The i3 Equity Partners fund is not afraid to take high-risk investments, provided the company has the potential to change the rules of the game and create a competency gap that will make it more difficult for competitors. Meanwhile, Adam Fischer of Bessemer and Ille Waldman of Melanox are boasting in the fund
Throughout the year, we at Geekit bring you the Israeli startups that raise money, buy companies or buy themselves, and our readers are exposed to innovative, revolutionary and sometimes unnecessary products developed in the Israeli ecosystem. But behind every product and company is usually a venture capital fund, which invests money, accompanies entrepreneurs, contributes to its experience and sometimes absorbs losses.
In Israel, there are currently 202 venture capital funds (132 Israeli funds and 70 foreign funds). Each focuses on different stages of startup life, in different areas and believes in its own investment strategy. As part of the “Unicorn” section, we bring you one venture capital fund each month and the story behind it – the way it selects investment companies, the successes and failures, the warning lights and the characters that inspire its founders.
i3 Equity Partners
- Year Established: 2017
- Founders: Noga Kef and Eran Wagner in collaboration with multinational companies
- Fund size: $ 20 million
- Fund Managers: Noga Kaperen and Wagner
- Investment stages: Pre-lime and lime
- Top Investment Areas: Deep-Tech
- Portfolio companies:
- Zencity, an AI-based platform that gathers all of the city’s interactions with social media and municipal centers, analyzes and presents the municipalities with the hottest topics in local discourse; The platform developed by Prisma Photonics is revolutionizing the market for critical infrastructure monitoring and management. The company uses fiber optics that are already deployed in the field, and monitors political boundaries on land and sea, power grids, oil, gas and water transmission pipelines, roads, railways and communications networks; Nanofabrica develops 3D printers for the precision manufacturing industry. The printers reach up to micron accuracy and allow printing, at industrial production rates, of tiny and complex components to unique markets, such as: plastic injections, robotics, electro-optics, medicine and more; DeepAI develops unique software that accelerates the learning of neuronal networks and deep learning to help AI-based app developers reduce costs and shorten market times. The system works in public or private clouds, and outperforms competitors, both at processing and cost rates, with significantly lower energy consumption; Xtend offers an XR-based human-machine interface on a tiny skimmer, allowing the user to experience remote places. The technology has already been implemented in the worlds of Homeland Security in Israel and abroad and has been used by the IDF in the war to thwart the explosive kites in the south. In addition, the company’s products are used for various civilian purposes; Vanti brings data science capabilities to the worlds of industrial production. The company develops an intuitive use platform that builds on relevant insights and actions at various stages of the product life cycle, from research to production, to reduce costs and improve profitability; Frontegg develops a platform for SaaS applications, such as user management, reports, dashboards and more, to enable its customers to focus on their core development. The product includes a rich collection of functional units, which are required in every application and can be added to any system with minimal effort; Tulu builds smart storage rooms in high-rise buildings or neighborhoods for renting a variety of home appliances (vacuum cleaner, drill, VR glasses, box games and more) that people prefer to avoid at home for cost considerations, sparse usage and lack of storage space. The tenants of the building rent the products through the app and pay for an hour.
What is your investment strategy?
Kep: “Our model is based on close collaboration with 6 investment partners, multinational corporations, which include the arm of Microsoft, General Electric and Qualcomm, TATA Group, Singapore’s Tamask and the Israeli venture capital fund Pitango. The greatest value that the partnership brings to startups is market access, including their international connections and the industry’s most experienced mentors. ”
Rabbi: “Some of the partnerships are becoming clients of the startups, as in the case of Prisma Photonics, which already carries out projects in several companies belonging to the TATA group. Other partners are continuing to invest in startups like Microsoft, which has invested in Zencity. ”
Kep: “These relationships are a significant part of our investment strategy, so when we look at a new startup, we also take into account its suitability for partnership, their emphasis and their interests. Thanks to the partnership, we know how to bring startups the value of a large organization, without giving up on the swift behavior of a venture capital fund. ”
Wagner: “We are also looking at technologies that come out of the academy. Noga and I teach entrepreneurship and innovation in leading faculties in Israel and meet with potential entrepreneurs at the very beginning. Another channel is our direct connection to the military, I am from the USSR and 8200, and Benzi Rabbi, Principal of the Fund and a graduate of the Intelligence Unit’s technology unit, are in contact with soldiers operating at the forefront of the military, targeting them immediately upon leaving the civilian market.
“We have 8 startups in the portfolio and most of them have already recruited follow-up rounds. Given that we invest in startups at very early stages – the leap of pace they make within a year – is an exception in the industry. This is happening thanks to the construction of a unique strategy that brings startups faster to recruitment round A, utilizing optimal value creation resources. ”
What will make you invest in the company?
Wagner: “We are looking for a company that develops Deep Technology that has the potential to change the rules of the game and create a skills gap that will make it more difficult for competitors. We are open to any idea, and especially to ideas in areas we didn’t think of, moving away from fashion and working outside the mainstream. We are ready to get into hardware and software projects, not afraid of marketers like critical infrastructure, 3D printers, sensors or smart cities. That’s how we invested in Nanofabrica even though the hype of supposedly 3D printers has passed. Our investment in Zencity is also considered to be the first investment in the country in the field of smart cities. ”
KP: “I agree with Eran. We like to take on challenging, high-risk projects when our partners share the risks with us. We find a connecting line between startups and partner companies, leveraging capabilities and relationships, and reach higher than average results with very high rewards. So, we get into Blue Ocean projects and not Red Ocean. ”
What are the warning lights that will make you run out of the investment?
