Identifying opportunities in today’s saturated cybersecurity market

Yoav Leitersdorf is the founder of YL Ventures, a 12-year-old, Mill Valley, California.-based seed-stage venture firm that invests narrowly in Israeli cybersecurity startups and closed its fourth fund with $120 million in capital commitments last summer — a vehicle that brings the capital it now manages to $260 million.

The outfit takes a concentrated approach to investing that has seemingly been paying off. YL Ventures was the biggest shareholder in the container security startup Twistlock, for example, which sold to Palo Alto Networks last year for $410 million after raising $63 million altogether. (YL Ventures had plugged $12 million into the company over four years.) It was also the biggest outside shareholder in Hexadite, an Israeli startup that used AI to identify and protect against attacks and that sold in 2017 to Microsoft for a reported $100 million.

Still, the firm sees a lot of cybersecurity startups. It also has an advisory board that’s comprised of more than 50 security pros from heavyweight companies. For insight into what they’re shopping for this year — and how startups might grab their attention — we reached out to Leitersdorf last week to ask what he’s hearing.

Sisense nabs $100m at a $1B+ valuation for accessible big data business analytics

Sisense, an enterprise startup that that has built a business analytics business out of the premise of making big data as accessible as possible to users — whether it be through graphics on mobile or desktop apps, or spoken through Alexa — is announcing a big round of funding today and a large jump in valuation to underscore its traction. The company has picked up $100 million in a growth round of funding that catapults Sisense’s valuation to over $1 billion, funding that it plans to use to continue building out its tech, as well as for sales, marketing and development efforts.

For context, this is a huge jump: the company was valued at only around $325 million in 2016 when it raised a Series E, according to PitchBook. (It did not disclose valuation in 2018, when it raised a venture round of $80 million.) It now has some 2,000 customers, including Tinder, Philips, Nasdaq, and the Salvation Army.

This latest round is being led by the high-profile enterprise investor Insight Venture Partners, with Access Industries, Bessemer Venture Partners, Battery Ventures, DFJ Growth, and others also participating. The Access investment was made via Claltech in Israel and it seems that this led to some details of this getting leaked out as rumors in recent days. Insight is in the news today for another big deal: wearing its private equity hat, the firm acquired Veeam for $5 billion. (And that speaks to a particular kind of trajectory for enterprise companies that the firm backs: Veeam had already been a part of Insight’s venture portfolio.)

Mature enterprise startups proven their business cases are going to be an ongoing theme this year fundraising stories, and Sisense is part of that theme, with annual recurring revenues of over $100 million speaking to its stability and current strength. The company has also made some key acquisitions to boost its business, such as the acquisition of Periscope Data last year (coincidentally also for $100 million, I understand).

Its rise also speaks to a different kind of trend in the market: in the wider world of business intelligence, there is an increasing demand for more digestible data in order to better tap advances in data analytics to use it across organizations. This was also one of the big reasons why Salesforce gobbled up Tableau last year for a slightly higher price: $15.7 billion.

Sisense, bringing in both sleek end user products but also a strong theme of harnessing the latest developments in areas like machine learning and AI to crunch the data and order it in the first place, represents a smaller and more fleet of foot alternative for its customers. “We found a way to make accessing data extremely simple, mashing it together in a logical way and embedding it in every logical place,” explained CEO Amir Orad to us in 2018.

“We have enjoyed watching the Sisense momentum in the past 12 months, the traction from its customers as well as from industry leading analysts for the company’s cloud native platform and new AI capabilities. That coupled with seeing more traction and success with leading companies in our portfolio and outside, led us to want to continue and grow our relationship with the company and lead this funding round,” said Jeff Horing, Managing Director at Insight Venture Partners, in a statement.

To note, Access Industries is an interesting backer who might also potentially shape up to be strategic, given its ownership of Warner Music Group, Alibaba, Facebook, Square, Spotify, Deezer, Snap and Zalando.

“Given our investments in market leading companies across diverse industries, we realize the value in analytics and machine learning and we could not be more excited about Sisense’s trajectory and traction in the market,” added Claltech’s Daniel Shinar in a statement.

