October 2019 - Monthly Insights Israeli Venture Capital
News and Updates
FUND IN FOCUS: UPWEST LABS As we continue to feature the recent trends and developments in Israeli venture capital, we are keeping up with our tradition of highlighting some of the leading Israeli venture capital funds and provide a bit more insight on each of them through short interviews with the partners of each firm. In this edition, we interviewed Gil Ben Artzy, Shully Galili and Assaf Wahrhaft , Partners of UpWest Labs.
UpWest Labs is a pre-seed and seed-stage Silicon Valley fund founded by Gil Ben Artzy and Shully Galili in 2012. To date, UpWest Labs has raised three funds and manages approximately $40 million across a portfolio of about 80 companies. Prior to establishing UpWest Labs, Gil was the VP of Operations Management at Yahoo! for two years where he worked on strategy and acquisitions, drove business for the Tech Infrastructure organization and managed relationships with the Israeli ecosystem of investors, entrepreneurs and startups. He led the acquisition of Yahoo!’s first Israel-based startup (FoxyTunes) and helped open the company’s first R&D center in Haifa. Gil also served as a consultant advising Fortune 500 companies for the Boston Consulting Group in New York. Prior to joining Gil to found UpWest Labs, Shully worked with Silicon Valley’s leading tech giants, investors and business leaders to help found the California Israel Chamber of Commerce (CICC), where she created the ultimate platform for ongoing business exchange, serving a network of over 10,000 companies. Assaf, who joined Upwest Labs as a Partner in early 2019, served as Partner, for seven years, at Viola Credit, part of the Viola Group, Israel’s largest multi-strategy technology investment group. - What is the investment strategy of UpWest Labs? We're a pre-seed and seed stage fund focused on investing in top Israeli founders looking to break into the US market. Specifically, we believe that establishing the US headquarters at the seed stage is critical for these startups in order to build world-class companies. To support them on this journey, we have established a cross-border venture capital platform that offers access to the market and proven best practices. - What are the leading sectors in which you invest? We focus on the application of deep technologies – such as artificial intelligence, machine learning, and computer vision – to solve both emerging and legacy problems across industry sectors. For us, this includes domains such as Cybersecurity and Enterprise SaaS, as well as more emerging technologies disrupting traditional industries like oil and gas, healthcare, and agriculture. - Why do you believe that Israeli entrepreneurs have an added value in such sectors? Israeli founding teams often have significant, unique technical experience that enables them to tackle complex tech problems, coupled with an inherent desire to challenge the norm (a trait deeply rooted in the cultural DNA of Israel). That mindset, coupled with advanced technical training, has bred a unique type of entrepreneur in Israel that can find success in both domains where they do and even do not have prior experience. They are able to leverage this unique set of traits to apply their knowledge in deep technology to domains that have not previously been touched by it previously. - What are the most important factors you consider when making an investment? We focus on the team, the market opportunity, and the fit between those two factors. First, we focus on our evaluation of the founders: joint vision for the company they are building, team dynamics, technical and business acumen, etc. Second, we dig deep into the market, evaluating the competitive landscape, magnitude of the business opportunity, go-to-market strategies, etc. Finally, we want to believe that this is the right team for this market opportunity, given their particular background and experience. While we do not necessarily believe that founders need to come from the industry they are disrupting (a 2018 analysis of Pitchbook data actually proved that only ~50% of founders of $1 biilion valuation companies come from their specific industry), we do need to believe that their technical and business experience can be leveraged as a unique asset to building a successful company in their target market. - What is your added value to entrepreneurs? How are you different from other funds? By being headquartered in the US, we're able to offer unparalleled value to Israeli founders that are penetrating the US market, all working out of our Silicon Valley office. From the moment the founders land in Silicon Valley, we help them identify new potential partners and customers from our immediate network, and we work with them to strategize and execute early stage KPIs and milestones. At the right time, we help them raise follow-on rounds from our broad network of top tier co-investors; to date, our portfolio has raised almost $1 billion in follow-on rounds. Finally, we help drive best practices to facilitate concurrent scaling in the US (business) and Israel (tech), alongside hiring the right leadership. We are the VC fund with the largest portfolio of Israeli startups headquartered in the US, with 35 active companies structured with the business HQ in the US, and the R&D in Israel. Part of our ability to continue supporting future investments is built on what we have learned from helping these companies scale across geographies from day one. - Finally, who in the local or global venture capital ecosystem inspires you? And why? Exercising discipline and focusing on staying true to our investment strategy is a core tenant of our fund as we scale with every new raise. Accordingly, there are many funds that have shaped us over the years. We draw particular inspiration from those VCs that focus on building a true VC platform catered to their founders, as well as those who have thoughtfully scaled their fund. We continue to learn from other seed stage funds that are particularly thesis driven, be it around a domain, type of technology, or founder profile, as we ourselves believe that maintaining focus is crucial to success as a fund.
Notable Investment Rounds
IronSource, a Viola Ventures portfolio company, secured a $450 million secondary roundby the private equity firm CVC Capital Partners. As part of the round, CVC acquired 25% of the company representing a valuation of over $1.5 billion. IronSource builds monetization, engagement, analytics, and discovery tools for app developers, device manufacturers, mobile carriers, and advertisers.
Axonius, an Emerge portfolio company, secured its series B funding of $20 millionled by OpenView, who joined current investors Vertex Ventures, YL Ventures, Bessemer Venture Partners and Emerge. Axonius is a cyber-security asset management platform that lets IT and security teams manage and secure devices.
Next Insurance, a TLV Partners portfolio company, secured its series C round of $250 millionled by Munich Re who joined current investors American Express Ventures, Zeev Ventures and TLV Partners. Next Insurance develops insurance solutions for small businesses, offering simple, affordable coverage tailored to the needs of each class of business.
Outbrain, a Viola Ventures portfolio company, which is a content discovery platform, merged with Taboola who paid $250 million to hold 70% of the merged company. The combined company of Israel's two largest digital advertising platforms will provide enhanced advertising efficacy and reach to marketers worldwide.
Google (NASDAQ: GOOG)acquired Elastifile for $200 million,a Battery Ventures portfolio company which develops data fabric storage technology for large data centers.
Recommended Venture Capital Reads
Libra, Facebook's recently announced cryptocurrency project, is already on life support. What went wrong? [The Wall Street Journal] Is Amazon unstoppable? Politicians want to rein in the retail giant. But Jeff Bezos is ready to fight back. [The New Yorker] Two recent acquisitions of startups are part of McDonald's plans to make sure the Big Mac keeps up with Big Tech—no matter how much it costs. [Bloomberg] In 2018, hedge fund Elliott Management gained control over seven-time European club soccer champion AC Milan. Here's the story of what's happened since. [Financial Times]