Dean Leitersdorf and Moshe Shalev, co-founders of the Israeli AI startup Decart, are nearing the completion of a significant agreement with Anthropic, the American AI firm behind the Claude language model. This partnership is poised to not only establish one of the world’s foremost developers of language models in Israel but also potentially yield at least two new billionaires, reminiscent of the monumental exit achieved by Wiz.
Industry analyses suggest that Leitersdorf and his associates successfully maintained control over Decart, holding about 64% of the company's shares, which translates to a theoretical valuation of approximately $4 billion. With Orian Leitersdorf joining the founding team as chief scientist last year, it's estimated that each founder could rake in between $1 billion and $1.5 billion. This is slightly less than the nearly $2 billion each of the founders of Wiz reportedly received.
While the Wiz founders were compensated entirely in cash by Google last March, Decart’s founders opted for a smaller overall payout that included shares in Anthropic, which is on track for a future NYSE listing.
Amid this, Leitersdorf and his team received a more lucrative acquisition proposal from Nvidia, estimated between $7 billion and $8 billion. Anthropic's offer, capped at $6 billion primarily in shares, required a cash commitment of only a few hundred million dollars, with the balance delivered to Decart shareholders as Anthropic stock.
Shareholders at Decart anticipate that shares from Anthropic, which is planning a historic IPO valued at $2 trillion with projected revenues between $100 billion and $120 billion by year-end, will yield better returns.
Similar to the deal involving Wiz, a majority of Decart's investors are not Israeli, apart from the Aleph fund led by Michael Eisenberg, who is an advisor to Israeli Prime Minister Benjamin Netanyahu. Major US investment firms like Benchmark, Sequoia, Radical Ventures, and Zeev Ventures, run by notable investor Oren Zeev, hold the bulk of shares. Collectively, these primary investors could see returns surpassing $2 billion.
From a fiscal perspective, it’s estimated that the Israeli government could earn substantial revenue from the shareholdings of the three founders. If they exercise their shares at the current rate of approximately NIS 12 billion, this could lead to tax income of about NIS 4.2 billion, factoring in a maximum capital gains tax of 30% and a surtax of 5%.
According to Racheli Guz-Lavi, head of the Tax Department at Amit Pollak Matalon, receiving shares in lieu of cash incurs tax obligations even though the founders are dealing with an illiquid asset. However, if certain conditions are fulfilled, the tax event may be deferred until the shares are exercised in the future. If any part of the proceeds comes from selling shares during a secondary transaction, tax would apply to that segment at the sale time.
Guz-Lavi points out that taxing funds received in the buyer's equity involves complexities. The state stands to benefit from taxes on profits if Anthropic's shares rise post-IPO, but there is also a risk of lower tax revenue should share values fall. Hence, the pivotal issues revolve around share liquidity, realization values, and the timing of tax revenues for the state.
Should the acquisition be finalized, it will mark Anthropic's inaugural venture in Israel, as their previous operations were solely through sales personnel based in Ireland. Despite this, Decart is anticipated to serve as a research and development hub focused on enhancing the performance of Anthropic's models across various hardware platforms, including Nvidia’s graphics processors and Google’s TPU chips.
Decart has the potential to become Anthropic's second R&D facility outside the US, complementing its 89 employees in Israel with 17 others based in the US. Anthropic is also expanding its R&D initiatives in London, where it is developing a 15,000 square meter center staffed by 200 personnel.
Simultaneously, competitor OpenAI is ramping up its efforts in the race for an IPO alongside Anthropic, having recently recruited a team of senior sales professionals from Amazon AWS in both the US and Europe to attract more corporate clients.