Mobileye expands its robotaxi footprint with a new deal in South Korea

Mobileye announced Tuesday an agreement to test and eventually deploy a robotaxi service in Daegu City, South Korea, the latest example of the company’s strategy to expand beyond its traditional business of supplying automakers with computer vision technology that power advanced driver assistance systems.

Under the agreement, which was announced at CES 2020, Mobileye will integrate its self-driving system — a kit that includes visual perception, sensor fusion, its REM mapping system, software algorithms and its driving policy that will “drive” the cars — to enable a driverless mobility-as-a-service operation in South Korea. This system’s driving policy, or the decision-making of the car, is influenced by “Responsibility Sensitive Safety,” or RSS, a mathematical model introduced in 2017 by Mobileye in a white paper.

Mobileye, a subsidiary of Intel, has long dominated a specific niche in the automotive world as a developer of computer vision sensor systems that help prevent collisions. The company generated nearly $1 billion in sales from this business and its tech made it into 17.5 million new cars in 2019, Amnon Shashua, Mobileye’s president and CEO and Intel senior vice president, said in an interview with TechCrunch.

But in recent years, the company has also turned its attention and resources to mapping as well as developing the full self-driving stack to support higher levels of automated driving. Mobileye’s REM mapping system essentially crowdsources data by tapping into the millions of vehicles equipped with its tech to build high-definition maps that can be used to support in ADAS and autonomous driving systems.

In 2018, the company expanded its focus beyond being a mere supplier and towards operating robotaxi services. Intel and Mobileye began testing self-driving cars in Jerusalem in May 2018. Since then, the company has racked up agreements, first with Volkswagen and Champion Motors. The companies formed a joint venture called New Mobility in Israel with a plan to  self-driving ride-hailing service there.

Mobileye then made an agreement with RATP in partnership with the city of Paris to bring robotaxis to France. The company also partnered with Chinese electric car startup Nio in late 2019 to develop autonomous vehicles that consumers can buy. Under the agreement, Nio will supply vehicles to Mobileye for China and other markets.

Mobileye also announced Tuesday that China’s SAIC will use its REM mapping technology to map China for Level 2+ — a newer industry term that is meant to cover higher levels of automated driving that still require a human driver to be in the loop. Level 2+ systems often cover highway autonomy, which means the system handles driving on highways in certain conditions but requires the human driver to take over.

1-800 Contacts buys the at-home eye exam provider 6over6 Vision

New developments in sensor technologies, computer vision and machine learning technologies are combining to drive medical diagnostics further into the home and the latest company to make a move to push services deeper into the home is the online contact lens retailer, 1-800 Contacts.

The Utah-based company has acquired 6over6 Vision for an undisclosed amount.

Based in Israel, 6over6 Vision, previously raised $15 million to commercialize its in-home eye exams based on a combination of machine learning and sensors. The basic eye exams can be performed with nothing more than a smartphone or computer and camera.

Investors in 6over6 Vision included: Rimonci Capital, Alumot VC, the Indian online eyeglasses company Lenskart.com, and TriVentures.

Companies including Lenskart, NovaVision, Kede Optics, SmartBuyGlasses, EyeRim, Liingo, Magic Leap, and Glasses USA use the company’s technology to retrieve optical parameters from existing lenses and measuring pupillary distance. The idea is to let consumers renew their prescriptions without needing a follow-up exam or appointment.

“We have long admired the innovations 6over6 Vision has built and have been using their technologies to serve our customers. This acquisition allows us to continue our 25-year commitment to pursuing a better way in vision care,” said John Graham, CEO of 1-800 Contacts, in a statement. “People deserve simple and affordable eye care solutions and combining with 6over6 allows us to deliver this for our customers on an even larger scale.”

The companies expect to offer additional services, like virtual check-ups for new eyeglass and contact lens prescriptions.

“It has been our life’s mission to create ground-breaking technology that would allow consumers the ability to take control of their own vision care and reach communities around the globe without access,” commented Dr. Ofer Limon, co-founder of 6over6 Vision, in a statement. “1-800 Contacts shares our drive to change what is broken in this industry, and we know that this acquisition will bring our vision to life on a global scale that can make real change.”

Finding free money for your social impact startup

Congratulations; you’ve decided to launch a technology-enabled startup with a positive social impact! Nearly every major Silicon Valley venture-capital firm has now invested in a B Corp; maybe you will be one of them!

