Insight Partners: Transforming Israeli startups into unicorns

Jeff Horing  / Photo:  flickr
Jeff Horing / Photo: flickr

With holdings in Israeli unicorns JFrog, Sisense, Lightricks and WalkMe and the recent acquisition of control in Armis at a $1.1 billion valuation, Insight has emerged as the king of Israeli tech.

In late October, US fund Insight Partners held an event in Jaffa. 150 tech industry personalities participated, mainly entrepreneurs and venture capital investors. The guest of honor was Insight cofounder and managing director Jeff Horing, who has been responsible for several of the most outstanding and intriguing deals in Israeli tech in recent years. In addition to good food and a performance by Netta Barzilai, there was also a small improvised ceremony in which Horing was awarded a paper crown by Avishai Abrahami and Roy Mann, respective cofounders and CEOs of Wix and, two companies in which Insight invested. Despite the flippancy, its meaning was clear - Horing is gradually becoming the indisputable king of Israeli tech.

Some may not agree with this title, or think that it is an exaggeration, but it is clear to anyone following the local startup industry that Insight's actions in Israel - the character. structure, and size of its deals - are very impressive, and are doing much to change the industry. A partial list: the acquisition of a controlling interest in cybersecurity company Armis at a company valuation of $1.1 billion, a deal that was closed earlier this month; the acquisition of the companies portfolio of Genesis Partners for hundreds of millions of dollars; and holdings in Israeli unicorns (private companies with a value of over $1 billion), such as JFrog, Sisense, Lightricks, and WalkMe, plus other promising companies.

Unusual acquisition of Genesis Partners' portfolio

"When Insight calls you, you don't ignore it; you go to meet with them," says a venture capital investor who chooses to remain anonymous. "They have a great team that calls companies and keeps in touch with them. What's special about them is that they are among the few concerns spread all over the spectrum, from investment in the early stages to private equity (a fund that invests in mature private companies), with almost the same people. Jeff can talk about an A round in a company with $1 million in revenue, and then acquire control of Armis."

Insight now manages the colossal sum of $23 billion. Over $6 billion of this is managed in Fund X, its tenth and most recent fund, which was closed in late 2018. The fact that Insight is a large fund requires it to make a lot of deals, and makes it capable of writing larger checks than most of the funds competing with it for each deal.

Horing previously said that investments of millions or tens of millions have no significant effect on the fund's bottom line. "When we write checks to relatively small growth companies, we don't care about the risk. The most we can lose is the check itself, so we can invest our efforts in helping companies achieve success. For a smaller fund, a $25 million check might really make a difference - it can be important for its returns," he said in an interview on's Startup for Startup podcast. "We have a lot of investments in which we get a multiple of ten on the investment, but these are investments in people. We gamble mainly on a product, a market, and a good match between the company and the market, because we have data to support it."

Horing also talked in the podcast about the fund's investors doubting its decision to invest in smaller companies, because although the amounts of money involved in each investment are smaller, the deals are riskier and their success is not guaranteed. He said that the process with the fund's investors in this context was similar to the process that entrepreneurs go through with their investors. "Since we had to explain this to our investors, we could really look at this as a strategy, not just an asset - we realized that we had to organize the entire business around this strength (the size of the fund, O.Z., Y.Y.), rather than defending it as a weakness." Insight does not want to settle for 10-15% of the company's shares; it makes efforts to increase its holdings in startups by purchasing shares from existing shareholders (secondary deals). Startups regard the fact that it provides liquidity to employees and shareholders in the early stages as an advantage.

The desire to increase its holdings was also the starting point for the deal with Genesis, in which Insight acquired that fund's portfolio of companies, except for one company (holdings in a total of eleven companies). Insight wanted to increase its holdings in three companies in which Genesis also invested (Sisense,, and Joytunes) by acquiring Genesis's shares, but the veteran Israeli fund offered a broader deal. These practices are likely to lead Insight to take over the companies' boards of directors, but the market says that Insight is regarded as a friendly investor that does not throw its weight around in board meetings.

