The Grass is "Greener"

Investing in Israel's most promising CEOs

I think the holy grail of deal making for VCs is being able to put your money behind the "Big Hitter" CEOs:

These are CEOs that have done it before big time (Multi hundred Million, or even Billion $ exits), and are still hungry to do it again - this time even bigger...

It just so happens that this week I had the chance to meet with two such CEOs. The experience was very different from anything most VCs experience on a day to day basis. To be more precise... It was almost the exact opposite:

• These CEOs can pick and choose whomever they want to work with (rather then strive to get a meeting)
• They set the agenda, and decide at what pace things move
• They conduct much more due diligence on you than you do on them
• They set the terms of the deal (and can stick to them)
• ...And they collect the term sheets (rather than wait to get them)

After spending some time with them, it becomes very clear why this happens - These guys are incredibly impressive, and there is no doubt they will build very big companies (or at least burn a lot of money trying...). One thing's for sure - they will not stop half way. And this is exactly what us VCs look for.

There is a lot to learn when meeting such people... but to me one thing stood out, which any entrepreneur should implement. It seems that for these people, the most important factor in the funding is:

The decision on who will be their partner

The person that will sit together with them around the board table and walk with them along the path to success... At the end of the day, money is a commodity... But selecting your partner is a decision that no entrepreneur can take lightly, and in that respect - any entrepreneur should see him/herself as the Billion $ Promise...

iDrink #2 is Approaching!

Following our last iDrink event (Israeli internet get-together), we're getting ready for the next event - this time much bigger and better!

So if you're into internet (an entrepreneur, blogger, industry lover, investor, etc) and are in Israel on Wednesday the 21st, I'm looking forward to seeing you there.
(In line with (avoiding) a bubble 2.0 atmosphere - it will be a "buy your own drink" event)

Pass the word on to your friends!

Wednesday, 21 February, starting at 19:30
Melle Bar, on Dizingoff street 215, Tel Aviv (Corner of Zabutinski street)
Please register here if you'd like to attend (so we can send any updates if needed)

PS - I'm sure there are some girls involved in Israeli internet - Would be great to see some more out there... (Its a great place to find a husband)

Can a VC move fast?

I'll start with the answer:

Yes! - A VC can move fast (Very fast)*

What does it take? Well, sort of a perfect storm:

• Great Entrepreneurs
• A Great Idea
• Great time Pressures (...i.e. competition)
• And Great Courage (of the partner leading the deal)

When these (and some other) conditions collide, a VC can take an investment decision very quickly.

I just got home after signing a term sheet with a new company. The whole process (i.e. first meeting till money in bank) was amazingly quick. I won't provide details on the time (trust me it was Fast), the amount of money (a significant sum), or the idea (a promising one).

I will mention one key thing - You really need to have a strong partner leading such deal - preferably one that has a lot of experience in the field, great intuition, the ability to drive deals within the fund, and a lot of guts.

... last, but not least - its always good to have an Associate that's willing to give up a few nights sleep and a weekend to push the deal through (I'm not complaining... not complaining...)

*do note - Such a quick process is not the rule in the world of VC, rather the exception... although from what I've been seeing over the last months - it's happening more often around here. Definitely a sign of the (heating up) times.

Tags: VC, Deal making, Raising money, Fast

The Bubble and an Airplane Escape

The last weeks have been crazy!

I really think the Israeli tech market is starting to boil – and I’m quite sure I can see the bubbles.

Especially if measuring by:

• The sudden increase of new deals we’re seeing - many of which actually seem very promising

• Valuations – Which have risen dramatically, and really seem outrageous at times

• The time to investment decision - which has been forced down to a number of weeks in some cases, given the competition within the VC community, and amount of money looking for deals

No doubt – it’s a great time to be an entrepreneur! The top entrepreneurs are definitely in the driver’s seat.

As a result of this - I’ve been working (very) long days (and nights), and have not had a proper weekend for several weeks now… (I’m not really complaining though, since this is probably the most exciting and challenging time to be in a VC)

Nonetheless – It’s been impossible to catch up on all my work. And only now, finally, as I sit in the plane (TLV to Paris… LeWeb3) – I realize the best escape – and most efficient workplace from all this mess is… On a plane:

• There’s no people / TV / kitchen distractions

• No new incoming emails / calls

• No connection to the web (which means I can’t google / read blogs / check my stats / or any other such time consuming activity)

• And its impossible to move out of the seat (given the big, fat, ugly guy in the seat next to me)

So not only have I finished 2 investment presentations… and cleared out my Inbox… I’ve also finally found time to blog about it!

(I just pray to the god of laptop batteries to give me more power)

Tags: VC, Israel, Technology, Bubble, Valuations, Efficient work

LGILab - New Website (Blog)... and a First Investment

LGILab - The Lightspeed-Gemini Internet Lab is basically a joint venture between Lightspeed Venture Partners and Gemini Israel dedicated to seed investment in very early stage internet Israeli start-up.

They've been running for a few months, headed by Ouriel and Chaired by Dan Ciporen - and seem to be doing very impressive work. Most importantly they have a very unique and attractive value proposition for internet entrepreneurs... (Such initiative could have a real impact on the sustainable development of the Israeli internet industry)

This week they both:

• Launched a new web site - Which is actually a blog (Ouriel is also the one behind TechCrunch in France)
• Announced their first investment - in the area of "Fantasy sports" - BPTech - Headed by two (very!) young, and (very) talented entrepreneurs

Worth keeping an eye on the lab's activities - I'm sure some very exciting web startups will grow from there.