The bad news: some venture capitalists have a bias against startups with an explicit positive social impact on the grounds that they have a smaller addressable market, and that the founders are not sufficiently focused on creating shareholder wealth. And of course, effectively all venture capitalists are going to require some equity for their investment.

Fortunately, there are a wide range of organizations that specifically want to support you, not just the VC community. I’m now researching non-dilutive funding for Action Tank, a startup I’m gestating to “Make America Functional Again.” I worked with outsourced research firm Wonder* to identify all of the institutions we could who support tech impact startups with cash and community, and in many cases without dilution.  I emphasize my focus here is organizations which are backing for-profit companies and do not take equity. If you think I’ve missed any, please contact me.

I suggest start by looking at the many programs offered by the Fortune 500’s startup networks. In addition, there are many other groups will give you cash, training, and community with few or no strings attached:

Ashoka is a foundation that engages in scouring for and choosing the leading social entrepreneurs across the globe, who it refers to as Ashoka Fellows.

Aspen Tech Policy Hub. “Our program mixes the best of both Washington and Silicon Valley, bringing together stakeholders in policy and technology to train the next generation of policy entrepreneurs. The Aspen Tech Policy Hub is a West Coast policy incubator, training a new generation of tech policy entrepreneurs. We take tech experts, teach them the policy process through an in-residence fellowship program in the Bay Area, and encourage them to develop outside-the-box solutions to society’s problems. We model ourselves after tech incubators like Y Combinator, but train new policy thinkers and focus the impact of their ideas.

Bluhm/Helfand Social Innovation (BHSI) Fellowship. Since 2011, the Bluhm/Helfand Social Innovation (BHSI) Fellowship has supported the work of 36 innovators—representing the United States as well as 18 other countries on five continents—who address pressing global issues, from healthcare delivery to college persistence and sustainable construction in developing nations.  From the beginning, the BHSI Fellowship has created meaningful, customized experiences for Fellows with connections to influential business and civic leaders, exposure to a broad audience as a speaker at Chicago Ideas, and over $3 million in financial support and in-kind contributions.”

The Clayton, Dubilier & Rice Fund for Entrepreneurial Studies. “The Clayton, Dubilier & Rice Fund for Entrepreneurial Studies supports entrepreneurs attempting to build something that advances business and society in revolutionary ways. “

Columbia Business School Tamer Fund for Social Ventures. Requires Columbia affiliation.

Draper Richards Kaplan Foundation identifies entrepreneurs that display characteristics of “exceptional social leadership through discretion, influence, vision, ambition, intelligence, and follow-through.” 

DV Hacks, led by BCG Digital Ventures: “A 48-hour hackathon to improve how we live, work, collaborate, and learn.”

Echoing Green is a foundation that distinguishes transformational leaders via its fellowships. Their foci include addressing environmental sustainability, racial and gender equity, economic development concerns, etc.

Future Labs Flash Pitch. “For pre-seed and seed companies based in the U.S. and Israel with a focus on AI for social impact,” 

Google AI for Social Good. “Our 20 selected organizations will receive coaching from Google’s AI experts, Google.org grant funding from a $25 million pool, and credits and consulting from Google Cloud. They will also be offered the opportunity to join a customized 6-month Google Developers Launchpad Accelerator program, including guidance from our nonprofit partner, DataKind, to jumpstart their work. We looked for projects across a range of social impact domains and levels of technical expertise, from organizations that are experienced in AI to those with an idea for how they could put their data to better use. “

Google for Startups Accelerator. “Geared toward social impact startups working to create a healthier and more sustainable future, the accelerator provides access to training, products and technical support. Startup founders will work with Google engineers and receive mentoring from over 20 teams at Google, as well as outside experts and local mentors.  

J.M.Kaplan Innovation Prize. “The J.M.K. Innovation Prize seeks out innovators who are spearheading transformative early-stage projects in the fields of the environment, heritage conservation, and social justice. The J.M.K. Innovation Prize is open to nonprofit and mission-driven for-profit organizations that are tackling America’s most pressing challenges through social innovation. In 2019, we will award up to ten prizes, each including a cash award of $150,000 over three years, plus $25,000 for project expenses, for a total award of $175,000. 

