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Funding in Israel - What do local ecosystem investors are looking for

Jan 23, 2018

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Page 1: Funding in Israel - What do local ecosystem investors are looking for
Page 2: Funding in Israel - What do local ecosystem investors are looking for

Funding in Israel - What do local ecosystem investors are looking for?

Page 3: Funding in Israel - What do local ecosystem investors are looking for

BackgroundYariv Levski

• 15 Years of Business Development, Marketing and management in 4 industries: Television, Telecom, Payment and now Digital Health

• Consulted foreign investors re investments in Israel• Former Board of Directors – TVTak (acquired), Appforma and Tekoia

• Current: CEO of Second Opinion Group

Page 4: Funding in Israel - What do local ecosystem investors are looking for

Background – Current Market Trends (Investors Market)

Thinking like an investor – chasing Unicorns

Questions Investors Ask

Ideal narrative (and pattern) investors like

Great ways to ‘turn-off’ investors

The good news are..

Page 5: Funding in Israel - What do local ecosystem investors are looking for

September 2015

2015 was great year for Israeli Startups

Page 6: Funding in Israel - What do local ecosystem investors are looking for

If an Alien would arrive Tel Aviv these days, he (or she) would think that it’s very easy for a startup to

raise money from investors, right?

Page 7: Funding in Israel - What do local ecosystem investors are looking for

In recent years,

3000+ startups try to raise money every year,

800-900 succeed (less than 30%)

only 150 would succeed in next round (17%)

Page 8: Funding in Israel - What do local ecosystem investors are looking for

BTW,

What is the most common reason for startups not succeeding in next

round?

Main Reason – not reaching a significant milestone

Page 9: Funding in Israel - What do local ecosystem investors are looking for

From investor’s point of view:

Yes, there are more opportunities

So It means

I have to be more selective!

Page 10: Funding in Israel - What do local ecosystem investors are looking for

AngelExpect to return

X3-X5 on his investment

Past – Idea phaseNow – product phase, maybe even revenue

Invest in early stages, most risky

phase

Page 11: Funding in Israel - What do local ecosystem investors are looking for

VCExpect to return

10X on their investments

Past – product phaseNow – Revenue Phase

Interested in decreasing their risk

Page 12: Funding in Israel - What do local ecosystem investors are looking for

Which phase are you?

Which kind of investors are relevant to your venture?

Page 13: Funding in Israel - What do local ecosystem investors are looking for

And what those investors would look for?

Page 14: Funding in Israel - What do local ecosystem investors are looking for

Let’s try to think like investors

Page 15: Funding in Israel - What do local ecosystem investors are looking for

Background – Current Market Trends (Investors Market)

Thinking like an investor – chasing Unicorns

Questions Investors Ask

Ideal narrative (and pattern) investors like

Great ways to ‘turn-off’ investors

The good news are..

Page 16: Funding in Israel - What do local ecosystem investors are looking for

The goal – finding the next Unicorn*

before others

*Unicorn – 1B$ Valuation company

Page 17: Funding in Israel - What do local ecosystem investors are looking for

So, how do we recognize Unicorn ? Especially in its’ early stages?

Page 18: Funding in Israel - What do local ecosystem investors are looking for

A research by Shasta Ventures

32 Unicorns

Page 19: Funding in Israel - What do local ecosystem investors are looking for

What was common to all of them?

Page 20: Funding in Israel - What do local ecosystem investors are looking for

1. Easy to Dismiss ideas

By the time the startup reach 1B$ valuation,The idea is understood.

But it wasn’t the case before

Page 21: Funding in Israel - What do local ecosystem investors are looking for

Easy to Dismiss ideas

Driving Black cars?

Watching other people playing video games?

A disappearing message with a picture?

Renting someone else’s couch at home?

Page 22: Funding in Israel - What do local ecosystem investors are looking for

2. Competitive Markets

Surprisingly, Unicorns started in hyper competitive markets

Page 23: Funding in Israel - What do local ecosystem investors are looking for

3. Reinventing existing consumer behavior

Not innovative, but improving an existing consumer behavior

Page 24: Funding in Israel - What do local ecosystem investors are looking for

4. Untested Founders

Not without experience at all, but 75% of the founders were first time founders

Page 25: Funding in Israel - What do local ecosystem investors are looking for

5. Zero Monetization

Does the business model work?

No business model (yet)

Page 26: Funding in Israel - What do local ecosystem investors are looking for

The research conclusion:

There are large companies to be built by offering new, innovative and superior

customer experiences to large markets, regardless of how competitive the sector already is or how successful the founders

have been before.

Page 27: Funding in Israel - What do local ecosystem investors are looking for

As investor, does it mean that when I meet a venture with:

1. No revenue2. Easy to dismiss idea

3. Low innovation (evolution but not revolution)

4. Operate in competitive market5. First time founders

Should I invest?