Tags: Gemini, Lightspeed, Internet lab, Ouriel Ohayon, Dan Ciporen,  BP Interactive Technologies

The VC pitch - The Ali G way

I've been looking for this clip for quite a while since I started working in a VC. It has to be the funniest clip I've seen about the VC world...

A few thoughts after watching it:

• Its nice to see that real VCs treat entrepreneurs very nicely - even when they have very lousy ideas (as opposed to Reality TV)
• Its sad to see that politeness sometimes get in the way of telling entrepreneurs what you really think! (this is a small problem for Israelis though)
• Who said VCs cant' be creative - I admire the guy who said "I don't dislike the idea"... although I think he took "out of the box thinking" a bit too far ;)

VCs: Next time you meet an entrepreneur - make sure he's not pulling an "Ali G" on you

Tags: Ali G, VC pitch

Journey 2006 - the Israeli tech industry barometer

I spent the day at the Journey Conference. An annual event (this is the 10th year) that "serves as a meeting place for leaders of the high-tech, biotech and venture capital industries in Israel". I think that more than anything else, the journey serves an interesting barometer of the current market situation:

At the highest level, when people don't attend - its a bad market... But when you can't get through to the croissants - The market is boiling...

So here are some of today's indicators. I'll leave it up to the reader to decide what's happening in our neck of the woods:

• The Semiconductor industry session - Was more than half empty
• The Internet industry session - I couldn't even get in (since the room was full... including the aisles)
• There were two (full) sessions on Green Tech, and one on Nano... (Including a very interesting session on Water technologies)
• As mentioned the place was packed - predominantly occupied by VCs, Lawyers, accountants, HR firms, etc. Surprisingly, there were just a few startup entrepreneurs (I guess all the rest were busy developing their Alphas, Betas, closing client deals, and working on getting acquired)

Tags: Israel, Journey, Conference, 2006

Israel Internet Technology Road show to the Valley

Getting exposure to the west coast community is a real challenge for Israeli Internet startups. Even though the "world is flat", Its crucial to have "real" exposure to the leading players and investment community. Given the startups' limited budgets, time, and resources, combined with the heavy level of web activity - its really hard to rise above the noise and get noticed by these players.

Here's one initiative I'm sure will help overcome this challenge:

The California Israel Chamber of Commerce and the Consulate General of Israel Economic Mission in San Francisco are about to announce a special “Israel Internet Technology Road Show to the Silicon Valley”.

This will be a great opportunity for Israeli web startups to gain exposure to the leading investors and players in the space, among them: Yahoo!, Adobe, eBay, Amazon, Google, Microsoft, etc.

Its scheduled for November 6-10, 2006 and will be held in conjunction with Web 2.0 Conference in San Francisco.
Stay tuned to their site, more details to come soon...

Tags: Israel, Internet, Valley, road, show, California Israel Chamber of Commerce

Entrepreneur Section

I've added a new section to my Blog side-bar: "Entrepreneur Section"...

In it I'll place links to information I run across, that might be helpful for entrepreneurs (as well as for VCs). (Addressing some of the questions that repeatedly come up)

I've started off with Information on what should go into an investor presentation, on term sheets, and the must read comic - TheVC.com

(Will be glad to get recommendations for additional links)

IDC Storage Roadshow 2006, Tel Aviv

This week I attended the IDC roadshow conference on storage technologies, which was held in Tel Aviv.

The team at IDC managed to bring in quite a distinguished group of speakers (successfully enticing me to stay throughout the whole event).

As the event progressed, it became evident that investing in storage startups has many similar challenges to those of investments in enterprise software players (Is enterprise SW dead?) and  Information Security startups.

Basically - the information storage industry has some inherent properties that make it a really tough market for startups to thrive in, and become large players.

• Its a highly conservative business - Large organizations seldom make a decision to purchase data storage solutions from a startup. A clichéd sentence that was repeated several times was "No-one ever got fired for buying IBM... (or EMC). (...Actually I just found out that someone was once fired for this)
• All the (usual) challenges of an enterprise sell exist (Clients look for a "complete" E2E solution, assurance, international support, etc, etc)
• The vendors (EMC and the likes) control the client relationships and budgets, and will make sure to block out new competition
• These vendors are also many times the only way to get to the market (i.e. startups need to partner, with those that might be direct competitors)
• And the large vendors are eager to buy up startups that shows signs of success and technology advantage - as soon (and cheap) as possible. (Although as opposed to info security SW, there have been some significant M&A deals in this area, as is evident from the 2005 top M&A valuations)

What will enable these startups to rise above the noise? Here are some thoughts that were discussed:

• Addressing a REAL pain point (some areas include disaster recovery, de-duplication)
• Making the right market selection - This issue was actually quite contested, namely - which market do you go for? The SMBs or the top tier clients?
  • Its easier to sell to SMBs. But can an Israeli startup scale on a $30K selling price? This can only happen if the company really knows how to develop VAR relationships and channels... And from things I heard offline, not many believe in this (including many VCs)
  • All the challenges of selling to large corporates are known. Nevertheless, according to Giora Yaron - the big guys do buy from startups! And if you're not able to sell to them - you're either not addressing a real pain, or a better solution exists
• Finally, as always, the right startup will have a really unique and innovative product and approach...
  

I'm glad to say that I met with a couple of startups at the show, who seem to address these challenges very nicely

Tags: IDC, storage, roadshow, Tel Aviv, 2006,  Startup,  VC, investment, challenges

Powered by Qumana