Kairos Fellows. “The Kairos Fellowship is designed to build the next generation of leaders in the field of technology, analytics, digital campaigning, and online organizing.”

MIT Solve initiative. “MIT Solve advances lasting solutions from tech entrepreneurs to address the world’s most pressing problems. Solve is a marketplace for social impact: we find tech entrepreneurs from around the world and broker partnerships across our community to scale their innovative work — driving lasting, transformational change.”

Mulago Foundation Rainer Arnhold Fellowship. “The course brings Fellows and faculty together for an intensive week to work on design for maximum impact and scalability. Held in a retreat center on the coast in Bolinas, California, the course gives Fellows the rare opportunity to focus completely on their ideas and a systematic way to apply them.”

Bloomberg New Economy Forum Solutions. “Mike Bloomberg announces an open call for solutions to global challenges facing the new economy. Entrepreneurs, academics, founders, and big thinkers are invited to submit their solutions to societal problems that need momentum, support, and adoption from the private sector.”

Notley Ventures.Notley is a catalyst for social innovation unlocking opportunities with today’s impact organizations and changing communities.  Our mission is to scale and support businesses, nonprofits, individuals, and programs making positive change in the world.” 

Recurse Center. “The Recurse Center is a self-directed, community-driven educational retreat for people who want to get better at programming.”

Skoll Foundation. “The Skoll Foundation drives large-scale change by investing in, connecting, and celebrating social entrepreneurs and innovators who help them solve the world’s most pressing problems.”

Summit Fellows. “Through a series of invitation-only events, Summit fosters a global community of entrepreneurs, academics, athletes, artists, astronauts, authors, chefs, engineers, explorers, philanthropists, spiritual leaders, scientists, and beyond.”

Thiel Fellowship. “Founded by technology entrepreneur and investor Peter Thiel in 2011, the Thiel Fellowship is a two-year program for young people [under 22] who want to build new things. Thiel Fellows skip or stop out of college to receive a $100,000 grant and support from the Thiel Foundation’s network of founders, investors, and scientists.”

Pioneer.app.Get funding and guidance for your project.  Pioneer is a weekly contest for creative people around the world making their ideas become real.  Winners get $7000, a round-trip ticket to Silicon Valley, access to world-class mentorship, and more.”

Roddenberry Foundation Catalyst Fund. “The Catalyst Fund awards small grants for early-stage, innovative, and unconventional ideas that address serious global challenges.“

SEIF Awards Tech for Impact. The SEIF Awards target European impact entrepreneurs who develop or make innovative use of technologies to tackle social and/or environmental challenges and contribute to the UN SDGs [Sustainable Development Goals]. Each Award grants the winners CHF 10’000. Together with our partners UBS and PwC we provide finalists a unique opportunity to increase their international awareness, gain reputation and present themselves to a top-class jury.

Three dot dash. “Powers the most influential social entrepreneurs between the ages of 13 -19, who have found a solution or innovation to address a basic human need.” 

YC120 (part of Y Combinator). “We’d like to find more curious, creative people who are doing exciting work in emerging fields and give them an opportunity to start building their network. “

VentureCrush FG.  Pando Daily wrote: “VentureCrushFG takes no equity, there is no co-working space, and no demo day. The application process is not advertised. Most applicants come from referrals.” “VentureCrushFG[‘s]…stellar reputation among founders and investors is due, in part, to the success of its most high-flying companies.” “If anything, it’s more of a community than an accelerator, a way to keep a strong network of alumni, mentors and investors connected. Between one and two hundred techies are part of the group, including founders, execs, 40 to 50 VCs and a few dozen angel investors.””

We Company Creator Awards. “This global competition is open to entrepreneurs, performers, startups, and nonprofits-anyone who embodies our mantra, Create Your Life’s Work.”

World Summit Awards for Young Innovators. “WSA Young Innovators is a special recognition for young social entrepreneurs under 30 years of age, using ICTs to take action on the United Nations Sustainable Development Goals (UN SDGs). Together with the WSA winners of each year, they are honored as outstanding digital innovation with social impact.”

