OurCrowd knows that interns can bring great value and manpower to your company or startup. We have created an internship map for you to access all of the internship programs in Israel and contact information you need to connect you to your next intern. Click to enlarge!
Many people don’t realize that the most important element of successful startups is talent, and how that talent is managed and structured. That’s why a great HR team is critical for technology to move forward.
Yesterday, we enjoyed meeting HR leadership at the latest in OurCrowd’s Portfolio Meetups series! Representatives from our portfolio companies, including prooV, CropX, Zebra, Airobotics, BioCatch, CrediFi, Intuition Robotics, Bizzabo, Consumer Physics, VocalZoom, HIL, Syqe, mPrest, Elminda, TechSee, Freighos, Elastic Media, CyberX, and more, got together to listen to a lecture by HR powerhouse on “Building Smart Organizations” over brunch.
Sigal is a strategic-organizational consultant who works with VCs and management teams, and is a trailblazer in combining human capital and business insights.
Here are some of the takeaways we put together:
- Know your business model inside and out.
Every HR professional should be working towards one goal: Growing a core group of team members into a smart network of professionals that are moving towards the trajectory laid out in the company business model. To do this, it is critical to know the business model from inside and out. What is the product, who are the customers, and where are they to be found? What are the advantages of the company? What are the activities and milestones of the company?
All this can be summed up in the golden circle model. The golden circle is comprised of the why as the innermost nucleus of a company, followed by the how encircling, and the whole thing encased with the what. By building outwards, the company model becomes clear and personnel needs can be better plugged in to the overlying team goals.
- There is no optimal organizational structure. It is entirely dependent on the business model.
When it comes to organizational structure, it is important that the company grow in a defined way. But that definition may vary greatly. Every company has a different focus, so basing structure around these is critical for success. Furthermore, some companies may thrive from a hierarchical structure, while others can succeed with a project-based leadership strategy. Some are team oriented, while some are all about individual output. There is no right answer, so map out the business model and work accordingly.
- Incentives are important, but they need to be specific to the business goals
On that same note, incentives are a really great way to motivate a team, and are critical for a team’s investment. However, how often, what is offered, and why it is offered should be in sync with the company model to create a positive atmosphere.
A clear rewards system should be built around larger business goals, not just numbers. If clocking the most hours doesn’t lead to productivity, it shouldn’t necessarily be rewarded. Reaching real milestones that are along the pathed trajectory and not ad-hoc bonuses will make the reward system transparent.
- Build smart teams
Smart companies need smart people. While making personnel decisions, it is important to find the people who fit the mindset of the company, and the organizational structure style. This will ensure mutual satisfaction on the side of the employer and the employee.
There are certain markers for a fully-rounded, smart team member. Executives in particular should possess four major features before being considered for a position: rational intelligence, creative intelligence, emotional intelligence, and social intelligence. This holistic tool box is essential for building a smart team.
- Even the most qualified candidate may not fit the bill; be sure to hire for the position
It all goes back to business model, structure, and the right mindset. A fantastic candidate with an excellent background in the field may look great on paper, but they need to fit into the rest of the team and the company goals. How does that person build towards the business model goals? Have they ever worked in the kind of structure that represents your company, and where would they fit in, given their background? Finally, get to know the candidate; do they have the right mindset to work in the context of your company? If they don’t fit the bill, their experience won’t matter.
We look forward to seeing you at the next portfolio meetup!
Sad you missed it? Check out the Facebook album here. Find out more about the Portfolio Meetup series by emailing email@example.com
Global Innovation Trends: How Corporations are Responding
By Jonathan Pressman
In a world of rapidly advancing technologies, it seems no industry is safe from disruption. Large businesses once thought “too big to fail” are now being forced to keep up with the times or suffer the consequences of being undercut by opportunistic startups. With so many new technologies coming to market, it’s important to know how established corporations are reacting. Here, we examine how some of the world’s most well-known corporations are innovating to keep pace with the rise of autonomous vehicles, blockchain, and artificial intelligence.
Like what you are reading? Our Q3 Corporate Innovation Report is out now.
