Star Ventures sees exodus of 4 GPs

Star Ventures Management, one of Isreael’s most active venture investors, has been hobbled by the departure of four of its 10 general partners in recent months, PE Week has learned.

Of the four GPs, Rami Kasterstein left to become CEO of Neocrafts, an Israeli startup that Star Ventures backed in March with a $5.5 million Series A; Yoni Cheifetz joined Lightspeed Venture Partners’ Israel office in July; Ami Samuels left for Poalim Capital Markets, where he is a senior director; and Pinny Chaviv took the helm of a stealth startup that is circulating term sheets in Israel.

The reasons for the departures are unclear. PE Week sought an explanation from Principal Managing Partner Meir Barel, who founded the firm in 1992, but Barel did not respond to an email query. Partner Christina Moehrle says Star plans to raise another fund, but she declined to give any details. “Such rumours [that Star won’t raise a new fund] are not correct,” she said via email. Moehrle did not respond to additional questions.

Star was one of the most active investors in Israel during 2005, cutting checks for 35 different deals during the year and outpacing such competitiors as JVP, Gemini and Sequoia Israel, according to data from the Israel Venture Capital Research Center. However, the firm has done only four venture deals in Israel this year, with its most recent investment occuring in mid-April, according to CapitalIQ. The four departed GPs left after April.

Following the departures, Star promoted Guy Sella from venture partner to general partner, bringing the firm’s total number of GPs to seven. Sella joined Star in 2004 after spending 14 years in the Israeli Defense Forces.

Star has frequently co-invested with CenterPoint Venture Partners, Charles River Ventures, Rho Ventures and Sevin Rosen Funds, according to Thomson Financial (publisher of PE Week).

The target size of Star’s new fund is unkown, but the firm, which is based in Munich and maintains offices in Herzelia Pituach, Israel, and in Dallas, raised $400 million for Star Israel II in 2001, according to CapitalIQ. The firm also runs a parallel set of funds called Star Ventures Enterprises.Limited partners in Star’s funds include Siemens (which was the sole LP for Star ventures Enterprises), Morgan Stanely, Pearl Holding, HarbourVest Partners and Poalim Ventures. Former LPs, such as Koor Indutries and CDB Web Tech, no longer invest in the Star’s funds due to a change in their asset allocation away from venture capital. PE Week contacted more than 15 Star LPs, but all declined to comment.

The Israeli venture market remains robust, with a number of U.S. venture firms expanding there. Greylock Partners joined Sequoia Capital and Benchmark Capital in July with a dedicated Israel fund worth $150 million. Battery Ventures, Canaan Partners and Venrock Associates all opened offices in the country recently and Norwest Venture Partners and Opus Capital have made increased investment in Israel keystones of their new funds. In fact, Israel-based investors accounted for only $154 million, or 38%, of total investment dollars in startups during the second quarter, according to the Israel Venture Capital Research Center. The remaining $250 million came from foreign investors, most of which stem from the United States.