October 2018 - Monthly Insights - Israeli Venture Capital
FUND IN FOCUS: STATE OF MIND VENTURES
As we continue to feature the recent trends and developments in Israeli venture capital, we decided to focus in the upcoming months on 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 Pinhas Buchris, Yuval Baharav and Nir Adler, General Partners of State of Mind Ventures.
State of Mind Ventures is an Israel focused early stage venture firm established by Pinhas Buchris and Yuval Baharav in 2014. To date, the firm has raised two funds and manages approximately $200 million across a portfolio of about 15 companies. Prior to establishing State of Mind Ventures, Pinhas was the Managing Director of the Israeli Ministry of Defense, Commander of a classified technology unit, and Head of the prestigious 8200 division - Israel’s signal processing intelligence unit - where he initiated many of Israel’s cyber programs. Pinhas was also a Partner with Apax Partners and served as a mentor to several successful cyber technology startups. Prior to establishing State of Mind Ventures, Yuval was a CEO of several successful Israeli startups, the Head of Corporate Development and Strategy for Amdocs, were he led ten global acquisitions totaling more than $2 billion. Following such role, Yuval was a Partner in Sequoia Capital, the leading US venture fund. Nir, who was promoted to General Partner in 2015, was previously the Head of Finance for the Bazan Group and the Chief of Staff of the Head of the Budgetary Department in the Ministry of Defense.
What is the investment strategy of State of Mind Ventures?
Yuval: “State of Mind Ventures is an early stage venture capital fund, investing in Israeli start-up companies which are building the technology infrastructure of tomorrow. Our goal is to partner early with the best technology innovators and leaders in Israel and we closely work with them to execute their vision. We help them shape their strategy, build their teams and create amazing companies. From an investment view, we focus on investing in seed rounds and aim to maintain our holdings in our best companies through participation in follow-up rounds” What are the leading sectors in which you invest in? Pinchas: "We mostly invest in companies operating in the leading sectors of Israeli venture capital which include Artificial Intelligence, Semi-Conductors, Communications, Marketing Technologies, Cloud-Infrastructure, Computer Vision and Aerospace. Israeli companies in such sectors have shown strong performance over the past 15 years, in part due to their ability to base their operations on the massive creation of skilled man-power in the Israeli army.” Why do you believe that Israeli entrepreneurs have an added value in such sectors? Yuval: “Israeli entrepreneurs grow up in a unique culture which encourages and places high value on innovation, creativity and independence. This tremendous energy was and is funneled into technological innovation. Later on, this innovative spirit is accelerated through strong military training which creates a wealth of knowledge in these specific domains, at a very young age.” Nir: “Startups and technological innovation play key roles in Israel, and represent the fastest and most efficient mean for social mobility and creation of wealth. As a result, Israel’s best and finest tend to focus on this path at a young age. In addition, Israel’s ability to develop an efficient and globally-connected eco-system of service providers including accounting firms, law firms, global investment banking institutions make Israel an extremely efficient, fast and truly global market – fostering innovation at a rapid pace.” What are the most important factors you consider when making an investment? First and foremost we put a very strong emphasis on the founding team. We look for capable and experienced teams - with a track record of success and hunger for more. As most startups we work with are trying to solve large problems in vast markets, we put a strong emphasis on assessing the fit of the founders and teams to their target market. We take particular interest in understanding internal team-dynamics as well as our ability to bond with the team and influence it. In addition we assess the market from numerous vantage points, including the ability to raise capital, how acquisitive the market leaders are and what are the common acquisition multiples. What is your added value to entrepreneurs? How are you different from other funds? We believe that investing in seed companies requires that we provide our portfolio companies with strong guidance, based on the knowledge and experience that we have gained as entrepreneurs and executives. As part of this, we help founders design their go-to-market plan, build their core team and prepare themselves for future funding. These are seed-specific skills which are not common in funds. In addition, we maintain and expand a global network of strategic partners, which we encourage to partner up with and invest in our portfolio companies, facilitating a strong go-to-market. Pinchas, as the former commander of one of the leading Israeli intelligence units – 8200, what is the contribution of the military to the training of the Israeli entrepreneurs? “8200 and the Intelligence Core have been pivotal in the development of the Israeli high-tech and cyber markets. Most of the developers and founders of these companies are initially trained in these units. They are exposed to cutting edge knowledge and research in cyber, AI, sensors, computer vision and much more, which they later implement into use cases in the private sector. In addition, the military allows them to build strong professional networks, which later on propel them into the startup eco-system." Yuval, as a former partner at Sequoia Capital, one of the leading global venture capital funds in the world, what is the distinct advantage of investing in Israeli entrepreneurs as opposed to entrepreneurs in other geographies? “I believe Israeli entrepreneurs are unique. They combine toughness, stamina and practicality with wild, at times bordering-insanity, innovation - this leads to amazing results. Some of these results have led to the development of key technological innovations, such as: Intel X86 series powering the PC revolution, the first mobile phone (Motorola in Herzlia), the invention of SSD (Flash memory) by M-Systems, Invention of the Firewall by Checkpoint and the list goes on. Even the first search engine in Yahoo and Google was developed by a team led by an Israeli (Prof. Udi Manber). Almost every critical system in use by today’s mass markets would not be possible without the involvement of Israeli innovation. The world is changing and a new generation of infrastructure is being developed. Israel will play a major part in creating this future.” Finally, who in the local or global venture capital ecosystem inspires you? And why? Yuval: “I am mainly inspired by the people who trained me at Sequoia, mainly Michael Moritz as well as the previous generations, including Don Valentine at Sequoia and Irwin Federman from USVP. These are all investors who brought an old-school-like approach of not relaying on brands and marketing noise, but rather working closely and quietly with very smart entrepreneurs and bringing their knowledge, wisdom and experience in a modest way."
