With thousands of Israeli startups forming all the time, hundreds of active investors and a whole industry of service providers, the need to unite under one roof where profile information is updated, organized and open to the general public is a need that is recognized by all in the business.
A few weeks ago, a new platform called ILVenture went Live as part of a volunteer project developed by a small group of people including Amir Shevat – Director of Community Development at Google, Ron Reiter and Omri Baumer.
According to the Shevat, ILVenture is an open platform for entrepreneurs in Israel. “The platform was created to allow entrepreneurs to do what they do every day in meetings, phone calls and emails, only now they can perform all these tasks in one online hangout with the rest of the Israeli hi-tech scene. Startups, investors, accelerators and entrepreneurs; all can register, connect and help each other move ahead in the industry, but the emphasis is placed on helping the entrepreneurs. ILVenture is trying to offer access to as much information and services as possible. If an entrepreneur is looking to contact an investor, find an expert, designer or developer, or needs advice on whether to agree to a specific set of investment terms – they can accomplish all these things on ILVenture. “
Teaming with Techcrunch
Recently, Techcrunch opened the API to its huge database of startups known as CrunchBase, and allowed for the connection by external sources to pull from it data and update profiles. ILVenture began a cooperation with TechCrunch where new members joining IL can also add themselves to CrunchBase with nothing more than the push of a button.
If you have yet to have an encounter with CrunchBase, it’s the largest database in the world of startups and investors. Entrepreneurs from all over the world turn to CrunchBase to research startups and dig for information about investors. “The connection between our platforms and Techcrunch will not only help Israeli startups gain exposure in the Israeli startup scene but in the international scene as well.” explains Shevat.
According to Shevat, ILVenture currently hosts dozens of investors, hundreds of projects and thousands of users who use the site to connect with each other on a daily basis. “Any startup who joins the platform can already search for Israeli entrepreneurs to connect with, find investors, learn about accelerator programs, ask questions of developers and more. The platform contains lots of good extras like features that help entrepreneurs find space for rent, designers, lawyers and service providers and even offers a resume exchange between companies.”
Israeli startup Jifiti announced the closing of a seed round valued at $ 2.5M and the official launch of the new version of the company’s mobile app which takes the idea of shared gift registries and makes them a relevant tool for today’s shoppers.
The money was not raised through funds or angel investors, but rather through a group of companies in the real estate and retail sectors. Among them are Simon Property Group – a U.S. property company which operates over 333 malls across North America and Asia and is considered to be the largest real estate company in the United States, Schottenstein Stores Corp – owner of brand names American Eagle and DSW, and Jesseison group.
Before the investment, Jifiti shared a joint cooperation agreement with Simon Property to bring the Jifiti concept to Simon owned malls and usher them into the live gift arena. In the new updated version of the service, the company assures that a mere 24 seconds after the gift is purchased, the user who received the gift will be able to redeem it at any one of the various shops that work with the app.
Preparing for the big shopping season
Timing the investment to precede the major shopping season in the United States was not done accidentally. The new version of the app is available for iOS, Android and HTML5 platforms and encourages consumers to label items on their wishlist and share it with their family and friends through their social networks; Facebook, Twitter, email and even SMS. Users within their network will then have the option of purchasing items for their friends from their wishlists, contributing to the purchase price or buying the item outright in the form of a gift card which is subsequently forwarded over to the wishlist owner.
For example, if a user is in an American Eagle store in New York and is interested in buying a blouse for their friend’s birthday who lives in California, the user can open up a purchase and send out a call to their network of mutual friends to come and contribute to the purchase. After raising the full cost of the blouse the application sends a gift card to the birthday friend in California who can then go to any online AE store, choose their favorite color and use their digital gift card to checkout.
Jifiti was founded in early 2012 by Yaakov Martin, Meir Dudai and Shaul Weisband. Among the company’s strategic partners can be found malls and retail giants like clothing outfitters American Eagle and Banana Republic, makeup brand name Sephora, and gaming chain GameStop. Jifiti’s has 12 employees working at their development center in Modi’in, Israel and at their sales and marketing offices in Ohio, U.S.
Chekkt, an Israeli startup company and developer of a Marketplace for SaaS business products recently completed seed round of funding for $1.25M. The round was led by a San Diego based VC firm called Israel Tech Trust, who invested about $1M in the company. The rest of the amount came from Pikadon Tech, Laurent queen’s Wingate Ventures, Nicholas Pariente’s Broadway Partners, ValueShine Ventures private Israeli investor Emilio Maimon.
Helping businesses find the right software
Chekkt was founded in 2012 to provide a solution to one of the central problems facing Small Businesses in the Internet age. In recent years, with the range of SaaS solutions growing significantly, small businesses who want to use various tools such as accounting services, online campaign management services, analytics and other services, don/t really know how to find them and how to know what service best fits their needs.
