Group 11, a venture capital fund headed by investor Dovi Frances, secured $120 million first closing for the firm’s fifth fund, and it only took 90 days. Dovi Frances tells Geektime that the new fund will provide unprecedented visibility, and his goal of being the top fintech investor.
“Rejuvenating relations with Israeli institutions”
A few major Israeli institutional investors joined Group 11’s fifth fund: Migdal Group, Harel Group, Menora Mivtachim, Mor, and more. For Frances, a former Israeli, this experience has rekindled his Israeli connection: “This is the first time that the major players join my fund. We’re rejuvenating relations with Israeli institutions, and it’s exciting as a former Israeli who invests heavily in Israeli tech, from far away.”
Back in December, Group 11 announced its plans to raise a 5th fund totaling $100 million, and after just 90 days, the over-subscribed ticket ballooned to $120 million, and counting: “It’s unusual, I’ve never seen anyone raise at this rate,” says Frances.
According to Frances, the fund’s performance places it among the Top-3 fintech investors - a catalyst that led to the oversubscription. Despite the fund not closing doors on additional capital, Frances doesn’t see Group 11 as an investing giant. “It’s not like the billion-dollar monster funds out there. We’re positioned to invest in areas that we want.”
Those “areas” that Frances refers to are primarily fintech ventures, which solve major problems troubling the financial industry. Frances adds that he prefers backing proven entrepreneurs, “who remember how to build and scale a startup.”
Group 11 places close to 70% of its investments in Israel-related ventures, with investments in Israeli startups, founders, or companies with R&D centers in Israel. “We tend to focus on startups that look to completely disrupt the “Legacy” companies market hold,” states Frances.
He says that the new fund will invest in early institutional funding rounds, with Group 11 leading most of the rounds. Although, the fund may also look inwards, and invest in its portfolio’s later rounds as well. “As long as the valuation makes sense, and I like the others participating in the round, it works. Look at the track record. Those numbers will significantly increase over the next few months. The method works.”
Fake Unicorns and the border between private and public
Group 11’s portfolio includes, among others, a few Israeli Unicorns, such as Next Insurance, Tipalti, and the group’s newcomer, Papaya Global, which just a few weeks ago raised $100 million at over a billion-dollar valuation. Despite Frances’ pride in his companies, he continues to warn against what he calls the “worrying signs” of the market: “You see fake Unicorns all the time. The valuation inflation makes it that the real Unicorns and fake ones look alike. On one side, there’s a real revolution, and on the other, relocation from the bonds market.”
Frances also likes to play both sides with his new fund. On on side he enjoys the advantages of a private firm, explaining that “there is something beautiful about not being exposed to the rise and fall of a stock,” however, on the other side, the fund will go public on the Tel Aviv Stock Exchange’s Tase Up arena, where it will be required to report earnings. “I’m not exposing our existence,” he explains, “we’re going hybrid. We remain a private entity and I don’t have to report my companies’ performance to the stock market… but participation units are tradable. It has never been done in the history of venture capital. The institutional investors can join the party.”
“I think it’s about time that the venture capital world starts playing outside its usual box. It’s time we allow our investors liquidity during the lifecycle of the fund, and not just many years later… I’ll report my performance quarterly, and investors can see how the portfolio progresses,” says Frances, who adds: “Show me one VC partner that reveals their performance. I’ll wait.”
While on the line talking with Frances, he texts me his funds’ IRR from 2012, with the most current (2019’s fund 4) TVPI sitting at X1.539, and the IRR at 89.51%. “Why doesn’t everyone do this? I’m proud to be visible, and I see this as a standard going forward.”
Saw success during COVID crisis lows
Frances is also critical of the VC funds that froze investments with the outbreak of the pandemic, and he claims to have made some of his best investments, like the Papaya Global one, during that time. Since then Einat Guez’s startup has raised another $140 million and joined the Unicorn club. “Do your frigging job,” Frances wrote on his Medium post to all the VCs who froze investments at the time.
He calls himself a “futurist, who envisions the fintech landscape over the next decade,” and claims that looking at periods of time over points in time is what has landed him where he is today and will guide him where he wants to go: “I want to be the world’s top fintech investor, and want Group 11 to lead fintech VCs around the world.”