Will early stage and promising startups survive and grow during the war and after it? In an effort to ensure that the answer is positive for as many of these startups as possible, veteran entrepreneurs Chen Linchevski, Jason Wolf and Gil Friedlander have founded Iron Nation, an emergency fund for investment in early stage startups.
The initiative is supported by an exceptional team of senior figures in Israel's venture capital world including Pitango's Chemi Peres, SilverTech's Charlie Federrman, Viola's Danny Cohen, IGP Fund's Moshe Lichtman, MizMaa's Aaron Applbaum and Elah's Calanit Valfer, who all sit on Iron Nation's investment committee.
"Many startup entrepreneurs and management teams have been called up to the reserves from the start of the war. On the other hand, there are wonderful companies that were in the middle of financing rounds that have been frozen. This situation mainly hits young companies that have no long-term horizon for survival," explains Friedlander.
"In addition, many companies were waiting until after the holidays to close funding rounds and the war caught all of them with their trousers down. The risk level of the Israeli economy rose and the perception of foreign funds that look purely economically was to either get out of Israel, or freeze processes and let things clear up. Therefore, the idea has been to set up an emergency venture capital fund, which would raise money from investors and invest in companies that were directly affected by the war."
Friedlander adds that the fund is seeking startups that deserve to exist, with the investment undertaken using the SAFE model. "We invest between $500,000 and $1.5 million, without talking about a valuation. We also don't want to take advantage of the situation, and lower the valuation. We will determine this in the next round for these companies, and in return we will receive a 20% discount on their valuation at that time.
Friedlander thinks that the fund not only benefits the companies but also represents an opportunity for investors. He says, "There aren't many venture capital funds that don't take management fees and with us 100% of the profits are returned to investors. Moreover, we have gathered together the finest people in the venture capital industry in Israel and in the US and they are responsible for conducting due diligence." Another point is that the Israel Innovation Authority matches all contributions to the fund so that every contribution doubles itself.
So far the fund has been approached by 625 companies and the plan is to invest in 30 of them and within a few weeks the first companies will be announced. "We are in talks with Israeli institutions with the idea that perhaps they too will join this move," says Friedlander.
He continues, "This began as a domestic initiative but Israeli high-tech is global. In terms of segmentation of the current investors 50% are from North America, 25% from Israel and 25% are divided between Australia, South America and Europe."
Published by Globes, Israel business news - en.globes.co.il - on December 13, 2023.
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