In an Interview with Geektime, co-founder and CEO Uri Manor explained that Chekkt’s solution enables companies of any size to purchase cloud based software relevant to their business needs in an easy and convenient fashion, “Our clientele are Internet companies who sell or buy SaaS products of various types and we actually accompany them along their journey, starting from product browsing, feature analysis, product comparisons and on through to their purchase. “
“When you get all of these sites, what you see before you are application categories. Most business owners are seeing a long list of programs from a particular category, with a large number of features at different prices, and they don’t really know what is right for them. We take a slightly different approach and say that before facing the customer, you have to first understand who the customer is and what they do; are they a large or small company and things like that. According to the details that the customer uploads about themselves we can know to recommend the most suitable applications for their business model, both in terms of features and in terms of price, “explains Manor.
“In addition, we have built into Chekkt a Rating mechanism based on CrowdSourcing intended to help customers understand if the product is really good or not. Unlike the B2C market, in the world of B2B it’s hard for customers to know whether they’re getting a good product for their money, and our feedback mechanisms allows our community to rate the various services so that everyone knows what’s good and what’s not compared to the other products and features that are out there.”
1/3 of the Portfolio
the story behind Chekkt is an odd bird as far as startups go. The company was originally founded by Valueshine Ventures. Valueshine is a kind of hybrid operation between a group of investors and a startup incubator who together have managed to fill their portfolio with no more than two other startup companies to this day .
In the case of Chekkt, Valueshine’s Uri Manor who runs the day to day of the company, joined Noam Simckes and Emilio Cohen from Pikadon-Tech and Emilio Maimon. Presently, the company has around 6 employees working from its offices in Tel Aviv, Israel who are working on the first version of the product expected to be launched towards the end of the year.
Apple can deny that she was ever interested in Waze, but the fact that Google is the one who managed to scoop the Israel based traffic app up seems to have left an impression on the hardware giant as Apple continues to purchase smaller scale mapping startups in an attempt to improve its mapping system.
Last weekend there were a number of reports published that Apple acquired two small start-up companies engaged in the mapping. First was Canadian based Locationary. Similar to Waze in that it gathers information from the community based on Crowdsourcing users, but different in that it doesn’t track navigation but rather information on businesses and services that users frequent; in other words, what happens when the Yellow Pages meets Wikipedia.
HopStop – Israeli investment
According to Bloomberg , the other company is HopStop , a U.S. based company with offices in New York, but a significant portion of its capital was actually raised from Israeli investors including serial entrepreneur Yaron Galai and Daniel Recanati’ investment fund, Rhodium.
HopStop was founded by an African entrepreneur named Chinedu Echeruo, almost 8 years ago, before there was such a thing as iPhones and apps. In 2008, when Apple launched the AppStore platform, Echeruo was one of the first to see the potential and developed a solution that allowed users to find public transportation routes from point to point. Earlier this year the company added a new feature allowing for real-time tracking of arrival times for public transit (similar to Israeli startup, Moovit).
The Israeli Connection
Though Apple acquires a substantial number of small companies each year (most of them we don’t hear about), an interesting element of this purchase is the involvement of Israeli investors.
After selling Quigo to AOL, Yaron Galai started investing in startups as an angel investor (ending this activity by 2010 according to his LinkedIn page) and in 2008 it was actually HopStop that attracted his attention. Other investors took notice as well, including friend and fellow Israeli investor Daniel Recanati, and together they have invested the amount of $2M in the company.
A year later, Echeruo left his position as CEO and Galai brought in current CEO Joe Meyer, who worked with Galai at Quigo when it was sold to AOL, subsequently managing its operations there.
They are expected to profit from this deal (albeit in relatively small amounts) and earn up to 2-3 times their initial investment.
Yes Waze, No Waze. What’s up with Apple’s maps?
In January of this year Tim Cook denied that Apple was involved in negotiations to acquire Waze and explained that although Apple released a problematic product in maps, it was more than capable of fixing things in house and does not need any external acquisitions to address the problem. Judging from what was published last week, it doesn’t look that way.
Apparently, after Apple had given up on Waze (probably due to the price tag), Apple continues to acquire small startups in mapping. The latest cases of Locationary and HopStop are small companies that will have a negligible impact on Apples budget. According to information obtained by Geektime, the two technologies are expected to be incorporated into Apple’s upcoming updates to their mapping service later this year.
Will an updated mapping service including business registration, navigation and public transportation allow Apple to compete with rival Google maps? Probably not yet, but it’s definitely a few steps in the right direction.
According to information obtained by Geektime, Israeli toolbar giant Conduit has been trying to close a merger in what may prove to be one of the most complex acquisitions made in recent years.
Sources reveal that Conduit plans on splitting the existing $1.5 billion company into two entities, each to deal with a separate core functionality: One company will be run by Josh Wine, who currently runs the company’s toolbar division, responsible for an estimated $200-300 million of the company’s $800 million revenue.
A second company, headed by current CEO Ronen Shilo, is expected to handle all mobile activity and development not directly related to toolbars – such as building systems for mobile websites, lock screens and the company’s own mobile Web browser.
