Venture capital firm 83North announced today that it had received commitments totaling $550 million for its sixth fund. 83North, which operates from offices in London and Tel Aviv, describes itself as an investor in startups led by Israeli and European entrepreneurs that are active all over the world in a variety of technological fields from fintech to robotics to healthcare. Investments have already been made from the new fund that have not been disclosed.
83North's sixth fund will be the second largest single venture capital fund raised in Israel, excluding private equity funds, which invest in mature companies. The largest fund ever raised in Israel was aMoon's second fund, which invests in life sciences startups. aMoon, run by Marius Nacht and Dr. Yair Schindel, closed the fund at $750 million last year.
Back to the dot.com bubble days
In 2000, Pitango (then called Polaris) raised a $500 million fund, and JVP raised a $427 million fund. But then the dot.com bubble burst, since when Israeli venture capital firms have mostly made do with much lower amounts, at least until recently. Up until now, 83North itself has raised funds of $200-300 million, and in an interview Laurel Bowden, a partner at the firm, described that fund size as ideal for giving investors good returns.
The size of 83North's new fund is a expressive of the big money that has been flowing to the technology sector in Israel and globally during the coronavirus pandemic, in the hope of high returns in the light of the accelerated digital transformation that the world is undergoing and the boom in technology stocks. The fund looks especially large when one considers that the firm specializes in fairly early-stage investments, in A and B rounds, although it does also make investments at later stages.
All the same, the large fund is to a large extent a necessity for 83North at this time, to enable it to adapt to a period in which startups are raising more money even at early stages, and to compete with aggressive, global players with huge financial clout such as Insight Partners of the US, which is very active in the Israeli market.
83North was founded in 2006 under the name Greylock Israel. It rebranded in 2015 under the current name, which refers to the latitudes of Tel Aviv (32) and London (51), the two cities from which, as mentioned, the firm operates. Besides Bowden, a South African resident in London, the firm has three Israeli investor partners: Arnon Dinur, Gil Goren, and Yoram Snir. The investors behind 83North are investment funds of universities and family offices, that have been with the firm since it started out.
83North reports that it has over $1.8 billion under management. This puts it in the top rank of venture capital firms active in Israel, after Viola Group and Pitango, and close to JVP, which manages $1.5 billion but which is raising $450 million for a large fund of its own. 83North, however, only makes about half its investments in Israel, the rest being in Europe, which distinguishes its profile from that of the other Israeli firms.
"It's better to be an entrepreneur than an investor"
According to 83North's figures, the firm has so far invested in over 80 companies, of which 21 have made exits and 12 have reached unicorn status, that is, a valuation of over $1 billion. Among its most prominent investees are Israeli fintech company Payoneer, smart transport startup Via, Finnish food ordering company Wolt, and app advertising platform ironSource. Less successful investments by the firm in the past include for example Dov Moran's cellphone company Modu, which closed in 2011, and price comparison company mySupermarket, which was sold for a few hundred thousand dollars last year.
Talking to "Globes", Arnon Dinur briefly commented on the current boom in the global and Israeli technology markets.
Globes: We're seeing very high startup valuations. Is it worth investing?
Dinur: "When you build a startup for 10-15 years, you ignore the market situation. If you invest in the right company, the price isn't the most important thing. First and foremost, we invest in people and technology. It's preferable for the price to be good, but if you find a cure for cancer, I'll invest in you right now. Our aim is not to wait for the price to be low, but to invest in the right company."
Are the valuations and multiples that we are seeing inflated in your view?
"There's a great deal of money in the market, and the multiples are high. It starts in the public market and trickles down. On the other hand, the level of technology and the difference it is making is crazy. There's no doubt that it's better to be an entrepreneur than an investor these days, and I see that as something wonderful, even if investment is my profession. I think that the people changing the world are entrepreneurs, not investors, so it's great that the power is on their side. They are the ones developing drugs, milk and meat alternatives, and cyber technologies."
Published by Globes, Israel business news - en.globes.co.il - on May 19, 2021
© Copyright of Globes Publisher Itonut (1983) Ltd. 2021