By Aviv Levy
Globes, Tel Aviv, Israel
WWR Article Summary (tl;dr) A new pattern is emerging in Israel — women as venture capital fund managers and founders.
Globes, Tel Aviv, Israel
The Israeli venture capital industry is red hot. Local venture capital funds invested over $160 million in the first quarter of the year, 16% of the over $1 billion raised by Israeli high-tech companies, thereby continuing the rapid pace set in 2016.
Behind this hype, a new pattern is emerging — women as venture capital fund managers and founders. More and more women are reaching important management positions and becoming partners or senior executives. Even if the change in not yet dramatic in numbers, their greater visibility in the sector is significant.
One explanation for this refreshing change is a new evolutionary change in this industry in Israel. Funds are developing more complex investment models, which are making them realize that they need more dominant female involvement in order to tackle the multi-tasking in this new world.
“Lady Globes,” “Globes” magazine on women in business, has assembled the important women managers in these funds in order to hear what they have to say about dealing with the obstacles, dilemmas, successes, and failures, and what goes on in the funds.
Call-up order
Standing out among the senior women managers in the sector are four women who themselves founded funds.
Anat Naschitz had already accumulated many years of experience in the life sciences at McKinsey & Co. and Apax Partners, when she spotted an opportunity in the major state tender in 2011 to establish a powerful life sciences fund.
As someone who “loves looking for new and exciting fields of business,” as she put it, she decided to found a new fund with two partners. “We contacted global fund Orbimed and started working on the tender. We were really a startup at the beginning; we even worked from cafes. There’s a real buzz when you’re starting something new,” she says. Today, Naschitz is a managing partner at the Orbimed Israel fund, which manages $530 million, and focuses on investments in drugs, medical equipment, and digital medicine.
Michal Geva, 44, founded Triventures as a continuation of a long career in entrepreneurship. “After many years in the startup industry, I realized that the Israeli medical devices market is very small, and that developments in Israel were aimed at larger markets, mainly the US and Europe. The thing is that we aren’t there, so we often don’t understand the integration for those markets. This is the reason why I decided eight years ago to found a platform that would provide what was missing — an understanding of the market, help in management, and money. I recruited two US partners, leading doctors in their specialties and also entrepreneurs with experience in the industry, and we set to work.
“We started on a small scale with our own money in order to make sure that we could work together. A year later, we raised $30 million, and we later raised $100 million in another fund.”
Anat Segal, 50, decided to go her own way after a long career at Poalim Capital Markets, Evergreen Venture Partners, and DFJ Tamir Fishman Ventures Ltd. (TASE: TFVC). “I saw entrepreneurs who had trouble raising money the first time, and who needed advice and help in the connections critical to making progress with their venture. In 2003, I decided to found Xenia Venture Capital Ltd. (TASE:XENA).” Segal managed the fund until 2016, when she decided to resign. Today, she represents overseas private investment concerns.
Ronit Segev Gal founded the TLV Partners venture capital fund two years ago. Together with partner Eitan Bek, she raised $115 million from US investment institutions, and has since invested in a number of startups. “As an investor, I met entrepreneurs all the time. Some days, I meet five or six companies, one after another, and that teaches me a lot,” she tells us.
One of the most senior women managers in the venture capital industry is Fiona Darmon, a partner in Jerusalem Venture Partners (JVP), the second largest fund in Israel. Darma began her career as a financial analyst at Claridge Israel, the Bronfman family’s investment arm. At the tender age of 26, she was part of the founding team of the venture capital fund of Koor Industries Ltd. (TASE:KOR), which then managed $250 million. In early 2010, Erel Margalit appointed her VP investors connections and business development at JVP, and she became a partner in the fund two years ago.
Dr. Irit Yaniv, 52, a partner in Accelmed, completed her medical studies, but decided to work in industry, and served in a variety of management positions in the medical devices field. Before joining Accelmed, she was CEO of MetaCure, a startup, which is developing a medical device for treatment of diabetes. She joined Accelmed, the investment fund of Uri Geiger and Mori Arkin, as a partner five years ago.
The seventh investor is Merav Rotem Naaman, 42, managing director of Verizon Ventures Israel. Three years ago, US Internet company AOL launched Nautilus, a program for helping and fostering startups and a scouting venture, and Rotem Naaman was appointed to lead it. Verizon acquired the company in 2015, and Rotem Naaman was appointed to her current position this year.
“Globes”: What is most rewarding about investment in startups?
Rotem Naaman: “Emotionally, I meet talented people every day with a lot of sparkle in their eyes. It’s an amazing experience to see a young team with an idea and a presentation, and to see the same idea reborn after several years, and sometimes even reshaping an industry. It’s a wonderful experience that makes it possible to see how the spirit of man overcomes many things, in addition to working with super-smart and creative people.”
Yaniv: “It’s a combination of remuneration for the soul and a financial return. A startup is a process in which you and the entrepreneurs start from scratch and create something that is financially worthwhile, and in medicine, also helps people, and that gives you a lot. Working with talented entrepreneurs is also part of the remuneration — an environment of intelligent and creative people is very rewarding to those around them.”