In addition, recent reports reveal negotiations between Conduit and Perion in what would amount to a reverse merger.
According to reports, Conduit plans on acquiring Perion for an estimated $150-200 million. Perion is a publicly-traded company founded by Ofer and Yaron Adler in the early 2000s and has built up its success based on the same business model as Conduit; namely developing toolbars and seeking out strategic partnerships with known search giants.
Unlike Conduit, Perion decided to go public, issuing an IPO on the NASDAQ and at their last trading closing their value stood at $146.36 million after a late day rally of 8.42 percent.
The purpose of this structural shakeup is to pave the way for a reverse merger, a move generally carried out to allow a private company to go public by occupying the shell of an already public company, avoiding the complex hassle of filing for a public offering.
The new entity will see Conduit handling toolbars and Perion’s activities in the form of an old/new company already listed on the NASDAQ.
Making sense out of this
So now after we explained what’s going on, let’s try to make some sense of it. Ultimately, if and when this complex merger goes through, the facts on the ground are expected to be two separate companies:
1) Conduit/Perion – a merged company under the direction of Josh Wine from Conduit, which will handle the operations of Conduit’s toolbars and various Web activities of Perion.
The company is expected to be traded as a public offering valued at over $1.5 billion.
2) Conduit Mobile – a ‘new startup’, which would be privately-owned and continue the development of various products outside the realm of Conduit’s toolbars.
The new company is expected to be valued in the tens of millions from day one due to the sheer breadth of the company’s activity, despite the fact that it will not of had the chance to generate any revenue yet.
Why is this happening?
One of the key reasons for this move (if not the main one) is the desire for Conduit’s investors to realize a return on their investment once they have a chance to sell of some shares on the open market.
Conduit’s management, and especially CEO Ronen Shilo, said several times that the company has no desire to go public and they have “enough money” to avoid doing so. They don’t need the public who mostly just makes noise and keeps the company from being able to develop.
The structure of the transaction, which will allow the company to take its profitable activities and move them over to a public company, will provide investors with a relatively quick exit without having to deal with the standard filings that generally take several months or sometimes longer than a year to complete.
It also helps avoid the clash between those investors who want to IPO and those who inevitably raise objections fearing a devaluation once the company hits the public market.
Sources close to both companies confirmed that there were contacts between the two companies, but refused to elaborate on the content. We turned to both companies for comment and will update if and when information comes in.
Venturebeat recently reported on its blog, that one of the most colorful startups coming out of Israel in recent years, Boxee, is in advanced talks to sell the company.The reports come against the backdrop of rumors in recent weeks that the company is looking to recruit a sizable amount of funding, somewhere in the vicinity of $30M, and simultaneously hired the services of Allen & Co, a private investment firm specializing in media, for assistance in finding potential buyers for the company.
At this point, it’s unclear who will now purchase Boxee, but it has been reported that the company is expected to be holding an event next week where the details of the transaction will be revealed. Geektime turned to Boxee for clarification of the matter and received a curt reply stating that the company had no comment.
Software to Hardware
The Israeli Boxee, was founded in 2007 as an open source media center, and since then has gained quite a fan base. Although there are no shortages of media center systems, most notable among them being XBMC (of which Boxee is based upon), the main distinguishing factors of Boxee is the introduction of ‘social’ to their media center, allowing for the sharing content viewed by friend networks, the ability to leave comments, etc.
In 2010, the company decided to enter into the hardware arena, joining the communications equipment manufacturer, D-Link, to create the Boxee Box, a device-based Media Center sporting the operating system of the company. The device, along with its non-conventional design, has not been met with much success around the world, and according to various reports, only managed to sell a few hundred thousand units.
In March of 2011, the Company raised a respectable $16.5M in a funding round led by Softbank Venture Capital and Pitango Israel. The round brought the company’s total funding to $30M. A few months later, Boxee released the latest version of their operating system (1.5), while at the same time, announcing that it will cease to support the older version of its operating system installed on desktops (the same system that made Boxee so popular in the first place), and has officially pivoted from being a software development company, to a hardware company.
The abandonment of PC users and the lack of success of the Boxee Box, led to the company’s current attempt at a successful product, the Cloud DVR converter, launched only a few months ago. The Cloud DVR is based on Boxee’s OS (with a bit more of a standard design), and allows users to receive, record and store free Cloud based broadcasts, as well as making available content from various network sites, such as Hulu and Netflix. When they launched their new box, the company also launched a mass campaign targeting consumers tired of paying the high costs of cable companies, encouraging them to join their service for a one-time payment of $99, gaining access to a wide variety of cloud based content and a mass amount of cloud storage, all at lower prices than what was otherwise being offered on the market.
