BloGiza

New Avenues in Seed-stage Fundraising

There is an old saying, many variations of which have appeared at various times, that goes, “One time is happenstance, twice is coincidence, three times is a pattern.” Based on this logic, I hereby declare the hot trend in the Israeli high-tech investment community to be organized very early-stage financing.  

Exhibit number one: a fascinating piece written by Bill Burnham called “The Great Abdication” in which he writes about the current challenge that Internet/Media/mobile apps startups face when trying to raise money these days.

“Anyone who has recently spent anytime fundraising for a consumer internet start-up in Silicon Valley quickly comes to an inescapable conclusion: there is effectively no Venture Capital available to Consumer Internet startups.”

To summarize his main points: There is a mismatch between the ever-shrinking cost of starting up a Web startup and the ever-growing size of VC funds who are looking to deploy larger – rather than smaller – investment sums   Many VCs don’t get the Internet/Media space and see success and failure as almost entirely random. (Not a joke – the number of times I’ve heard older VCs compare Internet investing to investing in movies)

Exhibit number two: IVC’s recent survey of investment activity in Israel (noted, among other places, here)  which shows a sharp drop in first-time investments by Israeli VCs from 2008 to 2009, albeit a slight increase in the number of seed-stage investments.  

The picture therefore is not necessarily a happy one if you are a very early-stage Israeli Internet startup, especially a B2C oriented one. Whether or not this is due to Israelis’ inability to create Internet success stories is a subject for a different blog post.  

So, what are the options for your average very-early stage Internet company? The obvious answer is angel investors, whether solo or as groups. This is your best bet to get enough money to develop your product/technology and get it to the proof of concept stage. The main drawback is that angels tend to make smaller investments, usually sub-$500K and may or may not bring any added value to your venture.  

Which brings us to Exhibit number 3: Robert Scoble has also noticed this trend and also notes the rise of organized groups such as Y Combinator and others which provide both investment, centralized services, and advice to puppy startups in order to get them to a point where they can raise a more substantial financing round.  

As of yet, Israel lags behind our friends in the States, lacking both an established Y Combinator and dedicated early stage funds such as Union Square Ventures or First Round Capital.  

The good news is that we are beginning to see a little bit of movement in this direction. In recent weeks we have heard of three different types of fund, all of which are geared towards helping out very early stage companies:

• Platonix Joint Ventures - Platonix offers business and technological development for entrepreneurs with interesting ideas in the world of software. Platonix works on the “sweat equity” model, offering their services in return for equity rather than directly making investments
• Yatir VC - Set up by Avi Domoshevizki (late of Battery Ventures) and Sani Sanilevich they offer technological and business mentoring as well as early stage financing
• Kima Ventures - Set up by Jeremie Berrebi and others, Kima is a Y Combinator-type micro fund looking to invest small amounts of capital in many early stage startups in Israel and Europe

I should take the opportunity here to mention Giza’s Ofek Program as well. Although we are looking for more developed companies than early-early stage, Giza is looking to invest sums in the $500K range as well as looking to syndicate with other investors for larger rounds in early stage companies.

Other funds have their own takes on early stage investing. We shall see where things develop.

Internet is Fun!

Another one out of the gate!

This week marks the official public launch of a second Giza Ofek Program company. This time around, the company is Viral Gurus who have opened their site to the big wide Internet.

Viral Gurus operates a site called Internet Is Fun. The name is pretty descriptive: Internet is Fun provides you the user with a new way to share all those interesting video clips, slide presentations, jokes, sound files, and other fun stuff that you normally get via email.

Internet is Fun still allows you to email these things to your friends and acquaintances. But it also adds a couple of new and useful functions. For instance the service allows you to:

• Have a discussion with your friends about a specific item - Does that YouTube video you got remind you of Haim in accounting? You probably won't leave a comment to that effect on YouTube, but you can here where it's relevant
• See how an item got to you and how it spread once you forwarded it - Internet is Fun tracks the viral spread of each item. You can see the chain of friends that led the item to your doorstep. More interestingly, you can see how an item spread out once you forwarded it. You send it to 10 friends and two weeks later more than 2000 people have seen it - cool!
• Collect all your fun items in one place - Internet is Fun automatically saves all the items you upload and forward to your own personal, customizable page, your "funblog". (This is like what Tumblr and similar microblogging sites enable you to do).

The site is open to everyone. You can check out my own funblog here. Feel free to friend me and let the fun begin.

Introducing: IMScouting

Attention football fans: IMScouting is here!

Today marks the official public launch of IMScouting, one of Giza’s Ofek portfolio companies, which has developed an information service for the professional football industry (“soccer” to you guys in the US).

In short, IMScouting aims to be the world’s leading information source for professionally traded football players. The company maintains an in-depth database of players from across the globe, and offers a wide range of features including:

•    Full statistical information on players from over 40 countries
•    Exclusive professional performance evaluations
•    Injury reports
•    Comparison graphs
•    Video highlights
•    Contract information
•    Market values and salary estimates

The full IMScouting service is aimed at football professionals: scouts, agents, managers, coaches, and anyone else needing in-depth information about players.

However, the site has plenty to offer even if you are not a professional. IMScouting’s free open area contains all the statistical and performance information, as well as an advanced search engine. You can use it for all your fantasy football needs or just as a useful complement when reading the sports pages.

IMScouting was founded by Ronen Carmona and Zeev Reznik, two entrepreneurs with a real passion for the sport (and in Zeev’s case, an insane amount of knowledge about the football industry). Giza invested in the company at the beginning of 2008 along with a group of angels.

What did we see in this investment? First off, two very passionate founders. Secondly, an interesting relatively untapped vertical: Football is a multi-hundred billion dollar global industry. Thousands of players are traded each year, but despite this football professionals don’t have a good way to search for talent. IMScouting hopes to answer this need.

Third, the company has a key competitive advantage. The founders managed to recruit Pini Zahavi, who is considered to be one of the world’s leading football agents. Pini, who operates here and in the UK, has been involved in many of the highest-profile transfers in European football over the last two decades. He serves as a member of the IMScouting board and is highly active in helping promote the company.

We wish the guys the best of luck and invite everyone to check out the site.