You may also want to look at product-based crowdfunding, e.g., Indiegogo*. Other traditional options for non-dilutive financing include grants, loans, SBIR, STTR, vouchers and tax credits, include:

You’re eligible for the many accelerators, as well as specifically the impact accelerators. See Conveners Impact Accelerator Selection Tool. Some specific accelerators:

There are many VCs who have a stated focus on social impact; for full lists see Impact Capital Managers and InvestorFlow. Oliver Libby, Managing Partner, H/L Ventures, notes, “it is important to remember that impact funders occupy the same spectrum of returns as regular investors.  From 100% loss capital (e.g. a grant) to shooting for massive returns (some impact VCs), an entrepreneur can unlock everything in between, including first-loss capital, impact bonds, patient capital from program-related investments and families, and more.  The market is also coming to understand that high impact can sometimes come with high returns too.”   

Rachel Butler, President, Cavendish Impact Foundation (where I’m an advisor), mentioned fiscal sponsorship as an option. “It’s an arrangement where an entity in need of funding (and it can be a for-profit, social enterprise) teams up with a 501(c)(3) that has an aligned mission, and money can be raised through the 501(c)(3) and used to support a specific project being done by the social enterprise.

So, for example, if the 501(c)(3) has in its mission to support improving education, and a for-profit social enterprise is developing an app to help improve access to better education for people in underserved communities, the 501(c)(3) could support that specific project. The 501(c)(3) does have to maintain discretion about how they use the funds (as a safeguard to just having it be an arrangement for funneling philanthropic funds), and there are some other stipulations, but otherwise it’s pretty straightforward.  The ‘Project’ can actually do the fundraising, as an agent of the 501(c)(3), and have the money directed to the 501(c)(3). The project is usually something that has a fairly short timeframe with measurable milestones that indicate progress. The 501(c)(3) also takes an administrative fee for their role in the collaboration.“

Bill Warren, CEO of Peeps Democracy, Inc., wrote, “another type of funding source for a social impact entrepreneur to think about is startup challenges/competitions at her/his alma mater. For example, Duke sponsors a $10,000 annual prize for students, faculty, or alumni working on a startup in the clean energy space. These prizes can be a great source of non-dilutive funding for early-stage ventures and also offer free exposure to academic thought-leaders and other alumni, who might support your startup via mentorship or investment. “

Emily Rasmussen, founder & CEO of Grapevine.org, suggests turning philanthropic donations into for-profit investments using Donor Advised Funds (DAFs), which are like Health Savings Accounts for charitable giving. You make a tax deductible donation into a DAF account, get an immediate tax deduction, and then donate your funds out to charities over time. In the meantime, your funds are invested to help grow your fund, just like an endowment. With some 501(c)(3) DAF sponsors (e.g Impact Assets), after making  a tax-deductible donation into their DAF account, donors can then advise the sponsor to invest their charitable assets into a specific social enterprise deal. These deals are sourced by the donor investor and any future returns go back into the DAF account and are available for future impact investments or charitable donations.

Lastly, I suggest reviewing these links on fundraising:

* I’m an investor in this company.

Thanks to Emily Campbell, Esq., of The Campbell Firm PLLC for helpful input; she has advised me on some legal matters in the past.

Top Israeli VC talks cybersecurity, diversity and ‘no go’ investments

It’s no secret that Israel is second only to the U.S. for its leading cybersecurity acumen, talent, startups and successful exits.

Israel is a powerhouse in both offensive and defensive cyber operations, with cybersecurity giants CyberArk, Check Point, Radware, and Illusive Networks all founded in the country in recent years. For more than two decades behind the scenes and powering some of the country’s largest cybersecurity startups was Jerusalem Venture Partners (JVP), a major venture capital firm in the region with more than $1.4 billion raised to date.

Now, the firm is pushing further into the early stage cybersecurity space. With a $220 million fund dedicated to early stage and pre-seed companies, the venture capital firm has expanded to New York.

Erel Margalit, JVP’s founder and executive chairman, spoke to Extra Crunch about why New York is a prime location for early-stage cybersecurity startups and how Israel became an incubator for some of the world’s biggest cybersecurity companies.

We also discussed why diversity is critical to his firm, how he separates fact from fiction in the security world, ethical investing, and which kinds of companies he would never invest in.

