Israel's unicorn hunters

"Globes" surveys the Israeli venture capital funds with the most portfolio companies valued at $1 billion or more.

Israel's biggest unicorn backers The funds leading the pack: Viola Ventures and Aleph Ophir Dor Which Israeli funds are best at hunting unicorns? A "Globes" survey examines who these Israeli venture capital funds are and which ones identified early stage start-ups that later became billion dollar unicorns. The survey covers over 60 companies that became unicorns in private fundraising rounds, public offerings, or acquisitions in 2019-2022, and identifies those Israeli funds that made early stage investments (Seed, A and B rounds).

It's definitely not easy to spot a start-up with unicorn potential early in the game. A 2015 study published by CB Insights reviewed the fate of 1,405 start-ups that had raised initial funding six years earlier. The study found that only 1.28% of those start-ups eventually became unicorns. This proportion ratio should probably be reexamined in this current period of unprecedented inflation in tech company valuations, but even in boom times like these, only one among dozens of start-ups that raise initial funding will ever achieve coveted unicorn status.

Hunting for potential

According to the "Globes" survey, two Israeli funds scored the highest in identifying Israeli unicorns: Viola Ventures and Aleph. The portfolios of these two funds include six start-ups that reached valuations of over $1 billion in the last two and a half years. Aleph, it should be said, achieved this figure in far less time than Viola Ventures. Viola is a long-standing fund founded in 2000, while Aleph was established only in 2013.

Obviously, early investment in start-ups that will become unicorns later on requires a good eye for identifying potential that others do not see. Israeli high-tech is full of stories about start-ups that were rejected by fund after fund, until one came along that took a chance and later reaped the rewards. Roy Mann, one of the two founders of, has said that his start-up failed to raise money from almost every investor in Israel, until he got to Avi Eyal from Entrée Capital. Last month, went public on Wall Street at a $6.8 billion valuation

Identifying potential, however, is not always the key issue. In many cases, and especially when it comes to experienced entrepreneurs with successful records, the significant element is the ability to win the investment deal, and beat the competing funds also striving to inject money into a venture with potential. Winning can result from a better financial offer, speed of response, and also the ability to connect with entrepreneurs and persuade them of the added value that the fund can provide.

The competition for deals is, of course, not only between Israeli funds, but also against foreign funds. Previously, Israeli venture capital funds were known to have the advantage of early identification of start-ups thanks to proximity, but this has also changed, as foreign funds, many of which operate offices in Israel with local partners, have begun investing in the initial stages.

In fact, a review of the investors in a series of successful Israeli start-ups reveals that, in many cases, Israeli funds are almost completely absent from the list. For example, on SentinelOne's long list of investors, after last week's huge $9 billion IPO, only one early Israeli investor (Upwest) could be found. Start-up Gong, which raised $250 million in private funding at a record $7.2 billion valuation last month, has no Israeli funds at all on its investor list.

Double-digit returns

When an early-stage investment, against all odds, becomes a unicorn, the result can be very rewarding for the fund and yield a high double-digit return, even after the dilutions along the way. Viola Ventures invested $20 million in IronSource and has now posted a 50-fold return in the company's IPO at a valuation of $11.1 billion. Viola, through its growth fund, invested $75 million in SimilarWeb, which also recently went public. This investment was made at a later stage and at the end of the day yielded a more modest 3X multiple on the money. (As this is a later-stage investment by Viola, it was not included in the current survey).

Following Viola Ventures and Aleph, three Israeli funds occupy the next places with four unicorn bullseyes apiece. The first is Pitango, one of Israel's oldest funds, established in 1993. In Pitango’s case, the investment in one of its hits, ForeScout, goes a very long way back.

Another veteran fund with four wins to its credit is Vertex, which began operating in 1997. All four Vertex unicorns are new and attained their status only in the last year. The youngest fund to score four wins is Entree Capital, which only began operations in 2009 and was, as mentioned, the initial investor in

Two other funds that have scored four times are Genesis Partners and Gemini Israel Ventures. These funds, however, are not making more new investments (Genesis even sold its holdings to US VC firm Insight Partners), and so in the end we decided not to include them in the final ranking. Both funds could potentially reach five or six wins, as several more of their investments are on the verge of becoming billion-dollar public companies through SPAC mergers. In Genesis's case, these are chip company Valens and digital advertising company Innovid, and in Gemini's case, auto-tech company Autotalks.

After the leaders, with three wins each, is an interesting group of funds that are either Israeli or have close connections to Israel. BRM Capital became famous when brothers Nir and Eli Barkat made an initial $150,000 investment in Check Point Software Technologies Ltd. (Nasdaq: CHKP), an investment that would become especially profitable over the years. BRM recently scored three wins, thanks to investments in Moovit (which was sold to Intel last year for about $1 billion), Amnon Shashua's OrCam, and eToro, which is expected to go public soon through a huge SPAC merger.

Group 11 and Zeev Ventures also scored three wins. These two funds were established by Israelis living in the US, Dovi Frances (of Group 11) and Oren Zeev. Both often invest, one after the other, in the same companies. Frances' Group 11 invested in another Israeli start-up that became a unicorn, Eynat Guez's Papaya Global, but since this investment was made post- Round B, it was not included in our ranking. Oren Zeev invested privately in Israeli-American unicorn Houza, founded by Israelis Adi Tatarko and Alon Cohen, but as this investment was not made through the fund, it was not included in the ranking.