With Boxee’s new Cloud DVR, the company now finds themselves competing with not just cable companies, but various other forms of media devices popular in the U.S., such as Apple TV and Roku, as well as the popular recording service TiVo. The fact that the company decided to launch the device with a very limited distribution net (the initial launch only hit 8 major cities across the United States, with the company promising to support an additional 26 cities by the end of this year), probably did not help the success of this new initiative.
So who want’s to buy the Boxee?
Boxee’s dual, software/hardware makeup, and the fact that its device has quite a few capabilities (access to online content, access to DVR content, recording and maintaining of content in the cloud, etc.) makes the company an attractive strategic asset to quite a few sectors. Among the potential buyers mentioned in recent days are; U.S. cable giant, Comcast (although Boxee now encourages cable consumers to migrate away from the older service), TiVo and Dish Network. Some of the companies who might be interested in Boxee’s recording and communication equipment are; Cisco (which is looking for options to expand its business of Set-top Box brought in after recently acquiring NDS last year) or D-Link (Boxee’s partner in the production of the Boxee Box).
Which one it will be? We’ll probably have to wait for the announcement to find out, which is reported to be occurring sometime in the coming days.
However you look at the Waze-Google deal, it seems like a Win/Win for everyone involved (except for maybe the users). But while everyone is celebrating the largest mobile acquisition in history, and all the millions of dollars that are now filling the pockets of investors, entrepreneurs, employees and of course, the Israeli economy – it’s also important to understand the implications of the $1.1B dollar deal on the startup ecosystem, which includes both entrepreneurs and investors in Israel and abroad.
At the beginning of their journey, the founding team of Waze would go from meeting to meeting, pitching potential investors and venture capital firms, and one after the other, the majority (except for Vertex and Magma of course) told them they were not interested. Even investors in the company up until last year thought it would be impossible to build a billion dollar consumer company in Israel. Even CEO, Noam Bardin, at one point moved his office to the United States. Yesterday proved just how wrong they were.
As entrepreneurs, the next time you meet an investor, remember now that there’s someone who did it. If anyone ever tells you that you can’t build a billion dollar consumer company in Israel because Israel doesn’t know marketing, you can wave this huge exit in front of them, an exit that’s a bit younger than 15 years old and that didn’t have Yossi Vardi to save the day.
At this point, people would say, ‘Fine, but I’m not interested in who said ‘No’ to Waze, I’m interested in who said ‘Yes’ to them. All those investors who said ‘No’ are now watching those who did invest, and are eating their hearts out.’
As a good friend told me yesterday, the Waze – Google deal will become a kind of a Yom Kippur for Israeli funds and investors. This deal is going to stimulate a country wide introspection by the Israeli investment community, where they will seriously revisit their basic assumptions about what makes for a good investment, and what is indeed possible, when previously thought not to be. Eyal Gura, a serial entrepreneur and now a partner in the Israeli venture capital fund Pitango, wrote yesterday on Twitter that one of the first questions investors would ask when it came to assessing the Israeli consumer startup community was, ‘Give me one meaningful Israeli exit for Consumer, besides for ICQ?’, or ‘It’s very nice to have you beta users in Israel, but it’s not a market where you can really examine consumer behavior.’
Starting today, and at least for the near future, it will be much harder for investors to flat out say ‘No’, or ‘You can’t.’
And why is that bad, you ask? For the very simple reason that the investor community’s basic assumptions were not ‘wrong’. But they, unfortunately, caused the investors to go into hibernation in recent years, preventing them from investing in companies that had all the attributes of success, and could have succeeded, even given these basic assumptions.
So when you read the positive commentary of the senior members of the Israeli venture capital community, and when you hear that the Israeli media has already crowned this to be ‘Israel’s high-tech deal of the decade ‘, you might need to take a moment and catch your bearings after you realize the industry just made a collective 180.
The true impact of the deal will have a little bit of good and bad mixed together. Luckily, Waze is not a photo sharing app, so it’s unlikely that hordes of startups will be running to try and copy their application right away. However, similar to the Facebook – Instagram deal, Waze – Google has no clear cut financial benefit in real terms, and could cause the development masses to rush on off again, seeking to develop startups without a well thought out business model, thinking that revenue in the form of millions of users will ensure revenue of the dollars and cents kind, later on down the road.
It’s important to remember that in the case of Waze, they had a monetization model from day one, only it was ‘invisible’ and was not meant to bring the company revenue right away. Real-time mapping took a company like Apple, close to a billion dollars an over a year to develop. Waze has free real-time mapping, created by its users. They basically saved themselves $1B dollars plus the time-to-market. This was a stroke of genius by Waze, so it’s a bit different from the Instagram deal, where the world is still a bit unsure as to how they bring any monetization benefit to Facebook.
On the other hand, all those investors – who are still trying to understand how a successful Israeli Consumer company slipped through their fingers and sold for over a billion dollars, and are now afraid of missing out on the next big opportunity – will return to the market and throw a whole lot of money at projects that do not really deserve it.