Page 28: Funding in Israel - What do local ecosystem investors are looking for
Page 29: Funding in Israel - What do local ecosystem investors are looking for

It’s like finding a needleIn a haystack

Page 30: Funding in Israel - What do local ecosystem investors are looking for

So, what can I do?

(Like in other areas)

I search for patterns

Page 31: Funding in Israel - What do local ecosystem investors are looking for

Background – Current Market Trends (Investors Market)

Thinking like an investor – chasing Unicorns

Questions Investors Ask

Ideal narrative (and pattern) investors like

Great ways to ‘turn-off’ investors

The good news are..

Page 32: Funding in Israel - What do local ecosystem investors are looking for

General

1. What does the company do?2. What problem do they solve?3. Market potential

*The idea is that when you solve an existing problem, you don’t need to educate the market

* 5B$-10B$ market size

Page 33: Funding in Israel - What do local ecosystem investors are looking for

Team

1. Do the team member know each other?2. What is their motivation (money?

changing the world?

Page 34: Funding in Israel - What do local ecosystem investors are looking for

Product

1. Do users love your product? Daily average use? Monthly?

2. What are the milestones?3. Is the product unique? Chances for IP?

Page 35: Funding in Israel - What do local ecosystem investors are looking for

Competition

1. How does the market look like? How would it look in 5 years? 10 years?

2. Planned market share?3. What’s your unique

point of value?

Page 36: Funding in Israel - What do local ecosystem investors are looking for

Marketing and Customer Acquisition

1. What’s the CAC?2. What’s the TLV?3. Does the economics work?4. Traction (downloads, daily behavior,

revenue)

Page 37: Funding in Israel - What do local ecosystem investors are looking for

Risks

1. Company main risks factors2. How can you decrease the risks?

Page 38: Funding in Israel - What do local ecosystem investors are looking for

More..

1. Business Plan2. Size round and what would you achieve

(milestones)3. What’s the round valuation

Page 39: Funding in Israel - What do local ecosystem investors are looking for

Background – Current Market Trends (Investors Market)

Thinking like an investor – chasing Unicorns

Questions Investors Ask

Ideal narrative (and pattern) investors like

Great ways to ‘turn-off’ investors

The good news are..

Page 40: Funding in Israel - What do local ecosystem investors are looking for

Example

1. Team – served together in the army or worked in the same R&D group

(It means that they have history and know how to get a long)2. The problem they solve – ideally experienced it as users3. The value proposition is understood4. Development has started. You can show Alpha, even better Beta, even better commercial version

5. There is a momentum (train is leaving the station)

Page 41: Funding in Israel - What do local ecosystem investors are looking for

What does it mean – the train is leaving the station?

Even if the investor, (especially angels)Likes the idea, team, product

His initial motivation is to keep his money in the bank.

You need to motivate him to actually invest (and saying – “we are meeting other

investors” doesn’t work ..)

Page 42: Funding in Israel - What do local ecosystem investors are looking for

Train is leaving the station

It means that you’re in progress,And soon the train is leaving and it would be too

late - To join

Page 43: Funding in Israel - What do local ecosystem investors are looking for

Background – Current Market Trends (Investors Market)

Thinking like an investor – chasing Unicorns

Questions Investors Ask

Ideal narrative (and pattern) investors like

Great ways to ‘turn-off’ investors

The good news are..

Page 44: Funding in Israel - What do local ecosystem investors are looking for

NDA

“Please sign our NDA”

(So, you want me to trust you with my money, but you don’t trust me?..)

Page 45: Funding in Israel - What do local ecosystem investors are looking for

Exit Model

“We believe Google is a potential buyer”

)But be ready to answer)

Page 46: Funding in Israel - What do local ecosystem investors are looking for

Competition

We don’t have competition (Well, is it a good sign?)

Page 47: Funding in Israel - What do local ecosystem investors are looking for

Team

“We know each other for couple of weeks,

but the chemistry is great (until now)"

Page 48: Funding in Israel - What do local ecosystem investors are looking for

Funding

“Once we would receive it, we would plan what to do with it”

(That’s not a good sign as well, right?)

Page 49: Funding in Israel - What do local ecosystem investors are looking for

Background – Current Market Trends (Investors Market)

Thinking like an investor – chasing Unicorns

Questions Investors Ask

Ideal narrative (and pattern) investors like

Great ways to ‘turn-off’ investors

The good news are..

Page 50: Funding in Israel - What do local ecosystem investors are looking for

The good news:

It’s really easy (and cheap) to develop a prototype. It cost more to develop a Beta – but still affordable.

Israel is a great market to develop Digital Health products (Great HMO, great health system, great doctors and more)

Foreign investors are here – it’s a global market!

Page 51: Funding in Israel - What do local ecosystem investors are looking for

Thanks!

Yariv Levski