Naschitz: “We generate innovation and support technologies that can heal patients, so we have an extra umbrella — benefiting humanity. We have investments that can change lives, and personally, that does a lot for me.”
Living with question marks
Question: What are your main conflicts as investors?
Darmon: “An entrepreneur is looking for money to help reach the market as soon as possible. Today, a good startup is like a beauty contest — the entrepreneur can choose from among several sources, and he has to find the money that will bring him the most value. Entrepreneurs today are much more sophisticated, and expect investors to create added value for them.
Every investor, including the venture capital funds, therefore has to differentiate himself and invest resources in creating infrastructure and a network of business connections that he can utilize for the startups. Another challenge is raising money for the funds themselves. Investors are looking for funds that are able to generate strategic value, in addition, obviously, to financial results. In raising money, it’s therefore important to focus on two or three main messages that will grab the investor’s attention.”
Naschitz: “The challenge is always to select the right company for an investment. You need a team with a gleam in their eyes and a stubborn entrepreneur, because if he’s not stubborn, he’s not an entrepreneur. In addition, the technology that he’s offering has to be an interesting and special technology that solves a real problem, and which can be protected with a patent.
“Another aspect is that as women investors, we’re playing a game whose rules were sometimes dictated by men. There’s beauty in the ability of women to shape the game in softer tones, and sometimes solve situations that appear insolvable.”
Segal: “We constantly have to make decisions in conditions of extreme uncertainty, because we’re making investments at the very early stages of activity, almost at the idea stage, and there are many question marks.”
Question: How do you cope with this uncertainty?
Naschitz: “The uncertainty in the work reflects the situation. Someone who can understand this as quickly as possible will be able to cope more quickly with what is facing him. I’m a very adaptive person, and I can adapt myself to new situations rapidly. You also need flexible thinking and personal strength. These are things that everyone develops by himself with time.”
Darmon: “The way to deal with uncertainty is to reinforce what is known. You can’t promise an investor that the situation won’t change, but you can give him a feeling of confidence about the investment he’s making when you present to him the team, the type of investment, and past success, and when you guarantee him a high degree of access to the team and to companies.”
Rotem Naaman: “Great uncertainty and change is what makes this work attractive to me, because I blossom in situations like this. Work with a regular routine doesn’t suit me, and in this work, I constantly meet entrepreneurs and face dilemmas that vary from company to company, and from one stage to another. This enables me to continue developing, and to always be learning.”
We’ll meet again in the next incarnation
Question: There comes a time when you realize that the company in which you invested has to close down. What do you do?
Geva: “This is one of the hardest decisions, if not the very hardest, that you have to make with regard to the company and the team, and also with our investors, and you have to admit that something didn’t work. It’s much harder to let an investment go than to make a new investment. We see 500 companies a year, and invest in about three of them, but writing the first check for a company is the easy part. It’s a little like marriage — the connection was made at least six months earlier. You start an intensive due diligence process, and the real work starts after the investment.
“After we invest, we become very involved in the companies, and a kind of strong partnership is created over many hours a month and over many years. To say farewell to a company other than by means of a joyous exit is one of the most difficult experiences an investor can have.”
Rotem Naaman: “You have to realize that there’s a cycle in this business. A startup is a collection of entrepreneurs with experience who know how to take failure and derive of value something from it. We know that we’ll meet these people again, so you have to be empathic, and remember that the relationship with them is no less important than the result. When a startup reaches a situation in which it runs out of money or something in the market has changed, the entrepreneurs are usually the ones who decide themselves whether or not to close it down.”
Segal: “Every startup that closes down produces good workers and experienced managers, who frequently gravitate to more successful new companies. The principle is to manage the process well from a human standpoint, and to learn from mistakes.”
No easy life
Question: How much staying power do you need in this business?
Geva: “You need nerves of steel, because working in investment, and certainly with startups that are just beginning, is like a rollercoaster: one moment you’re on top of the world, and the next you’re down in the dumps — sometimes only hours apart. When there’s a portfolio of 15-20 companies, there are always some that are succeeding, some that are on the way, and some in a crisis, and those are the ones that draw you in, because you have to be able to give each one what it needs in help and involvement. With time, you learn to look more at the processes, and to be less bothered about a dramatic day on which it looks like your world has been destroyed, because there are very great ups and downs in this business. You have to take a deep breath, and realize that what goes up comes down, and vice versa. But I still take things to heart.”
Naschitz: “You need patience, because we’re raising something here, and you have to give it time to build value, and believe in it, even when you encounter difficulties and surprises. At the same time, you have to keep your eyes open to pick up signs early enough that something is developing in the wrong direction, or alternatively, that there is an opportunity that changes the strategy.”
Yaniv: “There are places where the challenges use up a lot of emotional capital, such as in negotiations. You have to keep a poker face there sometimes, sometime pretend that you’ve been hurt, and sometimes withdraw from a deal, so that it will come back to you later. In any case, you have to appear strong. It’s a learning process that gets stronger from deal to deal.”
Segal: “Levels of tension and adrenalin are very high in this business, due to the extremely uncertain conditions we spoke about and the large workload. If you want an easy life, this business isn’t for you.”