The market also says that Insight is regarded as a persistent competitor for deals, which results in generous company valuations in its deals. "The valuation that Insight gave for Armis is high, and is not necessarily based on current performance, but on future projections," says a venture capital investor who prefers to remain anonymous. "In other deals also, the fund invests at the upper bound of a reasonable valuation." One of the entrepreneurs in whom Insight invested told "Globes," "While other investors tried to lower the company valuation in negotiations in order to protect themselves, Jeff looked only at the opportunity. He's a winner. Behind this is also a very thorough analysis."

In answer to questions that "Globes" asked the fund, Insight partner Teddie Wardi wrote, "Today's software market is the biggest ever, and the market's next generation companies will be even bigger. We're very selective in choosing our investments, and we're capable of assessing their future growth potential. A number of factors were taken into account in the valuation - we're growth and momentum investors, and adapt ourselves to the growth expectations. We believe that our valuations match those of the market."

They opened a limited branch in Israel

Horing founded Insight in 1995 together with Jerry Murdoch, who managed the fund until 2011, and is now a consultant to the fund. Horing graduated the Massachusetts Institute of Technology (MIT). Before founding Insight, he worked at Goldman Sachs and Pincus Warburg, where he invested in technology companies. After the fund grew, together with the checks it was writing for companies, Horing chose to leave in order to continue making $5-10 million investments in small companies. This was the period before the collapse of the bubble, and Insight had many exits. By 2000, it had raised four funds. The first was only $1 million, which grew to $700 million in the fourth fund. The deflating of the bubble caused heavy losses on the first investments by the fourth fund, but Insights practiced patience, and carried the fund for three-to-four years. Waiting for the market to recover enabled the fund to make a number of successful investments in 2003-2004, and to raise another fund.

Insight, which has been investing in Israel for 15 years, hesitated about whether to put a local partner here, as other US funds like Sequoia Capital, Lightspeed Venture Partners, and others have done, but decided against it. The partners, including Horing, visit Israel several times a year for board meetings and meetings with startups. In December, the fund decided for the first time to retain a permanent representative in Israel, Daniel Aronovitz, who has been working at Insight since 2014, and until recently was an associate (a relatively junior employee on the investment team). With his move to Israel, Aronovitz was promoted to VP responsible for managing the fund's Israeli office.

A post on Insight's blog after the announcement of the Israeli office's opening stated that it was the fund's "first global office," as if to give notice that additional global offices would be opened. "Innovation centers outside Silicon Valley were always a focus of interest for Insight, and the fund recognizes that in order to find the best software solutions, it is necessary to search globally," the post states.

Insight operated only in the US until recently, but from its partners' perspective, this will not make them miss out on investments. The founders of Armis recently told "Globes" that the connection with Insight was created around the company's most recent financing round in April. "Insight called us many times asking to participate in the financing round, and we told them no, because the round had already been closed, so they simply showed up in front of our door in Palo Alto and said, 'We're here. Won't you talk to us?'," Armis cofounder and CEO Yevgeny Dibrov told "Globes."

This story is typical of Insight's aggressiveness in going after deals. "Jeff makes the deals he wants to. He's good; he doesn't give up," an industry source who prefers to remain anonymous told "Globes." Horing himself previously said that there were a few deals each year that he considered "amazing," and he would move mountains in order to make them.

Insight does not encourage entrepreneurs to move to the US

In recent years, the fund began investing in earlier stages, similar to other growth funds, because of the growing competition in investment in growth companies. Market sources say that this trend is expected to continue, and that funds specializing in investments in early-stage startups are worried about it. "Insight is scaring the funds, because it is attractive and competitive, and its entry into earlier stages will influence other funds. It also moves quickly - it can close an investment in two or three weeks," says an industry source.

