1Mby1M Virtual Accelerator Investor Forum: With Yanai Oron of Vertex Ventures (Part 2)

Sramana Mitra: It’s interesting. Your comment that in the US your fund would be called a seed fund is not correct. In the US, $150 million fund is still a Series A fund but it’s a fund that is structured to be able to make smaller Series As. A lot of the traditional venture funds in the US right now are so large. Their Series A will need to be a $5 million to $10 million Series A.

In traditional terms, that’s a Series B or Series C. As a result, there is a lot of smaller funds that have come in to the market who are willing to do the smaller Series A. That’s where you are positioned it seems.

Yanai Oron: Just to comment on that, the definition gets so different between geographies. We actually see Series A as something that is $5 million to $7 million but we’ve done Series A that are $12 milion to $20 million. More often, we see seed of this nature. It’s a little bit confusing. It’s hard to say what’s seed and not. It’s not about the money. It’s about what your target is.

Sramana Mitra: The other corollary of that conversation is that it’s very difficult, as a first-time entrepreneur, to get people to write big checks. People are looking for entrepreneurs they know. People are looking for entrepreneurs who have done it before.

If you are a serial entrepreneur with a track record, you may be able to get money to build something from investors, but if you’re a first-time entrepreneur, that’s a very long shot. Let’s talk about market segments. What markets are of interest – B2B, B2C? Let’s deep dive into the markets.

Yanai Oron: We’re generally a B2B play. You can put our investments in two major buckets. The first bucket can be categorized as enterprise software. Within that, we include all the classic enterprise software. Israel has some very interesting infrastructure companies coming out of it – storage, cloud infrastructure, cyber security. That will probably be half of our investment.

If you look at Israel, the bread and butter is those things. The main reason for that is because we have anywhere between 200 to 300 multi-national companies to set up an R&D facility here. A lot of Israelis, who’ve gone through either MBA or worked through these companies, understand the culture and they understand what it takes to create the next generation of whether it’s storage, cyber, or the marketing technology. We have a unique set of skills for cyber because our army creates a lot of technologies which can later be used.

The other half of our investment is increasingly emerging sectors. Today, we see different areas that have become really interesting for startups. We’ve been very active with those in the past. Those have paid very well for us. Now, we’re looking for the next stage including agriculture and retail technologies. We’re starting to look at construction technologies. The main characteristic is companies that can bring very deep technology.

We’ve seen over the last three years that the automotive company, insurance company, and retail companies are more than willing to work with these early startups. It doesn’t matter how early. Sometimes, the earlier the better. They are, to some extent, concerned about some other company like Amazon reaching out and disrupting them.

We see two types of companies. One is companies that try to disrupt the incumbents. The second, which we see more of and the easier to do, are the ones that help them create automation and improve their processes to be able to progress to the next tier of customer experience.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Yanai Oron of Vertex Ventures
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