The past two years we have seen the same phenomenon here in Israel, as has been taking place in the Valley, that of the Series A Crunch. The same phenomenon was not represented so much in the decline of first round institutional investment (Round A), but a significant number of rash investments could be seen in Seed and Pre-Seed stages, a situation that saw many companies open up shop, only to get stuck when it came time to raise their next round of funding.
After two years of these early stage wastes, we are now seeing the beginning of a ‘relaxation’ process amongst Seed investors, and talented entrepreneurs are feeling the pinch. Whether it’s from spending enough to lose enough for them to begin to understand, or if funds are deciding to go back to doing what they know how to do right, the amount of money flowing to early stage investments in general, and Consumer style investments in particular, have begun to fall and return to normal levels.
Leaving aside the impact that the Waze-Google deal will have on established investors, there is also the significant influence it will have on ‘new’ investors who will be tempted to get into the game after this exit. Unlike the experienced investors, these individuals will have no problem throwing money at undeserving companies in search of the next Waze, inflating the early stage startup market once again – and so goes the cyclical evolution of the Israeli startup eco-system.
So what are your plans this summer? Planning on bumming out at the the beach or pool all day? If you’re a real geek (and we’re pretty sure you are), We think you’d rather attend the first Hackathon in Israel on Intel’s Perceptual Computing, in collaboration with Geektime.
Why do you want to do this?
Besides for the fact that Perceptual Computing is expected to be one of the hottest areas in tech for the next decade, missing the opportunity to experience Intel’s most innovative developments is not something you want to do. In addition, the first place winner will be flown out to Silicon Valley, along with the president of Intel Israel, Mooly Eden, to view Intel’s latest developments in person.
Tempting, right? Want to jump on the next plane? No problem, we’ll arrange it for you. There’s only one little thing standing between you and your ride to Silicon Valley – you have to lead the winning team at the event. And don’t worry about the rest of the team, all of you will be awarded with a brand new Ultrabook. The second place team will each receive new Intel tablets and we’ll have some awesome prizes for third place as well.
The event is designed for software developers, both beginners and experienced, who are innovative, original and knowledgeable about Windows environment and programming languages; C++ and C#. The event is looking for people who will offer ideas and develop applications that use Perceptual Computing SDK’s and the three-dimensional cameras of the company. Applications need to reflect original and unique ideas for the latest camera, which has not yet been released to the public, but which has been provided to software developers around the world.
The purpose of the event is to encourage Israeli companies and software developers to enter into the perceptual computing field, developing original applications and solutions to be submitted to the Intel Perceptual Challenge contest, with prizes totaling $800,000. The contest will end in September of 2013.
Please note that in order to participate in this competition you must submit your ideas by 17/06/13.
Workshop: Learning to Work with Perceptual Computing SDK
Since the development of Perceptual Computing applications requires some familiarity with the technology, we will be offering a three-hour workshop to help you learn about it. The workshop will take place in Petah Tikva on June 12th, from 16:00 to 19:00 (Park Azurim, Beit Megamot), and in Haifa on June 13th, from 16:00 to 19:00 (Intel’s Research and Development center, Park MATAM). To register for workshops, please contact Guy Grimland at [email protected]. The mail must specify which of the two workshops you wish to attend.
It is important to note that the workshop is not a prerequisite for registration at the event, but it’s definitely highly recommended if you want to submit an idea to the Perceptual Challenge contest, given the complexity of technology.
Want a little taste of what you can do with the Perceptual Computing SDK?
Magic Doodle Pad
Jeeno the kitchen computer
Want to see more ideas and applications from the first phase of the developer competition? submit request.
What you can expect at the event?
We’re talking about one of the events that we believe is worth our personal investment in. Opening statements by Mr. Mooly Eden, president of Intel Israel. Enrichment lectures by representatives of the Perceptual Computing Group. Refreshments are on the house. Technical support at the event from top tier experts from Israel and abroad, and most importantly – a great atmosphere for coding and developing innovative applications and unique content.
Tickets to the event cost $50 and all proceeds from ticket sales will be donated to Machshava Tova, which was founded by a group of educators and high-tech professionals in 2003 to reduce the growing social gaps in Israel through the use of technology. The organization today operates in ten different centers, including in Jerusalem, Lod and Kiryat Yam. Additionally the center’s association runs Mobile classes given throughout the country. Mobile classes allow the organization to operate in places devoid of technological equipment and to reach people who cannot get to the centers. The association teaches various populations including youth-at-risk, the elderly, Arabs, children of urban gardens, Deaf, and the unemployed. The association’s courses include imparting basic computer knowledge, learning office productivity software, web browsing, robotics, animation and more.
Every entrepreneur would love to remain a fly on the wall, if only for a few minutes, in the room where they just finished presenting their vision to a group of potential investors.
Fortunately, I’ve recently had the opportunity to sit in one of the monthly meetings held by a group of the most active angel investors in New York, with over 70 investments carried out in the last decade, and hear their first thoughts after presenting entrepreneurs had left the room. Those fateful few minutes usually determine whether your presentation of why you’re company is going to be the next Pinterest, hit its mark, and if you’ll be getting your requested investment.
