Alon Lifshitz
Before his VC career, Alon was a technology scout for leading European and Japanese technology companies where he maintains an active relationship today. Alon was relatively young when he started his carrier. He has worked with large international companies such as Softbank, Fujitsu, NTT, Vodafone, IAG (British Airways), and British Telecom. Then in 2010, he joined the San Francisco based venture capital firm called Blumberg Capital. There he spent seven years as a managing director and builtthe entire Israeli operation from scratch.
On behalf of Blumberg Capital, Alon invested in and sat on the boards of some of Israel’s fastest-growing companies such as Yotpo, Fundbox, Biocatch, ZooZ, and so on. Then in April 2017 he left Blumberg Capital in order to establish Hanaco ventures. It’s named after his grandmother, Hannah Cohen. “I always knew that when I’ll do something substantial, she will be involved somehow, and that’s Hanaco”. Today Hanaco manages approximately 400 million dollars, which primarily focuses on Israeli entrepreneurs in Israel and the USA.
What are the key attributes you look at when evaluating a deal?
I look for an outstanding team, nothing less; it has to be in terms of personalities and knowing the market they’re going into. I want to see that they do their homework before meeting me, even if it’s an early-stage company. Who do they speak to, how do they verify the quality of the solution with the competition, what they did earlier in their personal lives? These are all equally important. Also, joining the military is mandatory in Israel, so what they did in the military, checking the link in the social network, diving into the quality of the people, and their understanding of the market they’re approaching. So we try to understand whether we are directing a team of winners; if not, then we don’t invest. The Israeli market is a small one where you can do many background checks about every person and likewise about investors as well as me. Lastly, we reach some significant insights that help us in the decision making process.
What are the major challenges the startups face?
Israel is the second-largest market in the world after the USA. Israeli startups have no local market and have to go global. They have to start thinking globally from day one of their business. Also, they need to understand the influence of the laws and the way they operate, and the way investors operate when they take board positions. So you will want to see entrepreneurs with global thinking that know what’s going on in markets outside Israel. So Israeli companies look at if they’re doing a good job within a year and a half or two years from when they were founded. But that also requires a lot of thinking about the people that will need to relocate their family and a whole array of decisions.
Don’t fall in love with your solution. Technology is developing of course, but understanding what market problem it is solving is also important
Furthermore, SLA challenges that is unique for Israeli companies because, again, there’s no local market and it’s way too small with eight and a half million population. In terms of the geography, companies that operate here are the potential clients of a small company. So for Israeli companies to become global and be interesting for investors like myself, they have to think globally. And when I join the board, I direct them in the way of thinking global from day one.
Could you tell us about your investment style?
I look at different verticals to invest and am primarily focused on investing in companies disrupting the Cyber, Fintech, Marketing-tech, and Enterprise software sectors. Investors are interested in companies that are dealing with tons of data and apply smart algorithms to make sense of all of the data they’re collecting. Because understanding data is valuable for the long term run in global markets. On the other side of that, I am also keen on investing in companies with in-depth profile technology that acts as a high barrier for any competitor to come in. The quality and depth of technology also dictate high valuations, and it’s a real asset for a company to have deep and even futuristic technology. Hence the investments are leading on one side data-driven companies and on the other side companies which are developing deep, profound technologies.
Earlier this year, we’ve launched our second early-stage fund, which is a 120 million dollar fund with some leading LP’s from the USA, Asia, and Europe. Some of them have made their first-ever investment into an Israeli fund at Hanaco, and so we’re happy and satisfied. Lastly, Hanaco ventures is run by three partners; I am the founding partner, and with me are Lior Prosor, and Pasha Romanovski. Today we’re equal partners and are free partners, which is equally important to hold great success.
What would be the single piece of advice that you could impart to the forthcoming entrepreneurs?
Early on, optimize the quality of the investor and not the valuation, and secondly, don’t fall in love with your solution. Technology is indeed developing, but at the same time, understanding what market problem it’s solving is also important. Also, you have to think about the global markets right from the beginning because you might be developing a great solution that solves the problem, but if there’s no product market fit, then nobody will buy it.
Additionally, when you look at the Israeli market, one of the reasons for its success is that the military service is mandatory here a minimum of three years for men and two for women. The army of Israel is the largest incubator we have, not just in terms of technology, but in terms of developing character, survival, leadership and winning, which is essential to building a large company. Thus, companies need to raise enough money to be flexible enough in terms of changing plans as required while working with the right investors.