At the same time, Insight is also expanding in the opposite direction, and a prominent part of its strategy in recent years has been takeovers of relatively large companies. This happened twice in Israel, with Armis and Checkmarx, in which control was acquired at a valuation of $100 million. Dibrov recently told "Globes," "Horing's vision is to become 'Softbank done right' - to make very large investments in companies that are growing very rapidly in strategic sectors. If he thinks that a company can reach a $10 billion value, why should he hold only 10%? He wants to hold 80-90%."

"Our funds are relatively large, which gives us the possibility of helping companies on an extraordinary growth track to grow, and guaranteeing that they realize their growth potential. Armis is a good example of this," Wardi says. "We can also offer entrepreneurs another alternative - not just a financing round or a sale to a strategic buyer, but another option - acquisition of control, which combines the advantages of the first two options." The fund did not comment specifically on the comparison to Softbank, but Wardi wrote on another occasion, "We don't believe that raising money in itself can differentiate startups or constitute a moat for them (to fortify control in them, O.Z.). The purpose of a financing round is only to support a good business model."

In contrast to acquisition by a strategic buyer, for example companies like Google and Microsoft, acquisition by Insight allows the company to operate independently, until the fund decides to sell its investment through an offering or exit. Another example is the acquisitions of Swiss data company Veeam for $5 billion, which Insight announced a few days after acquiring Armis. In contrast to Armis, Veeam's founders announced that they would leave the company following the acquisition.

Insight began its strategy of takeover deals in 2015, when it raised two funds: an ordinary $5 billion fund and a $1.5 billion fund for acquisition and takeover deals in growth companies. Insight is now integrating its takeover strategy in its main fund, and the money raised for its recent fund in late 2018 is designate for both investments and takeover acquisitions.

"$6 billion seems like a lot of money, but I think that we don't have enough money. We spend most Monday mornings arguing about which companies should pass the selection, and many of those that don't pass raise money from excellent investors, so our selection isn't perfect," Horing said in the podcast. "There's a big advantage in looking at our mistakes, both in the checks you wrote and those that you didn't write. For example, I used to have a partner whose problem was that he was far too conservative in his investments, and many companies he let go past him proved in retrospect to be excellent deals. We could have been a much bigger company today had we participated in those deals. These are mainly takeover deals, but we were much too conservative to make them."

Insight helps improve the companies in which it invests, and acquiring control enables it to do this much more thoroughly. It helps companies improve their operational set-up, pricing, access to the market and customers, etc. The fund does this through a team with 50 employees in New York called OnSite, whose sole function is to create value for the fund's portfolio companies and support their growth. The team is divided into sections that operate like teams of growth companies: a development team, a product team, a marketing team, a sales team, a talent recruiting team, a business development team, and a strategy and mergers team. When a company gets an investment from the fund, it receives access to these teams, each of which provides high-intensity help to the corresponding team in the company, and helps it formulate a growth strategy, set targets, and understand how to achieve them.

In contrast to many other US investors, Insight puts no special emphasis on moving management of its portfolio companies to the US. In many cases, it even opposes this, among other things because of the intense competition for employees in Silicon Valley. "Insight realized that there are many companies here that have reached very advanced stages with CEOs and the team in Israel. In the past, they would have moved to the US and raised money from a US fund, but Insight tells them, 'There's no problem; stay in Israel'," says another venture capital investor. "I'm surprised that no US fund came here before and collected all of the mature companies here. There were funds that came here, but they did not operate as systematically as Insight."

Insight is known for using a model of inside sales, remote telephone sales, and it helps companies grow by utilizing this model. The idea behind it is that you don't have to move the CEO and the marketing sales headquarters to the US in order to be close to the market, because you can get very large sales and close deals remotely via telephone and Internet. The fund's reputation and that of this approach to sales highlight the idea that you can go far by using business insights and data, in contrast to business based on proximity and a personal connection. The firm's headquarters is in New York, away from most of the US tech industry, rather than in Silicon Valley, which also accounts for some of its special character.

Published by Globes, Israel business news - - on January 21, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Jeff Horing  / Photo:  flickr
Jeff Horing / Photo: flickr
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