—Psagot and an unnamed insurance company—also backed the fund alongside private investors from the U.K., U.S., Australia and Israel.

Cohen’s imprimatur helped attract investors to Bridges Israel’s first fund. The fact that the firm is replicating a model that has a 16-year track record in the U.K. and U.S. helped as well. Montsma adds that Bridges Israel’s investors have also invested because of their interest in improving equality and opportunity within Israel’s communities.

“The people who do impact investment have an emotional connection to where they invest. Those investors that we attract have a specific, personal interest in the Israeli market,” she says.