What is an Israeli company?

One of the biggest difficulties in building this sort of rating is defining what an Israeli company is. Both Group 11 and Zeev Ventures are invested in, among other things, TripActions. Although the company was founded by Israeli entrepreneurs, its activities are US-based and until recently it had no local presence at all. We therefore did not include it in the ranking. However, we did decide to rank Sunbit, which is also an American company, because of the significant local presence of its founders and its Israeli development center.

Israeli funds have been involved in many unicorns whose local connection is even more remote. 83North (formerly Greylock Israel) has invested in four Israeli unicorns according to our survey, but because it sold its holdings in two of them, IronSource and Payoneer, back in 2019, and missed out on their current IPOs, it was not included at the top of our final list.

However, 83North makes only half of its investments in Israel, on average, with the rest in Europe, where it has invested in a number of other unicorns, such as payment platform Marqeta, which went public this year at a $15 billion valuation. Other Israeli funds such as Entree Capital and Pitango have also invested in non-Israeli unicorns, some of which involve Israelis operating abroad and others that are not related to Israel at all. Aleph also invested in WeWork, founded by Adam Neumann, but it too does not meet the definition of an Israeli company.

The list does not include Israeli funds specializing in later stage investments such as Qumra Capital, for example. Vintage Investment Partners is also invested in a large number of Israeli unicorns, but for the most part it entered after the first rounds. Erel Margalit's veteran JVP fund also did not make the top list, as in total it registers only one win with an Israeli unicorn (Earnix).

Most of the unicorns in question are still "on paper" - but not all. Over the past year, a record number of Israeli IPOs took place on Wall Street, allowing the funds to realize their holdings in Israeli unicorns at a profit.

At the same time, Israeli funds like YL Ventures and CyberStarts decided for various reasons to sell all their holdings after the companies became unicorns. In this way, the funds took advantage of the generous pricing currently given to start-ups, in order to realize profits even before the exits and public offerings.

Veterans and newbies

Israeli venture capital funds are divided into older funds that belong to the founding generation of Israeli high-tech, and younger funds, born in the last decade after Israeli high-tech grew and developed. The "Globes" survey highlights the role played by the veteran funds; out of the top five that identified unicorns, three are old-timers (Viola, Vertex and Pitango), and only two are newcomers (Aleph and Entrée Capital).

But this comparison is misleading, as the veteran funds are still reaping some fruits of investments made many years ago. One notable example is Viola Ventures, where at least two of its now-lucrative investments, Payoneer and Outbrain, were made in 2008 and 2009.

Do the veteran funds really dominate the market today? If we had looked only at investments made in the last seven years - an acceptable period of time for creating unicorns - the list would have been slightly different. The older funds like Viola and Pitango (with two wins each) would have weaker rankings, compared with younger funds like TLV Partners for example - proving the neck-and-neck generational struggle between the new and the old in the Israeli investment world.

How did the ranking work?

The current ranking is based on a list of about 60 Israeli technology companies that raised funding, were floated, or were acquired at valuations of $1 billion or more during 2019-2021. The list was created based on data from the IVC Research Center, which analyzes publicly available information.

The ranking did not include companies that are expected to make IPOs at valuations exceeding $1 billion, but where the process has not yet been completed. The definition of an Israeli technology company has always been tricky, and we have only included those companies established by Israelis with a significant presence in Israel.

The funds examined in the current survey are Israeli funds or funds with a strong affinity with Israel. Funds that are inactive and have not made new investments were not taken into account. The ranking does not include foreign funds, even if they have offices in Israel with local partners.

In order to adhere to the definition of "first to discover", only investments made in Seed, A and B rounds were taken into account, and not investments made at later stages. Funds with investments in unicorns sold in the past were not taken into account.

6 unicorns: Honeybook, JoyTunes, Lemonade, Bringg, NextSilicon, Melio
Founded: 2013
Capital under management: $550 million
Partners: Michael Eisenberg, Eden Shochat, Yael Elad, Aaron Rosenson, Tomer Diari

Viola Ventures
6 unicorns: Payoneer, Outbrain, IronSource, Redis Labs, Verbit, Lightricks
Founded: 2000
Capital under management: $1.5 billion
Partners: Shlomo Dovrat, Avi Zeevi, Ronen Nir, Daniel Cohen, Omry Ben David, Zvika Orron

4 unicorns: AppsFlyer, Via Transportation, DriveNets, ForeScout
Founded: 1993
Capital under management: $2.5 billion Partners: Chemi Peres, Rami Kalish, Eyal Niv, Ayal Itzkovitz, Isaac Hillel, Ittai Harel, Zeev Binman, Aaron Mankovski, Guy Ezekiel, Yair Cassuto, Idit Muallem, Gad Huldai

4 unicorns: Verbit, Axonius, Innoviz, Own{backup}
Founded: 1997
Capital under management: $1.2 billion
Partners: Aviad Ariel, Emanuel Timor, Yanai Oron, David Heller, Tami Bronner, Ran Gartenberg, Yoram Oron

Entrée Capital
4 unicorns:, Rapyd, Riskified, Fundbox
Founded: 2010
Capital under management: $650 million
Partners: Aviad Eyal, Ran Achituv, Eran Bielski, Adi Gozes

Published by Globes, Israel business news - - on July 18, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

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