Funding in Israel - What do local ecosystem investors are looking for

Funding in Israel - What do local ecosystem investors are looking for?

BackgroundYariv Levski

• 15 Years of Business Development, Marketing and management in 4 industries: Television, Telecom, Payment and now Digital Health

• Consulted foreign investors re investments in Israel• Former Board of Directors – TVTak (acquired), Appforma and Tekoia

• Current: CEO of Second Opinion Group

Background – Current Market Trends (Investors Market)

Thinking like an investor – chasing Unicorns

Questions Investors Ask

Ideal narrative (and pattern) investors like

Great ways to ‘turn-off’ investors

The good news are..

September 2015

2015 was great year for Israeli Startups

If an Alien would arrive Tel Aviv these days, he (or she) would think that it’s very easy for a startup to

raise money from investors, right?

In recent years,

3000+ startups try to raise money every year,

800-900 succeed (less than 30%)

only 150 would succeed in next round (17%)

BTW,

What is the most common reason for startups not succeeding in next

round?

Main Reason – not reaching a significant milestone

From investor’s point of view:

Yes, there are more opportunities

So It means

I have to be more selective!

AngelExpect to return

X3-X5 on his investment

Past – Idea phaseNow – product phase, maybe even revenue

Invest in early stages, most risky

phase

VCExpect to return

10X on their investments

Past – product phaseNow – Revenue Phase

Interested in decreasing their risk

Which phase are you?

Which kind of investors are relevant to your venture?

And what those investors would look for?

Let’s try to think like investors






The good news are..

The goal – finding the next Unicorn*

before others

*Unicorn – 1B$ Valuation company

So, how do we recognize Unicorn ? Especially in its’ early stages?

A research by Shasta Ventures

32 Unicorns

What was common to all of them?

1. Easy to Dismiss ideas

By the time the startup reach 1B$ valuation,The idea is understood.

But it wasn’t the case before

Easy to Dismiss ideas

Driving Black cars?

Watching other people playing video games?

A disappearing message with a picture?

Renting someone else’s couch at home?

2. Competitive Markets

Surprisingly, Unicorns started in hyper competitive markets

3. Reinventing existing consumer behavior

Not innovative, but improving an existing consumer behavior

4. Untested Founders

Not without experience at all, but 75% of the founders were first time founders

5. Zero Monetization

Does the business model work?

No business model (yet)

The research conclusion:

There are large companies to be built by offering new, innovative and superior

customer experiences to large markets, regardless of how competitive the sector already is or how successful the founders

have been before.

As investor, does it mean that when I meet a venture with:

1. No revenue2. Easy to dismiss idea

3. Low innovation (evolution but not revolution)

4. Operate in competitive market5. First time founders

Should I invest?

It’s like finding a needleIn a haystack

So, what can I do?

(Like in other areas)

I search for patterns






The good news are..

General

1. What does the company do?2. What problem do they solve?3. Market potential

*The idea is that when you solve an existing problem, you don’t need to educate the market

* 5B$-10B$ market size

Team

1. Do the team member know each other?2. What is their motivation (money?

changing the world?

Product

1. Do users love your product? Daily average use? Monthly?

2. What are the milestones?3. Is the product unique? Chances for IP?

Competition

1. How does the market look like? How would it look in 5 years? 10 years?

2. Planned market share?3. What’s your unique

point of value?

Marketing and Customer Acquisition

1. What’s the CAC?2. What’s the TLV?3. Does the economics work?4. Traction (downloads, daily behavior,

revenue)

Risks

1. Company main risks factors2. How can you decrease the risks?

More..

1. Business Plan2. Size round and what would you achieve

(milestones)3. What’s the round valuation






The good news are..

Example

1. Team – served together in the army or worked in the same R&D group

(It means that they have history and know how to get a long)2. The problem they solve – ideally experienced it as users3. The value proposition is understood4. Development has started. You can show Alpha, even better Beta, even better commercial version

5. There is a momentum (train is leaving the station)

What does it mean – the train is leaving the station?

Even if the investor, (especially angels)Likes the idea, team, product

His initial motivation is to keep his money in the bank.

You need to motivate him to actually invest (and saying – “we are meeting other

investors” doesn’t work ..)

Train is leaving the station

It means that you’re in progress,And soon the train is leaving and it would be too

late - To join






The good news are..

NDA

“Please sign our NDA”

(So, you want me to trust you with my money, but you don’t trust me?..)

Exit Model

“We believe Google is a potential buyer”

)But be ready to answer)

Competition

We don’t have competition (Well, is it a good sign?)

Team

“We know each other for couple of weeks,

but the chemistry is great (until now)"

Funding

“Once we would receive it, we would plan what to do with it”

(That’s not a good sign as well, right?)






The good news are..

The good news:

It’s really easy (and cheap) to develop a prototype. It cost more to develop a Beta – but still affordable.

Israel is a great market to develop Digital Health products (Great HMO, great health system, great doctors and more)

Foreign investors are here – it’s a global market!

Thanks!

Yariv Levski

Funding in Israel - What do local ecosystem investors are looking for

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