This interview has been edited for clarity and length.

TechCrunch: Tell me a little about your firm and your current work on early-stage investments.

Erel Margalit: I established JVP 25 years ago. A lot of what we were doing in the beginning was taking defense-related technologies, like wireless and fiber optics and large data systems, and transforming them through the communications world into the commercial world. Now we have 14 companies — some of which have been very successful. We’re now at a different stage where we’ve partnered with New York City to create the biggest hub in the city for the next generation of companies — the sorts that are scaling up with solutions that are not necessarily the big solution today,

Israel as a cybersecurity powerhouse

You’ve seen three or four really successful exits in the last few years from former startups you’ve helped to build out. What does the formula look like that results in these successful exits?

One of the things that we’re trying to do with second-generation entrepreneurs is we’re saying, instead of building a company to be sold for $250 million, why don’t we build a sales organization that would reach $250 million in a few years and instead build a very significant robust sales and marketing organization?

Israel has big ideas, but we’re small country. That’s why North America — especially the U.S. — is a key first go-to market. But it’s not always easy to get it right when you’re trying to get into the U.S. and scale in a big way. However, if you are successful, a lot of Israeli companies are also able to sell into European countries and Asian countries. And so what you get is what I call a “mini-multinational,” which is a small organization that’s able to get its first customers in a bunch of places around the world. So — go forward, and then build a sales and marketing organization that is just as strong as your research and your development organization.

Israel has a conscripted military — one that invests heavily in both cybersecurity and offensive cyber capabilities. That’s one way Israel got a considerable amount of cyber talent in one place. But what else contributes to Israel’s ability to create so many strong cybersecurity startups?

Israel needs to be as strong as the seven countries around it. And the only way to do it was through technology. Cybersecurity today is one of the main means of technologically understanding what’s going on. There are state-backed cyberattacks happening all the time — they’re attacking utilities, they’re attacking the banks, but what’s going on now is they’re also attacking democracy and the individual’s rights for something that’s becoming a national issue. The British didn’t have a fair election on Brexit. The same thing happened in the United States.

I think that a lot of us understand that from just protecting large organizations and countries. Now we’re moving to protecting individual democracies and our free way of living. Everything is online. Everything now is penetrable. And if you don’t have the next-generation of strategies, you’re not going to not going to be able to continue to operate.

On the New York hub

The cybersecurity hub in New York clearly means a lot to you. Why did you choose to build a hub in New York and not somewhere else in North America?

Updated Israeli startup landscape maps 2019

As readers of this blog will know, I’m a big fan of Startup Landscapes and I enjoy collecting them. It’s been over a year since my last post on Israeli startup landscapes, so here’s a fresh batch of 2019 market maps. In this edition, you’ll find landscapes for Proptech, Future of Work, CleanTech, InsureTech, Supply Chain, Sports Tech, Retail Tech, FoodTech, AgTech, Robotics, Payments Tech and Fintech.

Proptech
Source: Innogy
Future of Work
Source: Deloitte
Cleantech
Source: ICV
InsureTech
Source: Startup Nation Central
Supply Chain
Source: Sosa
Payments Tech
Source: Visa
Robotics
Source: i3 Equity Partners
Retail Tech
Source: Deloitte
SportsTech
Source: Colosseum Sports
AgriTech
Source: Startup Nation Central
FoodTech
Source: Startup Nation Central
Israeli startup landscape maps 2019 - an updated look on various verticals in the Israeli ecosystem: Proptech, fintech, agritech, sports tech, insurtech and more.
FinTech
Source: StartupHub

10 Takeaways for Israeli founders considering the UK

This week brought together a few different parts of my personal and professional life. On Monday, Kevin Baxpehler and I hosted the UK Israel Business investor delegation to Tel Aviv, and today I spent the morning with the 8200 EISP startup delegation to London where I was joined by Kirsten Connell (Cylon Lab, Managing Director) Simon Menashy (MMC Ventures, General Partner). Having these two events in one week made me realise – there are huge opportunities to build stronger bridges between the two tech communities.

The two events were packed with great questions and takeaways. Here they are in no particular order.

