New Israeli micro-VC assures that ‘great people with great ideas’ won’t get passed over in the race for investment funds.
By Avigayil Kadesh
In Hebrew, lool means a hatchery or crib. Spelled in all lowercase, the word also evokes digital media. Put it all together and you’ve got a portrait of Israel’s new micro-VC fund to incubate fledgling Internet and mobile tech startups.
"This market is moving so fast that there is a need to acquire new technology quickly," explains co-founder Avichay Nissenbaum. "That’s why there’s a need for a vehicle to invest at an early stage and provide value-added services."
Yaniv Golan (pictured) and partner Avichay Nissenbaum expect to finance about two dozen startups in the next five years.
Lool Ventures, "growing companies @ Internet speed," was hatched from the collective imaginations of Nissenbaum and Yaniv Golan. This dynamic duo has churned out one profitable idea after another since their days at a product lifecycle management (PLM) company started in Nissenbaum’s spare room, renamed SmarTeam after its 1999 $35 million acquisition by software development giant Dassault Systemes. They then created the Q&A site Yedda), which they sold to AOL in 2007.
Over the past five years, they’ve been mentoring and investing in new Israeli businesses and realized that nobody was addressing what Nissenbaum calls "a surge of Internet/mobile/web kinds of startups in the last few years. We do a lot of pro bono work with many entrepreneurs, listening to their pitches and giving our insights. We recognized there is a big gap in Israel in terms of early-stage investment."
Shortcut to Israeli ingenuity
On a recent business trip to the United States, Nissenbaum learned that major companies "don’t want to miss the next Twitter or Facebook coming out of Israel" but have no way to source that new technology without people on the ground. That’s where lool comes in. It will allow established companies to benefit from the success of its portfolio startups and also pique their interest in investing in specific ones and taking them public.
Whereas VCs tend to withhold their largesse until a new company has gained some traction, a micro-VC comes in on the ground level, says Nissenbaum. This approach more closely tracks the current reality in a business world where Google, for example, is snatching up promising startups at the rate of two per month for less than $100 million a pop. "Traditional VCs have funds of half a billion dollars, and need to return about three times that amount to investors," he explains, "so they’re going for things that will be extremely huge. That means that sometimes great people with great ideas will get passed over."
However, he continues, "the market is a pyramid. At the top are those few companies that were sold for billions. Yet hundreds, if not thousands, of transactions are going on at the bottom of the pyramid, where companies are getting acquired for $50 million. A VC is not going to make its numbers on that. A micro VC is not shy about taking an offer below $100 million – in fact, we are structured to be very successful specifically at those rates."
An open space for synergizing
Lool, started in February with one portfolio investment (Nissenbaum couldn’t release the details save to say that it specializes in commerce and content on the go), also is dedicated to providing its hatchlings with holistic value-added services throughout the life of the company. He and Golan, who are still wrapping things up at AOL and seeking office space for lool, expect to finance about two dozen startups in the next five years.
"In the beginning, it’s all about the product and its tangible value," says Nissenbaum. "Then we add professional, social marketing, legal and financial services. We are putting these companies into the lool, an open space where they can synergize with others like them. And we’ve established an extensive network of mentors who are also helping companies to be successful." Among these mentors are Yaron Galai, CEO of Outbrain and Gil Hirsch, CEO of face.com.
What attracts lool first and foremost are the personalities behind the products. "It’s all about the people," says Nissenbaum.
One of Time Warner Cable’s major shareholders is investing through lool, "and others of that caliber, but there is room for more," says Nissenbaum, who is on the board of IncrediMail; chairs comparative pricing site WinBuyer; and mentors student entrepreneurs through the Zell Entrepreneurship Program at IDC-Herzliya.