Wagner: “We are looking for ideas and technologies that will develop and grow. So, if we identify established entrepreneurs, without any thought flexibility, entrepreneurs who are unable to answer difficult questions or deal with building a strategy we can live in peace with – that is a warning for us. ”
Kep: “As pre-seed investors, we often encounter passionate entrepreneurs who want to raise a very large sum of money at the outset to realize all their dreams, sit down and develop the product they dream of. This approach runs counter to the approach we offer and is a warning light for us. We advise our startups to start small, learn in-depth about the market, develop relationships with Design Partners and prospects and develop the product at the same time, through listening and connecting to the market. ”
What’s your tip for entrepreneurs?
Rabbi: “The most important thing to me is to do in-depth market research before sitting down with the fund. I come across entrepreneurs who come up with an interesting idea but never once talked to the market and did not do the validation. ”
Kep: “Uncertainty is the name of the game. Not just in this era of Corona, but always in the high-tech industry, especially in the world of startups and investments. Therefore, I advise entrepreneurs to best prepare themselves for any change that comes and reveal openness. Along the way, technologies are changing, the market is changing direction and sometimes, once a century or so, there is also an epidemic. ”
Wagner: “Following on from Noga and Benzi, the big challenge for an entrepreneur is to balance the way he understands the market at the start of the venture, and the market situation as reflected by customers, investors and other parties with whom he meets. This balance is very delicate. An entrepreneur must understand that there is always a gap between the idea that goes around his head and the need of the market. In any case, the sooner this gap narrows, the greater the chances of success of the venture. Our entire business is based on trial and error but the process must be managed scientifically and not rely on the case. ”
How are you different from other funds?
Kep: “In 3 years, we have made 8 investments and the model we have created, which connects multinational investors and startups, is an exceptional connection in the Israeli venture capital industry, allowing us to take greater risks while mitigating risk and proving big time.”
Wagner: “Another thing that sets us apart is a close and personal relationship with all entrepreneurs. We feel and act like full partners of the portfolio companies, involved and supported at every stage and in every field. This proximity is also created by the fact that these are startups at very early stages, sometimes only 2, 3 guys when the CEO is usually lonely in the campaign, looking for people to consult with. We come to this place with many years of experience and help in all areas, from business development to hiring. ”
Rabbi: “We have a dedicated office space that we reserve for entrepreneurs at the outset, so we sit close to entrepreneurs and maximize our benefits. For example, the Frontegg startup, which we invested in less than six months ago, was sitting in our offices until recently and the office is now waiting for the next startup. This close work with the developers proves itself and brings fast results. This is how our companies reach significant second hires in just a few months. Like a company that came within two months to raise $ 5 million, without any intention at all. ”
In retrospect, which company would you like to invest in?
Wagner: “TriEye produces a special wavelength focusing sensor that gives an advantage in night vision and vision in harsh conditions. This is an excellent team and technology that came out of the Hebrew University that allows the production of a military product, already in use, at a cost of 3 sizes. The technology is best suited to the automotive field that needs such solutions urgently. In this case we did not invest even though we liked the venture because the investment parameters did not fit our strategy. ”
Kep: “Epsagon develops a solution that alerts and identifies performance and bottlenecks in complex software systems, in a timely manner, enabling companies to prevent malfunctions by identifying potential problems ahead of time. The company has a great group of entrepreneurs, but we decided not to invest due to disagreement about the company’s building strategy and the necessary budgets. ”
Which figure in the industry (local or global) inspires you?
Wagner: “Eli Barkat, the founder and owner of BRM, is someone I have often consulted over the years and appreciates his cool and thoughtful way of thinking. Eli is first of all a good friend, and he also has very strong analytical skills combined with a rare combination of calmness and overall vision. ”
Kep: “One of the most inspiring people in Israeli high-tech to me is Eyal Waldman. I had the right to invest in it when I worked at Walden. An executive who has taught us all how to take the company forward, even on a closing day, with a great vision and faith. ”
Rabbi: “Adam Fisher of Bessemer is an inspiring investor to me. A man who grew from the bottom of the venture capital world and became a partner in the world’s oldest fund after making excellent investments. One has the ability to identify great companies at very early stages, WIX is a prime example of that. ”
How did you end up in this field?
Wagner: “For about 20 years, I founded and managed technology companies. I spent many years in the US and returned to Israel in 2011, and then the opportunity just came into the world of venture capital. It was Eli Barkat who connected me to Menashe Ezra and Yossi Sela from Gemini who opened the door to the venture capital world, gave me a golden opportunity to learn and try a new world and made available to them all their invaluable accumulated experience. ”
Kep: “After many years in high-tech and last position as GM Europe of Mint (which was a Carmel Ventures portfolio company), and acquired by American SunGard – I was invited to a job interview at Walden Israel with the aim of replacing a CEO with one of the portfolio companies . After thinking in the negative, Ronnie Hafetz and Il Kaplan invited me to a meeting to understand why I refused, and immediately offered to serve as a consultant to the company. A short time later, I joined as a partner. ”
What other fund is Paragon:
Wagner: “Noga and I have always said that it is no coincidence that the most consistently successful funds are also the oldest. These funds have long-standing investment theory and organizational culture that facilitates intergenerational transfer. That is why the Bessemer Foundation, established in 1911, is a brand that symbolizes the direction to aspire to. As Benzi, Adam Fisher, the Israeli partner, points out, is one of the most esteemed people in the industry. “