Meron Capital secures $50 million for its second fund, Meron II, which will focus on investing in Pre-Seed and Seed rounds of Israeli led startups. The second fund, like the first one, will cover startups developing software solutions for enterprise, cyber, FinTech, DevOps, and digital health.
A conflict of interest between large funds and entrepreneurs
Meron II plans on investing in 18-20 startups, with each check moving between $500,000 and $2.5 million. As much as $35 million of the total has already been raised and 4 investments have already been made by Meron Capital’s second fund: Laminar, developing data security and privacy technologies; LendAI is operating in the mortgage industry; Sorbet, which helps employees take their vacation days, or convert them into cash; and FinTech company Firmbase.
Meron Capital was founded by Managing Partner Liron Azrielant, who previously led investments at Blumberg Capital, and graduated from MIT's LGO dual degree program with a computer science and electrical engineering Masters and an MBA and was the youngest-ever applicant accepted. Meron’s second founder - Daniel Roditi - was born and raised in Switzerland, and joined forces with Liron after moving to Israel in 2015 and working at Blumberg Capital as well.
Meron Capital’s Liron Azrielant says that the size of the fund determines the number of portfolio startup exits needed to succeed. This allows her to set expectations with the entrepreneurs in which she invests: “We, as a smaller fund, have a more natural alignment of interests with our entrepreneurs. Funds which raised hundreds of millions of dollars find themselves forcing the entrepreneurs to shoot for the moon or burn out trying. Obviously we want to encourage growth, but we don’t have a conflict of interests with the founders. For us, even a startup exit that lands $10 million for the entrepreneur and $20-$25 million for the fund is a major celebration for both parties. These acquisitions often mean life-changing money for the founders, but for large funds they rarely even blip on their radar. This is why many times these types of investors are incentivized to push founders to give up on opportunities.”
We see a lot of capital in the market; Insane valuations, IPOs, SPACs, mega-rounds, but these are all targeted at later stage startups. Leaving Seed and Pre-Seed companies stuck in the mud - unless they were founded by serial entrepreneurs. Doesn’t this create a problem for new ventures?
Azrielant: “True, there is a lot of money in the market for mature startups, and this is exactly the opportunity we have found in the early stage companies. Our job is to identify successful startups at the Pre-Seed and Seed levels, and provide them with the financing and support they need to scale, where a plethora of opportunities wait. We identify potential in entrepreneurs by getting to know them and their abilities, and not necessarily relying on past experience. For example -- many of our success stories, like Clear Genetics (acquired for $50 million in less than 2 years) and Immunai (raised over $80 million), and others, were founded by brilliant entrepreneurs on their first startup.”
Meron Capital’s first fund, which also totaled $50 million and was launched in 2017, invested in 16 startups and marked 4 portfolio acquisitions: Clear Genetics’ $50 million exit brought back x6 ROI for Meron; Loom Systems, which raised $15 million and was acquired by ServiceNow for $75 million, tripled Meron’s initial investment; Twitter’s acqui-hire of Reshuffle; and more recently Dutch giant Planon acquired Axonize, which develops an IoT platform for smart buildings.
We’ve also noticed, over the last few weeks, an exponential rise in news about startups led by women. Do you think this is a coincidence or is this the new normal?
Azrielant: “Definitely the new normal! When I was young, my grandfather (who was pretty progressive at the time…) would ask me “when will you bring home the Mercedes?” -- referring to the award for the national beauty pageant (which I remember was actually a Suzuki). At the time, I paid no thought to it, but when my brother grew up, he would ask him about his future as a lawyer or engineer, and that’s when I started noticing the differences in expectations.”
We’ve been aware of these problems for years. Opening more opportunities for women is starting to show its signs, and now I think we are finally just starting to reap the fruits. Beyond this, as we have more and more successful representation in the market, this provides young women with the examples they need to embark on the entrepreneurial journey. So, I think we’ll see many more down the road. And I see the trend covering the world of venture capital in the near future too.”