Investing in Israeli Enterprise Software Companies
Erez Lahav segments the enterprise software industry into niches such as machine learning, Internet of Things, marketing technology and Big Data. He provides key insights into determining the potential revenues that may be derived from distributors.
Erez introduces us to three fascinating portfolio companies—Pente Networks, Anima and Cyrebro.
Erez Lahav, Principal, INcapital Ventures
Erez Lahav is a Principal at INcapital Ventures, which has offices in Toronto, Tel Aviv and New York. Erez has over 15 years of experience in technology and entrepreneurship; he founded and led two start-ups from bootstrap to acquisition. Erez was also a software solution architect for Amdocs in Dallas, Texas.
INcapital Ventures’s reputation as “bridge builders to the North American market” provides INcapital access to exclusive and attractive opportunities in Israel. INcapital invests in early growth-stage technology companies and is industry agnostic.
00:00:59 – The check size depends if we need the round.
Incapital Ventures we’re a Global DC offices in Toronto, New York and Tel Aviv. Our focus Israeli companies, Israeli startups looking targeting the US market mainly. So we invest in series A and B.
Usually, the check size depends if we need the round or if we join anywhere between two to $5 million the check size and our focus is SAS company B to B software and as far as the sector and the industry leader are agnostic.
So we invest in fintech, IoT, marketing, tech, machine learning operations, dead tools, anything that is software, B2B. It’s interesting.
00:09:48 – We are very focused on product-market companies that already have multiple customers showing steady growth.
When you get a company, startup company in general. And I can say that one of the things that finish saying, in Capital Ventures, we’re very focused on product-market fit and elaborate more about the product-market field because it’s something that can be interpreted in a different way.
So we are very focused on companies that already found their business model, the working business model. Now they need the money to scale. So our mission is to take the company from that step to the growth stages. So we are very focused on product-market companies that already have multiple customers showing steady growth over a few quarters at least. They need our money and our expertise to scale.
And besides more factors that are important for us, as you mentioned, the team makes sure the team is experienced.
It’s very relevant for the startup, for what they do. We want to make sure that they’re solving a real problem, something that we know it’s not a niche market. And this is something very important for us when it comes to investment.
Another thing that’s for us to see is that the companies start-up one in their go-to-market.
00:28:23 – We want to make sure that the customers using the platform, using the solution, and there’s good engagement.
So as part of our due diligence, we get into the details of the sales of the company.
So in order to determine product-market fee, we need to make sure that the revenue is stable, not necessarily two years, let’s say, for example, if the contract is on a monthly basis. So we want to make sure that the customers using the platform, using the solution, there’s good engagement and as you said, keep renewing and they need it.
This is a very good indicator for the product-market fit. So yes, we want to see that it’s not like one of projects and it’s something that’s going to grow.
00:34:47 – So they invested in a company in the space of the private networks and their partners really hired a salesforce.
Usually what we see with our portfolio companies have channels, at least three companies have some channels that are very committed to the process.
So they invested in a company in the space of the private networks and their partners really hired a salesforce like a team to take their platform, take their product and distribute it to their customers.
When we see another company at one of their channels, they make a purchase order of very high commitments or capital for future services and future usage of the platform. So some channels and again it all comes down to how valuable and how important our student’s solution or the selling solution for the channel.
00:40:16 – You don’t want to be the first solution to be cut out of your customers budget as well.
So marketing technology, specifically something that we invest, we look at marketing is a little bit tricky, I have to say, because usually the technology is not too deep, usually.
So you can get you see some new companies with different technology, different approaches every often, but we like to see companies that one of the important thing is to make sure that the solution is sticky. So if the company has any issues, need to cut some budget and need to make changes. You don’t want to be the first solution to be cut out of your customers budget as well.
We want to make sure that the return on investment for the customer is very clear. Selling marketing solution, we want to make sure that ROI is clear, that you’re helping the customer to make more money using platform solution.
As you said, we invest in different industries.
So for example, with IoT we see more stickiness, we see also very good customers and solutions, but we see all of them. We are secure.
00:48:46 – We can see some use cases of manufacturers trying to improve the product line if they need.
One example is everything related with smart infrastructure. You see most of them, at least from the companies I see most of them related with infrastructure. Another example is on the industry four.
Through industry four by itself, that the industry. We can see some use cases of manufacturers trying to improve the product line if they need, for example, to manufacture something in a higher accuracy, precision. So we see the IoT, how it works.
For example, they put some cameras on top of the production line and based on with computer vision and IoT, they are able to improve real time in the way they manufacture. So it’s another use case mostly the industry for smart infrastructure.
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