"One of the biggest changes that has taken place in Israel's ecosystem in the past decade is by the venture capital funds supporting high tech companies. Most of the Israeli venture capital funds that were around 15 years ago no longer exist and that's just as well," Micha Kaufman, CEO of gig economy platform Fiverr International (NYSE: FVRR), which held a Wall Street IPO this year at a company valuation of $650 million, told a conference on Monday. The conference was organized by the Fusion LA, an accelerator program for Israel startups in Los Angeles and Pearl Cohen Zedek Latzer Baratz law firm.
"The veteran venture capital funds that are no longer on the map were very focused on the short term and did not have the stamina to take companies on for further financing rounds. Very often they got in the way of entrepreneurs who wanted to raise money in further financing rounds and ultimately they weakened them. It's a good thing that that generation is no longer here. Their departure and the entrance of strong foreign funds and local funds with more distant horizons have changed for the better our ability to think ahead."
Kaufman also spoke about the information revolution that according to him has had a major influence on the high tech sector. "Alongside this, the availability of information and content has become much bigger. When I started my entrepreneurial journey 20 years ago, there wasn't a single book about entrepreneurship and that's without mentioning blogs or Google. Nothing. I was clueless. In contrast, during the IPO process, which we began two years ago, there was so much from whom to learn following the information revolution. There are no few Israeli companies that have done it, and if someone is thinking about an IPO in the next few years, then talk to me. We have a lot of information to give them and there are many ways to shorten procedures, and if we hadn't done that, then we would have worked much harder than we did."
"Everything has changed. Today 22 year-olds come to us and they already know what it took me until I was 35 to learn. It's scary. You feel like a dinosaur and irrelevant after just five years from today. It is this information that has made the biggest revolution. Money is in second place and together they have changed everything that we see here in recent years."
On the panel, which was chaired by Qumra Capital growth fund managing partner Erez Shachar, Eynat Guez also participated. She is CEO of global payroll solutions developer Papaya Global, which recently raised $45 million led by US venture capital funds Insight Partners and Bessamer Venture Partners. Guez said that, "The most outstanding change that has happened here in recent years is that it has already become impossible to tell entrepreneurs or CEOs what to do. If three years ago, everybody would ask me if I needed to move to the US because I need to move there and the American funds won't invest in me if I'm not there, the situation has changed. All attempts to teach you or force all types of rules of the game on you are no longer relevant, because ultimately the market has changed and even though the companies operate abroad and they have US investors, at the end of the day the managers are based in Israel and that can be successful in all sorts of ways. The CEOs know what's right for them and their company and how to do it, and there is no point in forcing spurious things on them in order to make them successful."
Adv. Guy Lachmann, senior partner in Pearl Cohen's Hi-Tech Group spoke about the changes that took place in the high tech industry in 2019 and the anticipated trends for 2020. He said, "We see more and more new players coming into the market and bringing with them large sums of money in the early stages, which together with additional processes are bringing more and more local startups closer to their US counterparts. We are talking about sums of money that are generally acceptable to see in Palo Alto and we never imagined that they would also come to Israel. Despite the growth in financing rounds, they are still low compared with Silicon Valley and Israeli companies are still being underpriced."
In his forecast for the coming year, Adv. Lachmann said that in his opinion, the hottest high tech sectors would be digital health and agro-tech. He added that, "German and Japanese companies are investing large amounts in Israel in unique ways not usually seen in financial deals, and already from the first day we are seeing discussions on the terms of the exit and what will happen when the hoped for exit is reached."
Published by Globes, Israel business news - en.globes.co.il - on January 2, 2020
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