ISRAELI PRESS COVERS THE FIRST CLOSING ANNOUNCEMENT OF SWEETWOOD VENTURES
Leading Israeli financial press outlets, including Calcalist and TheMarker covered the announcement of the first closing of Sweetwood Ventures with total commitments of $40 million.
SWEETWOOD VENTURES HOSTS A SERIES OF TALKS WITH LEADING FIGURES IN ISRAELI VENTURE CAPITAL
Over the past few weeks, we had the opportunity to host several prominent leaders in Israeli venture capital to discuss recent trends an developments in the ecosystem. We have also welcomed several delegations from Europe which have taken strategic interest in expanding collaboration with Israeli technology. Below is a recap of several of these events.
Sweetwood Ventures hosted Omer Keilaf, CEO of Innoviz, for a chat on the recent developments in the automotive technology space. Innoviz is one of the key players in the development of the autonomous car through its development of LiDAR technology. Innoviz has raised $82 million in just over two years from leading investors such as SoftBank, Samsung Catalyst, Magna International and Delphi Automotive and recently announced that its technology will be part of BMW 2021 models.
Manuel Sussholz, Managing Partner of Sweetwood Ventures, hosted Pinhas Buchris and Roy Alon, Senior Director at NetApp, for a fire side chat on the recent trends and developments in Israeli venture capital.
Sweetwood Ventures hosted Anya Eldan, Vice President of the Israel Innovation Authority and Head of the Startup Division, at the residence of the Belgium Ambassador to Israel for a chat on the successes of the Israeli government sponsored programs to enhance innovation.
A. Sweetwood Ventures hosted a delegation of Swiss financial institutions for a discussion on recent developments in financial technologies and how to enhance collaboration between Israel and Switzerland. The delegation included representatives from Swiss Re, the Swiss Bankers Association. Zurich Insurance Company and FINM
Notable Investment Rounds
Cognata, an Emerge portfolio company, secured its series A funding of $18.5 million from Scale Venture Partners and current investors. Cognata develops a car simulation platform.
VAYAVISION, a Viola Ventures portfolio company, secured its series A funding of $8 million from Viola Ventures, Mizmaa Ventures, Mitsubishi and LG. VAYAVISION develops a self-driving solution based on a fusion of raw data and perception systems.
Jolt, an UpWest Labs portfolio company, secured its series A funding for $7 million from Octopus Ventures and current investors in the company. Jolt operates a study campus which enables managers and high-tech professionals to acquire or reinforce expertise needed to further advance their career.
Temasek, the Singaporean goverment-controlled company, acquired Sygnia a developer of technology and services offering to help large organizations respond to cyber threats, for $250 million. Sygnia only raised $4 million since its establishment by Team8, an Israeli venture building fund.
Perforce Software, acquired Perfecto Mobile, a Viola Ventures portfolio company, a market leader in cloud-based automated mobile and web application test software solution, for $200 million.
Notable Fund Formations
Glilot Capital Partners, announced the closing of its third fund with $110 million in commitments. The fund will be focused on investments in AI, Big Data and Cyber Security.
Recommended Venture Capital Reads
Former Reddit chief executive Ellen Pao writes that the absolute power of so many tech founders is destroying company cultures. [Wired]
In India, Amazon and Walmart are conducting an ecommerce battle for the ultimate prize: 1.3 billion customers. [Bloomberg]
Explaining SoftBank's close ties with Saudi Arabia [Bloomberg]
Uncomplicated technology, and why it's always worth your money [New York Times]