Dovi Frances, a founding partner of the investment firm Group 11, has sharply criticized Papaya Global’s move to divest itself from Israeli banks. Frances, whose firm is a major investor in Papaya Global, stated in an open letter on LinkedIn that he does not feel that a business should be making such a drastic move based on political considerations.
On Thursday, Israeli startup Papaya Global, a fintech unicorn that offers a cloud based platform for companies to handle their payrolls, revealed it decided to divest itself of Israeli banks due to the judicial reform plan proposed by Benjamin Netanyahu’s government. The move came after the Governor of the Bank of Israel himself warned Netanyahu that the plan could harm foreign investment in Israel since it would weaken Israel’s democratic system.
The move came after the Governor of the Bank of Israel himself warned Netanyahu that the plan could harm foreign investment in Israel since it would weaken Israel’s democratic system.
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Group 11 owns 3% of Papaya shares.
“As venture capital investors, we are responsible for funds of institutional and private investors,” explained Dovi Francis. “The largest insurance and pension companies in Israel and the world are invested in Group 11, and they manage the funds of the investors in all of them from all ends of the political spectrum, of all genders and all shades. My job is to invest the money in great category-defining software companies”
“Sometimes venture capital investors and company managers forget who owns the house, so I want to remind all of us – our landlord is the private person, the owner of the pension policy. It’s their money, not mine, not Group 11’s, not the pension fund’s and not the portfolio company’s.”
“It is true that the CEO has full right to manage the company’s funds in any bank they see fit,” wrote Dovi Francis, “and the board is usually not required to be involved in such a decision. But that doesn’t mean that a bank account can be used as a tool for disputing and making a political statement.”
Dovi Francis added that he personally is “full of professional appreciation for Eynat (Papaya CEO Eynat Guez) and fully appreciate her personal desire to express her political position. But I really do not support this move.” But, in his opinion, this is not the way to “express a personal political position, in my opinion it only leads to the continuation of the division in the people.”
“The role of the high-tech industry,” he declared, “which is mostly not part of this, is to bridge between everyone and give a tremendous opportunity for financial well-being to anyone who wants it.”
Eynat Guez, Co-Founder and CEO Papaya Global, Tweeted a statement on the matter Thursday morning saying, “Following Prime Minister Netanyahu’s statements that he is determined to pass reforms that will harm democracy and the economy,” she said, “we made a business decision at Papaya Global to withdraw all of the company’s funds from Israel, in the emerging reform, there is no certainty that we can conduct international economic activity from Israel, this is a painful but necessary business step.”
The decision came the day after Benjamin Netanyahu gave a press conference in Israel Wednesday evening to dispute critics who said that his judicial reform plan, if passed, would harm Israel’s economy by making the world less confident about Israel’s stability as a democracy.
Flanked by his Finance Minister Bezalel Smotrich and Minister of the Economy Nir Barkat, Netanyahu said, “In recent days, I have heard concern about the effect of the judicial reform on our economic resilience. Here as well, I would like to set the record straight. The truth is the exact opposite. Not only will our moves to strengthen democracy in Israel not hurt the economy, they will strengthen it. They will restore Israel to the legal situation of most of the leading democracies in the world, where it had been for 50 years.”
Benjamin Netanyahu’s coalition government’s proposed judicial reform plan would dramatically curtail the powers of Israel’s Supreme Court and attorney general. So, opponents say that this would leave the government free to do whatever it wants in the absence of any oversight.
Founded in 2016 by CEO Eynat Guez, CTO Ofer Herman and CPO Ruben Drong, Papaya Global says that it is reinventing global payroll, payments, and workforce management. The company declares that its automated platform helps companies hire, onboard, manage, and pay people in more than 140 countries. The cloud-based solution is “easy to use and scale, ensures full compliance and provides industry-leading BI and analytics.”
His official bio at Group 11 states Dovi Frances is a financial services entrepreneur and the Founding Partner of Group 11, a venture capital firm based in Los Angeles, California. Over the course of his career, Frances has invested over $550 million in some of Silicon Valley’s most prominent and disruptive financial technology companies, including Tipalti, TripActions, Next Insurance, Papaya Global, HomeLight, Sunbit, Masterschool, EquityBee, Venn, and Lili to name a few.