By Arik Kleinstein, Founding Managing Partner, Glilot Capital Partners
Blog Series | Part Two | From Unknowns to Unicorns
Over the many years I’ve been part of the technology and finance scene, I have seen a very clear evolution with respect to both VC and startup cultures. These are two intertwined industries that are unique in that they do not rely upon experience or past successes to determine future success. Rather, they require agility and keen observations into the changes that are taking place at all times. Over the past decade, I have noticed incredibly positive shifts that are contributing to both VC and startup success in Israel today.
The Israeli Startup Market is Maturing
The total amount of money flowing into the israeli market has grown significantly. When Glilot started in 2011, VCs managed about two-billion USD. Now in 2021, we are seeing a significant increase to around ten billion USD. Furthermore, when Glilot first started, the big companies born in the 90’s such as Checkpoint, Verint and Nice were trading at a one to two billion USD market cap. There were no unicorns – the idea of a startup with over a one-billion USD valuation was unheard of in Israel. This has changed completely over the last decade. We now have a large, mature industry that is working like a well-oiled machine.
When the Startup Nation launched in the 90s, the focus was primarily on semiconductors followed by telecom, with enterprise software not being on the radar. The last decade changed this and thus began the era of enterprise software. The list of exits over the past decade has largely consisted of startups serving other companies, and turning Israel into a hub for multinational companies as a result of the quality of the startups here. The profile of Israeli entrepreneurs has also changed to a more experienced bunch and it is the companies of second-timers or entrepreneurs that came from C-level tech and business positions at large companies that Glilot and other VCs have focused on.
An Urgency for Working at Startups
Another significant change that occurred over the last decade across the Israeli tech industry is the increased desire to launch or work for a startup. The demand to work for an innovative company that will change the world is very high, compared to the desire to work for a big stable company. People want to make an impact. For Glilot, this notion resonated from our inception and our investments in, and support of, these startups is what defined our brand identity. Now, a decade later, Glilot has grown to a center-stage VC fund. To this day we have maintained our vision of a founder-friendly fund, which provides as many resources as possible to our portfolio companies in order to drive their growth as trusted partners.
Continued Optimism as Technology Takes Center Stage
With the great developments that took place over the past decade, I also hold a great deal of optimism about the next decade. I truly believe in a bright future. Technology will continue to take center stage and it will be driven by continued focus on the cloud and cloud migration (which accelerated during the pandemic). I believe we will see less investment in companies that cater to huge data centers, but rather those with a focus on cloud infrastructure (IaaS, PaaS, SaaS). Fortunately, this is where Glilot is strong.
Furthermore, when we began, not many startups aspired to be big, but rather to make a quick exit. Today, startups are planning to grow through to IPOs as opposed to early exits. Glilot has positioned itself well to support these companies, with its Value Creation team, robust Advisory Board and most recently, its new early-growth fund, Glilot+. Of course we will see challenges throughout, but the market is responding to these trends and the needs that come with them.
Building a startup is like building a physical building. The foundation is very important, which is why we at Glilot focus on providing unique support at the start of the startup’s journey. We, along with our portfolio companies remain flexible and agile, yet strategic. Successful startups think big and broad but are strong in product technology. Without the ability to do both well, they will not succeed. Finally, it’s still all about the people – not just the Founders but also the first hires across the board – whether in development, marketing, sales or the like. Developing the capabilities to get the best product out there with right people is key. Glilot has remained true to its vision which I believe is a driving force for success over the past decade and will continue to guide us in the future.
For more information, please contact Arik Kleinstein, Founding Managing Partner, Glilot Capital Partners
Glilot has remained true to its vision, which I believe is a driving force for success over the past decade.