  1. Should Israeli startups even look at the UK at an early stage given the US market is much bigger/strategic? There’s no doubt the US is THE key market, but it’s not the only one. Reasons to consider London as a launchpad:
    1. It’s close and cheaper to get to than the US
    2. Most companies /funds are concentrated in 11 square miles in London. You can get a lot done in a short trip ;-)
    3. Sometimes trying to take on the vast US market too early can result in “bringing a knife to a gun fight”
    4. You’ll find less competition and easier to stand out than in the valley.
    5. For certain industries (fintech, retail, health) it makes sense for Israeli startups to tap into the UK market early.
    6. To take on the US market, will likely mean the CEO needs to relocate to the US and build a team there.
  2. Is there too much money? Israel is on track to reach $10 billion in venture capital invested in startups in 2019. While there’s a huge growth in the capital volume, it is concentrated in mega rounds for growth companies. The number of seed deals is actually flat or a bit down from last year. Takeaway – while Israel is the highest in the world for VC per capita, there’s still a gap in funding at the early stage.
  3. Who to raise from? Given the competition between funds, some have started investing early than they normally do, so series A funds dip into seed and several claim they need no investment committee to write checks under a certain amount. That’s great, but founders should understand what’s the follow on ratio for those seed investments. Having a top tier investor not follow on can create serious singling risk for the startup. Nothing new here, but good reminder!
  4. Soft skills – Israeli Entrepreneurs are brilliant innovators and have strong technical expertise. Where they can use some help is in the soft skills and storytelling. Don’t lose the Chutzpah, but learn the please/thank you/small talk/follow up email to get things done in the UK.
  5. The value of boards – Don’t underestimate the value a good board of directors can bring. In UK registered companies, every member of the board can be found in the Companies House website, and having the “right” people on the board can open doors and accelerate relationships, especially for a startup coming from abroad. In the UK, the Chairman (or Chairwoman) for example, work closely with the companies and can be mentors, introducers and companions to the founder. The board should support the startup and leveraged to make key decisions. Israeli startup can learn from the UK in this regard.
  6. Diversity is key. No more “Pale, Male and Stale”. London is probably the most international city in the world and has a lot to offer in terms of diverse talent. In terms of female founders, there’s still plenty of work to be done, but we all agreed there’s never been a better time to be a female entrepreneur!
  7. Tax incentives – The UK gives tax incentives for investors (EIS and SEIS) as well as tax incentives for employee options (EMI). Especially at the early stage, investors will care about accessing those benefits. To qualify, the startup must have at least one full time person based in the UK.
  8. Two ears, one mouth – Israeli founders are wonderfully opinionated, but investors want to know they are being heard. This point is slightly due to cultural differences, but Israeli founders should keep in mind that UK investors see this as a potential concern. Be ready to take feedback on board.
  9. The UK is very easy and relatively frictionless to do business with. There are companies like London and Partners, that help startups from abroad establish a UK presence and get connected.
  10. Finally, there’s a growing social network for Israelis in the UK:
    1. The Israeli tech parliament, is a regular meetup for Israelis in tech offering “Firgun time” and the ability tap into the community with what you’re looking for. Monthly events (via meetup group) and active FB community.
    2. The UK Israel Tech Hub (affiliated to the UK government) connects UK corporates to Israeli startups, now about to open a physical space for Israeli startups looking to expand in the UK
    3. Sosa is setting up shop in London
    4. Labs/WeWork/Mindspace operate in both countries
    5. There’s a growing community of Israeli VCs and founders in the UK.

If you’re an Israeli startup looking at London as a potential market, there are plenty of doors open for you. Please get in touch if I can be helpful!

Israeli tech parliament meetup
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Israeli seed fund Remagine is financing media’s AI revolution

While large entertainment companies scramble to catch up to streaming content platforms, more fundamental upheaval is headed their way as a result of technological advances in artificial intelligence and 5G. 

Former ProSiebenSat.1 executive Kevin Baxpehler (based in Tel Aviv) and former Google Ventures partner Eze Vidra (based in London) launched Remagine Ventures earlier this year with a $35 million fund that bridges the gap between technologists at the forefront of change and the largest owners of content.

