It’s good to be a startup in Israel right now. Venture capital investments hit a seven year record, and everyone seems to be looking for early stage startups. Angels have found their place in the food chain, and it all seems to make sense.
1) The early stage investors are interested in ideas, and willing to trade off immediate profit for the potential of being part of something great.
2) The entrepreneur is generally content with the arrangement. He finds the angel/lab/incubator more accessible than a top tier VC, and he doesn’t want to give away much equity. If he scores a seed investment, he’s idea is being validated, and the relatively small seed investment (typically ranging from $25K to $1M) has a big impact on the early stage venture. It gives him enough runway to hit the first milestones, or establish a working prototype.
3) The VCs look at the developments from afar, making sure to keep in touch with their potential investments quarterly, or every couple of months. They ask the entrepreneurs to touch base when they raise money or hit a major milestone. An angel investment in the seed stage can only increase the startups valuation and raise its value pre-money. The VC makes the investment. It will take a year or two until the startup begins shopping for a second round. And so the wheel goes on.
Below are a few of the latest angel investors/labs who are actively looking for early stage Israeli startups:
Earlier this month, HP announced it will be opening a new International Technology District (ITD) which will collaborate with and offer support to approximately 300 up and coming Israeli Hi Tech startups of technological interest to the company. ITD will be run by the former HP Israel telecom and financial manager, Harel Ifhar. This is the first ITD set up by HP, anywhere in the world, but if successful, HP will likely replicate the model in other locations. To date, HP has invested $6 billion in high-tech companies in Israel, where it employs 4,000 people. Last year, it bought 4 companies in Israel, including software support company Mercury for $4.5 billion. (more in Hebrew)
Check Point Software Technologies (Nasdaq: CHKP) and Tel Aviv University are setting up a joint information security research institute at the Department of Computer Sciences. A joint company-university board will manage the new institute and it will be jointly financed by both entities. The set-up investment is estimated at several million shekels. Prof. Ran Canetti will run the institute. He is currently a researcher at IBM Laboratories and a lecturer at the Massachusetts Institute of Technology. The institute will finance research into various aspects of information security and will sponsor academic conventions on the subject.
Ido Sarig, employee number 13 in Mercury (see above), is a partner at Thomas Weisel Ventures. The fund realized that the big VCs are the ones who will likely score all the lucrative deals, so Weisel decided to take a different strategy- investing in the startups that others turned away. Weisel Ventures is looking to invest in Israeli startups post A round, who are interested in moving their headquarters to the US.
VON founder and angel investor Jeff Pulver recently was in the headlines for rumors of financial strains in his investment arm, Pulver Media. However, today Pulver announced on ‘The Jeff Pulver Blog” that he’s actively looking for early stage Israeli startups. Pulver, who invested in Twitter and Seesmic, believes that his investment decision depends almost completely on the team:
These days when I’m making a decision about a startup opportunity to invest in, I put the people first, I consider their vision and then weigh-in on my take on their ability to be a disruptive force in their chosen market space.
There’s always Yossi Vardi, but beware – Yossi will not invest unless he’s first in line, so you might want to talk to him first.
In the US, there are angel investors by the dozen, but one that stands out in mind is San Francisco-based Ron Conway, one of the original backers of Google.
Happy hunting. If you’re an Israeli early stage startup looking for funding in Silicon Valley or Israel, contact me.