Meet the NY Angels
New York Angels, the investment group which operates out of New York City and conducts monthly meetings with entrepreneurs who pass the initial screening stage, do not operate like our typical investment fund. Investors choose companies to review and negotiate as a group, but at the end of the process, each investor makes their decisions and investments individually. Often times the investors do wind up investing in groups, raising a combined average early stage investment of anywhere between $100K – $1M. These initial investments are designed to afford their vested entrepreneurs the leverage they require to move their business forward through an extended network of angel investment groups.
Among the group’s investments, which focus on Internet, media and e-commerce, one will recognize many notable companies, including Israeli expenses and investments company, Payoneer, and on the social media front, Pinterest. With close to 10 exits, the group enjoys an impressive variety of companies in various stages of their life cycle, coming over to try their luck at becoming part of this very successful portfolio.
It all began with a short conversation with Brian Cohen – Chairman and first investor of Pinterest.
I met Brian Cohen at a neighborhood bagel shop in New York. Brian, a warm person with boundless energy, is an entrepreneur to the core. His biography and credo is something that I recommend every entrepreneur to read, and I leave it to you to do so; but I will mention that this is a man who believes that regardless of race, religion or creed – he believes in people, potential, and in helping entrepreneurs fulfill their dreams. Make no mistake of it though, if you want him to believe in you enough to invest, you’ll have to go a long way in proving yourself.
After almost two hours of conversation, Brian invited me to sit in on The New York Angel’s (of which he’s a member) monthly presentations meeting, which introduces promising entrepreneurs who applied for funding and passed an initial screening stage. The presentation determines the next step.
What the Angels want to see?
Anyone who’s ever opened a book on entrepreneurship or taken a minute to read over the bios of the investors they’re looking to get investment from, knows that the most important thing to an investor is the team themselves. Now we’re going to take this tip a few steps further, so take note; What are the things that speak most to your competence as a Founder worthy of investment?
Did you fumble your answers to questions related to the structure of the company? Guess what? You just lost points. Did you throw out an unrealistic figure when answering to the value of your company? You just got filtered out. Does your business model fall short of yielding an adequate return? Why did you even bother leaving the house this morning? Your presentation was not full enough? Should have done some trial runs first with people who can give you feedback.
Divide and conquer
One of the best strategies in fundraising in general, and when trying to convince the New York Angel group to invest in you, in particular, is to create a personal connection. Angel investors prefer to invest in people where at least one investor told them personally about a positive impression they had of a given company or entrepreneur.
If you panicked, but managed to squeeze in a presentation to one of the Angels beforehand – then at least that one group member knows already what you’re capable of, and can accept that maybe it just wasn’t your day. While there’s no better impression than a first impression, you don’t always get to convey your message at the perfect time and in the perfect way. Also, after finishing your presentation and leaving the room, the first one to give their thoughts on you as a potential investment is the one who brought you to the groups attention. Having formed an initial relationship before the meeting with one of the Angels to any degree can come in handy when that angel steps up to speak on your behalf.
Another advantage of developing a prior relationship with a member of the group, is the ability to receive feedback on your business plan, presentation and message, even before you present, and getting to know whether this Angel will really be your ambassador to the rest of the group when the time comes. If they’re not interested, it’s really just a waste of your time, and the time of the other investors.
Introducing the Bicycle Law
Network connections offered by the New York Angels alongside financial investment is also a great advantage. Angel investor groups come from different parts of the world – these are business people who have already made their fortunes and are now ready to open their pockets and their contact lists to portfolio companies within their groups.
But to do so, it’s important to understand that you’re going to have to turn these Angels into close, personal contacts. The rule was explained to me in a somewhat humorous fashion, but it relays the message rather effectively: Can you ride your bike to the Investment office? If you can, the odds of you landing investment by that investor go up significantly. If the investor has to factor in an overseas investment, without physical representation close to the investor’s home base, investment probability drops significantly. that’s not to say there are no exceptions to this rule, but it is important to understand its impact on the decision making process.
It’s not only about the technology – Find the users
I know, it sounds bizarre, but a technological advantage is also significant disadvantage when it comes to securing investment. Entrepreneurs often come to the table with a developed technology, but without knowing or understanding why this technology is relevant, or who will be using it.
I know, we’re all graduates of elite technological programs from around the world, and American investors can almost smell the money they’re going to be making off our genius, but then come the hard questions – Why do we need it? And no, not all technology is the next game changer. Nikola Tesla can tell you all about the inability of the consumer market to grasp the benefits of technologies.
And don’t forget your users – the “billion Facebook users” are not your market, nor are “women” or “Mobile users.” Do your homework. Give some sort of intelligent explanation as to who your target market is specifically, and why they will truly value your product. Explain why you want to develop this product, and why competitors will want to as well (of which you always have more than you think).
