1Mby1M Virtual Accelerator Investor Forum: With Yanai Oron of Vertex Ventures (Part 4)

Yanai Oron: There are some very interesting programs in Israel of large corporates creating commercialization programs. They would sometimes look for early-stage companies and sometimes late-stage. Microsoft is a big one that is looking for companies that already have products but are very willing to work with them. It brings them very deep into the organization, and teaches them who in the organization are the right people to speak to.

Sramana Mitra: Very hard.

Yanai Oron: They’ve really changed. The accelerator was a big contributor to this. The folks who run this program completely changed their view on how to work with startups. Retail has become extremely amenable to working with new companies. As far as five to six years ago, we would not touch a retail-based company because we would say, “You would run out of money before you get your initial pilot.” That has completely changed. That’s one. Construction is beginning.

Within the enterprise software market, the major trend is that bigger companies today are becoming harder to compete with. We’re not as likely to fund a small company doing developer tools for Amazon serverless. There are plenty of people doing it. We’re not as happy to do that because it’s pretty scary to see what these big monies are able to spin out quickly.

Sramana Mitra: Are you looking for billion-dollar TAMs only? Is that your sweet spot? Are you also looking for companies that are working in more niche areas with smaller TAMs but with deep technology that can really be the market leader?

Yanai Oron: Our DNA is the billion-dollar TAM. It’s very hard for us to diverse from that. In some cases, we try to think if we really understand the TAM. Is it even possible to assume that? We are okay with $200 million outcomes if it ends up being a smaller market than we thought. I’ll give you one example.

We invested in a company called Prion. It is a company that does Robotics Process Automation (RPA). Many people haven’t heard about it even though it’s a big deal with enterprise. Enterprise may want to cut cost and they want to do it by automation. They used to do it with very long and costly business process management with large vendors like IBM. These would be very long and hard to work with. A lot of times, the CFO says, “I’m going to cut costs but it’ll take me five years.”

What RPA does is look at all the manual tasks that each employee does. If you think about an insurance company, think about someone taking the claim, copying it to another ERP system, and then running a few emails. 80% of that is manual task that can be done with software. It’s hard to integrate to these legacy software. RPA mimics the worker even being on the same machine sometimes. What you can achieve is you can increase the capacity and reduce error. If this is a process that is customer-facing, you can actually improve customer experience as well. You get all of that with half the cost and half the time.

Until two years ago, this was seen as a niche product. Because enterprise is really complex to really change, this can work for a long time. Having a real solution that can automate stuff is something to stay. We’ve seen the market grow very fast, but still many of our counterparts believe that this is a small market. Until two years ago, it was estimated to be a $200 million TAM. We’re thinking this takes a big part of the $7 billion market of VPN. We’re already eight months in seeing that it’s taking a big portion of it. The company was growing very fast. I know that a lot of other VCs have invested in it because of TAM.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Yanai Oron of Vertex Ventures
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