Backed by a roster of multi-billion-dollar media companies in Europe, Asia and the U.S. as its limited partners, their firm operates independently (and focuses on financial return) but aims to provide strategic value to portfolio companies and insight into the future for its LPs. Vidra referred to it as “a multi-corporate Google Ventures type of model.”

The firm’s focus on entertainment technologies has a B2B bent, with a geographic focus on Israel as its primary hub and with most of its initial portfolio selling to enterprise media companies. That makes Remagine’s ability to guide entrepreneurs through the halls of traditional media giants highly relevant; it also means it can gauge whether traditional media companies are likely to buy a startup’s product before they invest.

I spoke with Baxpehler and Vidra to learn more about their playbook and why they believe a wave of entertainment tech companies is about to come out of Israel. Here’s the transcript of our conversation (edited for length and clarity):

Eric Peckham: Are there specific investment theses within entertainment that you are hunting for startups in?

Kevin Baxpehler: Our investment thesis is based on two main drivers: new advancements in so-called AI technologies — specifically deep-learning, computer-vision and NLP — coupled with new consumer trends such as esports, visual search, and engaging with computer-generated imagery (CGI) like Lil Miquela. 

We believe that recent technological developments such as GANs (generative adversarial networks), coupled with new powerful computing power like new microprocessing chips and 5G, will change how brands, consumers, and stars/influencers will all interact. It creates tremendous opportunities to invest. 

Eze Vidra: Remagine Ventures invests independently in seed and pre-seed startups at the intersection of entertainment, tech, data and commerce. Seed investing is particularly hard for corporates to do directly (because of a combination of reasons including speed, signaling risk and the challenges of deal flow for corporates) so we specialise at that stage by sourcing real time feedback from the market. 

We are seeing industries and disciplines converge and find the intersections to be the most ripe areas of opportunity. For example, content + commerce, AI + entertainment, gaming + live stream tech giving us esports as a cultural phenomenon changing consumer behaviour.

Give me some examples of what startups at these intersection points will look like.

Vidra: The two core tenants of our thesis are 1) changing consumer behavior — for example, how esports is moving young viewers to engage with gaming — and 2) new technologies that make new forms of entertainment possible, primarily driven by AI.

Our portfolio company Syte is an image-recognition and computer-vision company that recognizes the products inside images and videos with a very high degree of accuracy. They are working with top retailers globally and Samsung selected them to power the Bixby assistant and is rolling them out globally. It’s been tried before, but the difference with Syte’s product is the level of accuracy. 

We invested in HourOne, which is a synthetic video company using generative adversarial networks to generate video without the camera. It has multiple use cases, from reducing the cost of video production to programmatic video, to text-to-speech to gaming. 

Another example is Vault, which uses deep learning to predict the success of scripted projects, whether it’s movies or TV shows down to the box office opening Rotten Tomatoes scores, the probability of there being a season two, the demographics that are most impacted, etc. So bringing a more data-driven approach to marketing films and shows.

Being vertically-focused means that we can attract relevant dealflow from both entrepreneurs and co-investors. As we evaluate startups, we look for interesting teams that are leveraging new technology (or taking an interesting consumer angle) that can scale and we focus on helping them open doors internationally. 

To what extent is your interest focused on startups selling their technology to enterprise media companies versus startups building tools for the broader landscape of small content creators?

Laurel Bowden of VC firm 83North on the European deep tech and startup ecosystems

London and Tel Aviv based VC firm 83North has closed out its fifth fund at $300 million, as we reported earlier. It last raised a $250 million fund in 2017 and expects to continue the same investment mix, while tracking developments in emerging areas like healthcare AI and autonomous vehicles.

In a conversation with general partner Laurel Bowden, the veteran investor shared a few further thoughts with Extra Crunch — talking about the tech scene in Europe vs Israel, what the firm looks for in a team and tips on scaling globally.

The interview has been lightly edited for clarity. 

TechCrunch: Is Europe starting to catch up to Israel when it comes to deep tech startups?

Laurel Bowden: We clearly think we have in our portfolio some deep tech. And in other VC portfolios too — there’s clearly some deep tech [coming out of Europe]. And then on the reverse side you’ve seen more consumer-related stuff coming out of Israel. But still if you take a blanket look, we see more data infrastructure, security, storage coming out of Israel than we see in Europe — that’s for sure.