If you’ve been paying attention, or maybe even if you haven’t, surely you’re aware that the markets are not doing so well right now. There are layoffs, more reluctance on the part of investors to deploy capital, and as a result, many companies are struggling to keep the lights on.
We had the chance to sit down with one of the pioneers of the venture world in Israel to discuss the markets, along with many other topics.
Before we jump in, a bit about Uri Adoni.
Sanara Capital focuses on A-B round companies in digital health, bioconvergence and medical devices.
Uri is also the author of The Unstoppable Startup – Mastering Israel’s Secret Rules of Chutzpah, recently published by HarperCollins in the US and by Tsinghua University Press in China.
Prior to Sanara Capital, he was a partner at Jerusalem Venture Partners for 13 years, serving on numerous portfolio companies’ boards, both early and late-stage ones.
JVP is one of Israel’s leading funds with an impressive track record including many M&As to global corporates and IPOs on NASDAQ.
While at JVP, Uri was highly active in forming a new and unique impact fund, Takwin VC, focusing on investing in Arab entrepreneurs. He was also a member of Takwin’s board and investment committee.
Prior to JVP, Uri was the CEO of Microsoft Networks (MSN) Israel for seven years.
In his military service at the IDF, Uri commanded a combat unit and achieved the rank of major.
Fun fact: Uri is a graduate of Rimon School of Music, he plays the guitar and the piano, and is a member of the Journey Band, whose members all come from the Israeli high-tech ecosystem.
So let’s just jump right in.
Please share your backstory and how you ended up where you are professionally.
Back in the 90s I was a partner at one of the leading advertising agencies in Israel. I vividly remember the first time I was introduced to the Internet, way back in 1995, and it just blew my mind… It was as if someone opened for me a window into the future.
Later on, I told my partners at the agency that I believe this new media could revolutionize the advertising business, and we should tap on the opportunity that it brings, but also be cautious of the threat…
We opened an online department, but it was more of a small side business and I thought it was too little given the opportunity.
I decided to leave the agency and focus on this new and exciting media. One of my partners told me at the time, “You’re crazy, this Internet-thing will never catch-on.” Until today, every time we meet, he laughs at himself for that.
After I left the agency, I joined MSN Israel. They were looking for people who believed in this new media called the Internet.
A year later I became the CEO, and ran the company for almost seven years. It was a fascinating time and an amazing “management school” working for such a great corporate-America company.
During my time at Microsoft, I had the opportunity to meet and assist various startups that wanted to build partnerships and collaborate with Microsoft.
I loved the interaction with the founders and the startups, and after completing my job at Microsoft, I decided that this is what I want to focus on next.
At JVP, I had the opportunity to meet thousands of startups and to invest in quite a few of them.
Being a Jerusalem-based fund, part of our work was to build and develop the Jerusalemite high-tech ecosystem, together with the other Jerusalem-based stakeholders, and JVP had a very instrumental role in doing it.
Following 13 years at JVP, I was working in Miami for about two years, assisting a US-based company to build and develop the high-tech ecosystem there – “exporting” the Jerusalem high-tech model that was proven to be very highly effective.
As part of my work there, I was exposed to many health-tech startups and innovations in this space, and decided that this is the next thing I would like to focus on.
And so, two years ago, I joined Assaf Barnea from Sanara Ventures, to launch a new fund called Sanara Capital.
What are some trends you’ve seen change in the tech world over your long career in venture?
- Understanding the market need before developing the technology. For many years Israeli startups started their journey by developing a unique and innovative technology, and only after doing so, they asked questions such as “What is it good for?” or “What market should we focus on?” or “What would be the best application for this technology?”
Many companies failed due to their lack of understanding of the market they should focus on, and the lack of product-market fit.
This has changed dramatically. In most cases today, when you meet entrepreneurs, they usually have great answers when asked about the application, the market, their competition and go-to-market strategy. Naturally, most of them still develop a unique and innovative technology, but with their finger on the market’s pulse.
- The importance of a great team. In the past, many entrepreneurs didn’t appreciate enough the importance of the founding team and the management team of the company. They were willing to compromise on the experience, the professionalism and the diversity of the team, believing that if the technology is good, it will overcome any issue in the management team.
Many of them were proved wrong. That has changed. More and more entrepreneurs are spending a lot of their time looking for the right cofounder or management member, and not compromising until they find the right match.
Since one of the most important things for any VC when looking at a company is the strength of the team, this is a very good trend as it is raising the chances of the company to raise capital.
- A high sense of urgency to reach the market. In the past, many entrepreneurs took their time regarding their go-to-market, and spent a lot of time developing the technology and perfecting it with more and more features before going to the market and approaching potential clients or strategic partners.
As time went by, many startups realized that it is not necessarily the best product which wins the market, but in many cases it’s the first to reach the market and to claim to itself the disruption and the new proposition.
More and more entrepreneurs today are talking to the market in parallel to the development of the product, receiving feedback and building their pipeline as the product is being developed.
In some cases, a potential client or a strategic partner may function as a design partner and be highly involved in shaping the product.
The markets right now are not pretty. What are your thoughts on how this will affect the tech world? Are you worried?
The history of economy teaches us that there were, and there will always be, cycles. Sometimes when we are in the midst of a storm, we tend to forget it, but we shouldn’t.