Users like water
One of the things that bothers foreign entrepreneurs in the early stages of their startup, is the fact that New York based startups manage to attract large user bases very early on in the companies life cycle. Or as one of the angels put it “all the startups here couldn’t take two steps without stepping on 100 possible deals that could potentially bring them hundreds of thousands, if not millions of users.”
Even with the illusion that the Internet can bridge the gap between countries, foreign entrepreneurs usually fail to close a large number of transactions and bring in users on the scale that their American counterparts do. This holds true even in cases where foreign startups may have a superior product, a more interesting business model, or even an easier sale. Problem? Definitely. Can it be solved? Definitely. Be creative.
Money, money, money
When sitting in on presentations of entrepreneurs who begin to demonstrate a financial plan for the next 5 years, I always laugh a little on the inside. In my opinion, investors and entrepreneurs have no idea what will happen five years down the road. Two years, maybe, and that’s still mostly guesswork. All markets, especially those revolving around the Internet, are constantly changing. This isn’t to say you shouldn’t try and build a case for why your business will grow in the coming years. A realistic outlook and vision geared toward real growth and based on real data, that’s what investors are looking for.
You really don’t know how much you can expect to sell? Yes, it’s a gamble, even investors understand this point. So on the one hand, it’s important to know how to explain attractive numbers (tens of millions), on the other hand, don’t reach too high (remember what happened to Icarus?) – Try to remain rational and tell a story that you believe in yourself.
The money side of your presentation is foremost meant to demonstrate how you intend to create a profitable company, one that is worth the investment you’re requesting. If you can only show profits of a few million, you know there’s no point to shoot for American investment – they need to see companies that have the potential to reach profits of tens of millions of dollars. The company’s value should make sense to invest in it early. Don’t be tempted to attend a meeting where you will be expected to explain how your company will reach the tens of millions mark if you’re unable to explain it to yourself.
Money has a third side to it with regards to Angels – If you want to raise money, you should know exactly how much you want, what your goals are, what you imagine the terms of the deal should look like (of course it is open to negotiations), and understand concepts such as classes of shares, types of investments, loans and options benefits available to investors – CEOs who don’t understand basic concepts in the investment world are seen as unprofessional.
The best advice I can give you is to understand each letter of a contract. Yes, even if it’s incredibly boring reading. Do not leave it to your attorney or you may be surprised by the agreement you signed a few years down the road.
One of the last slides in almost every presentation I saw was that of consultants related to the companies. One of the things that generally impresses Angels are the approval and pledges of contribution by experts in your industry.
Do not be tempted to list industry familiar names here if they don’t know you very well. One of the worst possibilities would be for one of the angels to follow up on your list and hear something like “Yes, we met once but it wasn’t very interesting.”
On the other hand, if the list shows relevant people, internationally renowned individuals who can leverage your sales, marketing and/or your technology efforts to help you grow and eventually exit – that’s worth quite a lot of influence points. Checking out these references is a very important part of any due diligence process for potential investors, and that includes the New York Angels.
The Israeli Connection of New York Angels – Azi Cohen
Azi Cohen is one of the angels that I spoke with on the first day of presentations. Azi has a clear agenda to help Israeli entrepreneurs; whether it’s raising money from New York Angels, or serving as a pointman for Israeli startups in the New York market.
With a successful exit and many years of experience in information security, Azi invests primarily in information security, but not only. He also helps quite a few other companies. In a private conversation with him I found out that Azi is a self appointed chief ambassador for Israeli startups, helping them strengthen ties with the American market. He believes (as do I) that he can bridge the gaps and create a successful relationship between all parties for the benefit of all.
The bottom line
At the end of the day, you as an entrepreneur should ask yourself how to get an American investor who sees 100 requests a month, to choose a company located overseas and far from its target market, where the CEO speaks with a strange accent. Sounds too hard? Maybe you should reconsider your choice of careers.
Here’s the place where I tell you again exactly who we are. Geektime continues to be the home of entrepreneurs, startups and investors in Israel, and one of the purposes for which I went to New York was to strengthen Israel’s relationship with investors in New York. Please continue to contact us and tell us about your startups, investments and achievements. Good Luck!
Are you a full-time employee – out all day with no time to take Scruffy out for a walk? Apparently, you’re not alone. Swifto (formerly known as Todayjob), the trendy urban startup of 25 year old Israeli entrepreneur, Penina First, announced this weekend the landing of their first funding round by Benchmark Capital for a cool $2.5M.
The funds will be used to provide across the board services for everything realated to Dog Walking, which according to First, has an annual rolling market value of $60B. The investment was made by Benchmark Israel’s, Michael Eisenberg, who will be joining Swifto’s Board of Directors.
Wanted: Dog Walkers
The story begins three and a half years ago (somewhere in September 2009) when First lived up to here namesake, taking 1st place in the Exit 09 competition for the idea of building a matchmaking site, pairing temporary workers with employers in real time.
