On a recent trip to visit high-tech firms in the United States, Israeli businessman Avichay Nissenbaum heard many top executives express concern that without a formal channel for access to startup Israeli technology, they might miss out on the next Twitter or Facebook.
To fill that need, Nissenbaum and fellow Israeli entrepreneur Yaniv Golan have created a micro-VC fund where Israeli Internet and mobile tech “fledglings” can incubate and hatch – appropriately called lool, the Hebrew word for hatchery or crib. Spelled in all lowercase, the word also evokes digital media.
Nissenbaum tells ISRAEL21c that lool Ventures will allow established companies to benefit from the success of its portfolio startups and also hopes to pique their interest in investing in specific ones and taking them public.
Started in February and already boasting one portfolio company with a nascent novel solution for commerce and content on the go, lool is dedicated to providing holistic value-added services throughout the life of an expected two dozen startups over the next five years.
From concept to product, one-two-three
Established companies have a growing appetite for adopting the latest hot ideas almost before they’re off the drawing board, and lots of those ideas originate in Israel. Two of many such examples are Convergin, a developer of real-time service brokerage applications that was bought out for an undisclosed sum by software giant Oracle last year; and Google’s $10 million acquisition of virtual tour software maker Quiksee, based in Or Yehuda, last September.
“This market is moving so fast that there is a need to acquire new technology quickly,” Nissenbaum explains. “That’s why there’s a need for a vehicle to invest at an early stage and provide value-added services.”
Traditional VCs usually come in with big money only after a project has proven itself capable of providing hefty returns for investors. “That means that sometimes great people with great ideas will get passed over,” says Nissenbaum. In contrast, a micro-VC is structured to offer more modest help – under $100 million — when it’s needed most, right at the concept stage.
“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.”
Nissenbaum and Golan are old hands at turning ideas into successful products. They first worked together at a product lifecycle management (PLM) company started in Nissenbaum’s spare room, which was renamed SmarTeam following its $35 million acquisition by software development giant Dassault Systemes in 1999. They then created the Q&A site Yedda and in 2007 sold it to AOL (which earlier that year had plunked down more than $300 million for Tel Aviv-based Quigo, which specializes in Internet advertising and marketing services).
During the past five years, the two experienced businessmen have been mentoring and investing in Israeli “Internet/mobile/web kinds of startups,” says Nissenbaum. He is heavily involved in helping students get their ideas off the ground through the Zell Entrepreneurship Program at IDC-Herzliya and has leadership roles in two current Israeli success stories, IncrediMail and comparative pricing site WinBuyer.
“We do a lot of pro bono work with many entrepreneurs, listening to their pitches and giving our insights,” he says. “We recognized there is a big gap in Israel in terms of early-stage investment.”
Mentoring is a large part of the services offered by lool, with advice available to portfolio companies from 14 experts, including Doron Reuveni, founder and CEO of utest, Yaron Galai, CEO of Outbrain and Mike Brown of AOL Ventures.
Lool has attracted investors including one of Time Warner Cable’s major shareholders, says Nissenbaum, “but there is room for more.”
Though concepts are, of course, vitally important, Nissenbaum says it’s just as important to evaluate the personalities behind the products. “It’s all about the people,” he says.