In my nature I’m always optimistic, and since I believe we are still in the early days of tech, there are still endless opportunities for new companies, innovative technologies and disruptive propositions.
In the past, high-tech was a very specific sector. Today, on top of the traditional sectors of enterprise software, cybersecurity and such, almost any sector you can think of has a technological development and innovations that are changing the sector: health tech, food tech, fintech, prop-tech, clean tech, ed tech, sports tech, insure-tech, ag-tech, mobility tech – just to name a few.
High-tech is no longer a vertical, it is everywhere and affects every industry. Corporates realize that if they don’t embrace new technologies, they are risking the existence of the company.
Technology is not a nice-to-have anymore, it is a must-have, and there are quite a few examples of companies that have disappeared since they had not adopted this approach soon enough.
So, in that perspective, I’m a big believer that the future is bright for innovative tech-related companies.
What do you look for when you invest?
We usually look for three main things:
- A great team – that includes talented people, who know how to listen, mainly to the market.
They need to have true passion for what they do, and they need to have a high level of conviction that they are the ones who will lead the change in the market they’re targeting. They need to have a high sense of urgency and know how to respond fast when needed. On top of all these, they should be fun to work with and be able to have an honest dialogue when things don’t go well. It’s a long ride, with many ups and downs, and you should have really good relationships in order to overcome it together.
- A growing market that is not yet cluttered or dominated by other players.
It could be a new market, or an innovation that completely disrupts the existing solutions in the market. A market that if the company plays its cards right, has a real potential to become the category leader. If the market is already cluttered, or has a few companies that are dominating it, and the startup doesn’t bring a completely new and disruptive proposition, there’s no point in investing in it.
- A unique product that meets a real market need (a must-have) and has an edge over its competitors.
The company needs to have a significant competitive edge that will give it the time it needs before its competitors catch up. During this time, it should be able to establish market traction, and preferably market dominance over potential competitors. In many cases the competitive edge will come from technological superiority, and thus it could be a significant advantage to have an innovative and unique technological solution.
However, a startup should always remember that the success of a company is not only based on its technology, but on many other factors such as the product, the go-to-market, the distribution channels, the pricing and many more.
What do you not invest in and why?
We are not investing in pure bio companies. This is not our expertise, and it is a different ballgame in terms of the size of the checks, the average investment period and the time-to-exit.
What do you think is the main contributor to Israel’s success in the tech sector?
One can think of a long list and many factors that explain the success of Israeli tech, such as the vibrant ecosystem, the army role in growing technological talent, the commitment and support from the government, the strength of the Israeli academia, the presence of many multinational corporates in Israel, the multistage funding available, and others.
But these could be found in other countries as well, and they are not as successful as Israel. So, my belief is, that you need all these, but above them, the one thing that truly differentiates Israel is the entrepreneurial culture, and within it, the Israeli chutzpah (I happened to write a whole book about it).
It is the positive side of chutzpah that enables entrepreneurs to challenge the status quo and existing solutions, and come up with new and innovative products that are disrupting industries and challenging traditional category leaders.
What are the top 3 technologies you’re most excited about?
Naturally there are many more than three technologies I am excited about, but if I have to choose only three:
- Quantum Computing
Around 2.5 quintillion bytes of data are created per day… a quintillion is 1,000,000,000,000,000,000. To give a more concrete example, Google receives more than 3.5 billion searches every day, billions of messages are exchanged on WhatsApp every day, each Internet user is generating more than 1.7MB of data per second… this is not “big data” anymore, it’s “humongous data” and it’s growing exponentially every day.
Quantum computers are expected to revolutionize the computational world and will enable us to leverage these endless amounts of data for highly accurate predictions, in various verticals and applications such as drug discovery, financial markets and natural-language-processing.
Moreover, this new computing power will enable us to resolve highly complex problems in a matter of minutes, comparing to years with current computers.
- Highly advanced 3D printing.
Whether it is printing of living tissues or living organs that will revolutionize healthcare, or food-printing that could solve so many of the issues that the human race is facing today, these new capabilities will not only change industries, but will have a major effect on our health, our quality of life, and on the planet.
- Nanobots injected into our bodies
These tiny robots could be used to constantly monitor for maladies and symptoms, and to stream this information 24/7 for ongoing monitoring. They will be able to alert to any change or threat as soon as it arrives, and before it evolves.
Another very important application of these nanobots is in drug delivery. Today, many of the drugs are not targeted, and they are spread around the body without knowing where to go. A friend of mine once used the analogy that it is like sending a pizza guy to deliver a pizza in New York without having an address. One of the main advantages of these nanobots will be their capability to take a specific drug, and deliver it very accurately to the right place at the right time with the right dosage.
Finally, what’s the most important advice you’d give a first-time entrepreneur?
Since I believe that a great team is the basis for what makes a great company, my advice would be: “Don’t be afraid to hire people that are better than you.”
CEOs or founders don’t have to be the best at everything they do; it’s impossible. They need to be confident enough to bring the best people they can, and if they hire well, these people in most cases should and will be better than them in their field of work.
Those are some incredible insights and I, for one, agree with Uri that the hysteria about the markets is unwarranted and that everything will be ok.