Late last year, the Israeli branch of US investment firm Ibex underwent a facelift. The two partners who ran it, Gal Gitter and Nicole Priel, both left the firm, each for their own reasons, and subsequently the young investment managers who worked with them also left. Priel, who was responsible for investment in early-stage startups, set up her own venture capital fund, Kinetic Capital, for investment in digital services for end users, while Gitter, who oversaw investment in growth companies at Ibex, set out to look for the next thing after Ibex decided on a strategic change on growth companies, but he remained as a consultant to the firm’s secondary fund. The firm’s investments in Israel are now managed by partners Aaron Ringberg and Adi Dangot Zukovsky.
It now turns out that the next stop in Gitter’s career is Alpha Partners, a US firm that manages $450 million and is currently setting up activity in Israel for the first time. It is believed that Gitter will manage an allocation of $150 million for investment in growing Israeli technology companies, in a way substantially different from the operation of a standard venture capital fund.
Unlike regular foreign venture capital firms active in Israel, such as Sequoia, Lightspeed, Index and Insight, Alpha Is not looking to lead company fund raising rounds, and unlike Israeli funds that focus on new and early-stage companies, it is not looking for people who have served in the IDF’s 8200 cyber teams to be their first investor.
The fund offers small venture capital funds and private investors a sort of package deal: the possibility of raising finance for investment in specific companies in order to preserve their stakes and avoid dilution. In return, in the event of an exit, Alpha will share with the fund what is known as the “carry”, generally 25% of the profit after the investors in the fund, the limited partners, have been repaid the amounts they invested.
In this way, Alpha enables small investors to participate fully in the exits of the portfolio companies in which they invested at early stages when the companies are acquired or make an IPO. “Almost 90% of companies that embark on an IPO have small investors that manage less than $100 million and, because of capital constraints, can’t avoid dilution when the company’s valuation rises in later fund raising rounds,” Gal Gitter told “Globes.” “A fund that raises $50 million over its entire life cannot invest at one go a third or a quarter of the fund in a new round, or raise $8 million at one go externally in order to preserve its percentage stake in the target company in the event of a new fundraising round.”
Exposure to data on hundreds of growth companies
This is where Alpha Partners’ most significant achievement comes into play. The firm has persuaded hundreds of funds to open up the financial books of thousands of companies in order to consider whether to participate in their names in fund raising rounds and share with them the gains on future exits. It does this by setting up SPVs (special purpose vehicles), financial entities that raise capital for investment in fund raising rounds, through which it invests in the name of the venture capital fund that seeks to maintain its stake in the company concerned.
Thanks to a network consisting of some 1,300 small and mid-size venture capital firms around the world, including in Israel, Alpha obtains exposure to the confidential data of hundreds of growing technology companies every year, after signing confidentiality agreements. Last year, there were about 1,600 fund raising rounds for growth companies. Alpha examined 800 deals, and ultimately made five investments.
So far, Alpha has made five investments in Israel even without a local allocation, including in Zero Networks and Exodigo this year, and Semperis and Vi Labs in the past.
With the new allocation, the firm intends to invest between $3 million and $12 million in each of fifteen Israel companies, focusing on B to D rounds, with a preference for companies growing at a rate of at least 150% annually, generating annual revenue of over $10 million, and addressing a market larger than $10 billion.
Alpha’s exposure to a vey large number of companies at the critical growth stage provides it with a complete picture of what’s happening in the technology market. Gitter speaks of very rapid growth, sometimes astronomical, in the revenue and profits of companies that lead the various categories in artificial intelligence, but at the same time he reports negative phenomena that emerge in the sector because of the growing dependence on language models, and the lack of discrimination that many investors have developed.
“AI companies that are among the leaders in their categories, whether they’re language model companies, companies that apply AI to industry, or AI infrastructure companies in storage, data and cyber, are companies that are growing at rates we haven’t seen anywhere, far faster than what we saw in 2021,” Gitter says. “These are companies whose growth rates can range between 200% and 600%, whose revenue can leap in a single year from $8 million to $40 million, or from $40 million to $200 million, and we see this in many companies.”
“Investors going in at any price”
With the huge growth because of the increasing demand for AI technologies and their growing effectiveness, Gitter also identifies a negative effect that blinds investors to the fall in gross profit in a broad swathe of companies, and warns of over-dependence on the language models. “Investors see a trend of very rapid growth and the formation of a vast market, and to a large extent this takes us back to the days in which investors want to get into investment in certain companies at any price, when important financial criteria such as low gross margins or over-dependence on language models make almost no difference to them.
“The use of language models, usually developed by other companies, detracts from companies’ profitability, and adds a significant risk factor, since the models themselves and the economic model behind them are constantly changing. This basically means that an investor in a mature company can go into a company with the risk profile of a young company, and invest at a super-high revenue rate multiple, knowing that there’s a good chance that the company will never reach its fund raising round valuation. Essentially, he’s gambling on the company becoming a market leader in its category; if it does, it will be worth tens of billions of dollars.”
Gitter is aware that Israel holds no advantage over other countries in AI. “The share of Israeli companies in this market is smaller than their shares in other markets,” he says. “But we see here companies training AI models for various industrial sectors, and doing so from first-hand data. For example, underground mapping company Exodigo, in which we have invested, analyses the data it receives from its underground sensors, and it will be hard to compete with it, given all the data that it gathers and with which it trains its model. Another segment of AI companies is infrastructure companies, in storage, data, and cyber. We haven’t yet got into this market in Israel, but I think that we shall be able to reach any Israeli fund that deals in this area and compete for the best deals.”
On the opening of official activity in Israel in wartime, Gitter says, “The firm believes in in the advantage of the Israeli entrepreneur in creativity and technological leadership, but it also realizes that Israel’s geopolitical risk is lower than it has been for a long time on every metric: the shekel-dollar exchange rate; the strength of the stock market in Israel; aggregate venture capital investments in the first quarter – every metric shows that the future risk level here is low.”
Published by Globes, Israel business news – en.globes.co.il – on September 4, 2025.
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