“When I started the TodayJob, I was a bit pretentious” First told Newsgeek in a recent interview. “I thought at the time that I could solve all the problems in the world, and do it all in one place. But that first manifestation was the precursor to Swifto, which is essentially a platform to connect people with service providers in real time.
“At some point along the way – about a year ago – we began to understand that the users really wanted something beyond an initial connection. So we decided to try and develop a full, end-to-end, user solution. We quickly realized though, a comprehensive solution for every case specific need, just wasn’t going to happen. We needed to focus our services on a niche within our market, but which one, we had no idea. So we decide to redeploy with a test based approach, changing the focus of the service on a weekly basis. One week it was Dog Walking, the next, waiters, then cleaners, etc. The idea being; when we find something that works, we’ll stick with it.”
First’s strategy is something familiar to all startups. It’s called Pivoting, or directional change. Sometimes it works, sometimes not. In First’s case, it took them somewhere they never expected to go, but at the moment, their direction’s looking mighty promising.
“After a week of focusing on Dog Walking, we realized that there’s this whole world of dog care that we never even knew existed. This niche was much larger than we initially thought and we felt we should look into it a little more seriously. We decided to keep the focus on Dog Walking for a month, and then three months after that, and before we knew what happened, it was catching on like wildfire, so we thought, ‘We found our niche’, and we stuck with it.”
Real time walking tracker
Swifto now employs nine people in Tel Aviv and New Jersey, providing pet owners with a one-stop-shop for everything related to their Dog Walking needs. First explained that:
“For a $20 Dog Walk, you’ll be sure your dog is getting the best care imaginable. The system we built allows for registering pet owners to enter all the information about their dogs into the site, including small-but-important stuff, like being sensitive to particular temperatures or having a tendency to be startled by certain noises. After users are registered within the system, they’re prompted to build a schedule indicating exactly when they’ll be needing our services, and we match them to one of our ‘Walkers’. Our Walkers are given a short interview by the client, and if the client’s happy, we close the deal. With the deal is sealed, the Walker takes the dog out for walks based on the preset schedule entered in by the owner.
“One of the issues raised by Swifto users was; how could they tell that the Walker was actually taking the instructed route, or walking the dog at all, for that matter? To solve this issue, Swifto developed a dedicated application that kicks in as soon as the dog starts its walk, updating the owner automatically.
At the end of the trip, the app updates the owner again with total walk time and actual route taken. For really concerned (or paranoid) owners, there’s the option of tracking your dog via GPS, every step of the way, simply by keeping the app opened throughout the course of the walk.
“Most businesses in this field employ an average of two to three Walkers, severely limiting their ability to cover the market. There are a lot of details and logistical issues to work out in this job, which makes enterprising growth very challenging. We’re unique in the sense that we use technology to bridge the gap whenever and wherever possible, but in some places we still insist on human involvement, and that makes all the difference.
“Eventually, this market will present quite a few hurdles that small businesses will not be able to deal with, for example; all the insurance issues. We carry full insurance for pretty much anything you could think of, including hypothetical cases where we lose the key to a customer’s apartment, or if a dog bites someone or another dog, God forbid, or if something happens to the dog or Walker, etc. Everything’s covered and we have the capacity to handle any event in real time. ”
Dog Walker: BA required?
The quality of Swifto’s Walkers is also no less important to them than the hi-tech features of their site. If users are going to be leaving their dog (and the key to their house) with somebody, it better be somebody they trust.
First explained that the process of screening and hiring Dog Walkers for Swifto is no simple task:
“The hiring process to become a Swifto Dog Walker includes a comprehensive background check. We also require all of our Dog Walkers to have at least a bachelor’s degree, as well as previous experience in Dog Walking or of handling other pets. Additionally, we require our Walkers to have a comprehensive knowledge of Dogs and their treatment, along with a genuine passion for life.
“After we verify that an applicant meets all of our standards, they undergo a series of, no less than, three interviews, as well as a series of scored examinations – and that’s all before the personal interview with each prospective client.”
Manhattan’s marked territory. San Francisco’s next
With $2.5M in the bank, First says the company is already steady on its feet:
“37.5% of American households have dogs. The average customer pays us $5K a year, and if you think that only the upper class can afford it – you’re mistaken. It’s true that our customer base is not exactly starving, but we have quite a few clients who just work full time and can’t take care of their dogs. We have customers using our services three times a day, and there are even some who use us upwards of 5 to 7 times a day, especially those with puppies.”
So what now? Although their operation is currently centered in New York – a healthy market with a dog population of over a million strong – Swifto’s set the following objectives to be met by years end: The Company expects to expand its services to Boston, Chicago and San Francisco. Additionally, according the First, Swifto expects to end the year with revenues exceeding $1M.
When asked whether Israel’s scent is also on Swifto’s radar: “Of course! I give it an estimated two years or so. Israel will be the first country we enter after reaching all the major cities in the US.”