The advent of autonomous vehicles arguably represents the greatest innovation in the automotive industry since Ford’s creation of the assembly line in 1913. Here’s a quick rundown of what some of the largest OEMs are doing:
In a 2017 report by Navigant Research, Ford ranked number one in the autonomous vehicle race. Ford is tackling the entire autonomous stack from sensors to control systems and fleets. The US manufacturer invested over $1B in Argo AI, an artificial intelligence company employed to help Ford develop its virtual driver system. The Detroit-based automaker also invested $150M alongside Baidu in Velodyne’s LiDAR technology and acquired ride-sharing service Chariot in a $65M cash deal.  Ford is planning to roll out its fleet of fully autonomous ride-sharing vehicles by 2021. If all this isn’t enough to convince you of Ford’s aggressive play to lead the world into an age of autonomous vehicles, the 114-year-old company recently replaced its existing CEO with the chairman of Ford Smart Mobility, Jim Hackett.
Longtime rival and fellow American automaker GM is hot on the heels of Ford. In 2016, GM partnered with Lyft, investing $500M with the intent of developing a ride-sharing network of self-driving cars. The company also purchased Cruise Automation, a self-driving startup, in an acquisition worth $581M. GM has already produced a fleet of 130 self-driving electric cars, which it plans to deploy in California and Arizona this summer. Through its partnership with Lyft, GM has also announced its intent to test thousands of autonomous vehicles as soon as 2018, which will represent a tremendous advance for the American carmaker.
Outside of the US, the Renault-Nissan partnership is pushing to get driverless cars on the roads of Europe and Asia. Last year, Nissan unveiled ProPilot, its partially autonomous driver assistance technology that can be found in select models in Japan. The company plans on gradually adding functional features to the ProPilot, culminating in the release of fully autonomous vehicles in 2020.
Finally, Toyota, the world’s largest automotive company, has refused to be left in the dust in the race for self-driving cars. Following a $1B investment into its artificial intelligence arm, TRI (Toyota Research Institute), Toyota unveiled its first autonomous vehicle in May 2017. With the investment, Toyota is leveraging its AI technologies to support fully-autonomous vehicles in the future, as well as offering a driver-assist system for the present to help drivers stay safe through AI-powered, machine learning technologies. TRI has also recently announced a new $14M investment into Intuition Robotics, a leading AI startup alongside OurCrowd and Maniv Mobility.
Less than a decade ago, the world of blockchain and Bitcoin was practically non-existent. Today, individuals and companies alike are mesmerized by blockchain technology, and can’t seem to get enough of it.
A collaboration between Citigroup and Nasdaq Inc. has introduced blockchain to securities sales. The two companies have teamed up with Chain Inc., a financial blockchain provider. The move allows CitiConnect, Citigoup’s cross-border payment system, to manage large-sum international payments using Nasdaq’s Linq, a private market blockchain technology.  Citi and Nasdaq executed the first private securities sale in December 2015, and are continuing to partner to integrate distributed ledger technology into their payment networks.. In addition, Citi’s Head of Innovation Labs, Ken Moore, said in an interview that the company has built three blockchains, in which it is testing its own cryptocurrency, Citicoin.
Another financial services firm working to implement blockchain solutions into its offerings is Visa. Last year, Visa partnered with blockchain platform BTL to explore automated, blockchain-based interbank payment and settlement solutions. Visa also launched a pilot program with Chain Inc.’s enterprise blockchain infrastructure, which offers faster, more secure global B2B payments. The company is also hiring blockchain engineers, further demonstrating its commitment to a future in which blockchain is a key component.
IBM has taken blockchain to the next level with its March 2017 release of Blockchain-as-a-Service (BaaS), which combines the best of blockchain and cloud software, allowing customers to set up their own secure blockchain networks. IBM Blockchain is the first fully managed service for Hyperledger Fabric, a distributed ledger platform which offers flexible, scalable enterprise blockchain solutions.   IBM Blockchain has already demonstrated impressive traction after being selected to provide the blockchain platform for the Digital Trade Chain Consortium, whose members include Deutsche Bank, HSBC, and Societe Generale.
Despite the practical application of blockchain for financial institutions, the digital ledger technology offers a number of other business uses. Media and information giant Thomson Reuters has taken the blockchain world by storm, investing over $1.5B and launching beta versions of its BlockOne ID and BlockOne IQ oracles. Powered by Ethereum, BlockOne ID uses a wallet and smart contract to help developers secure web applications, while BlockOne IQ allows for the use of Thomson Reuters content and data in Ethereum and Corda smart contracts. The company recently announced the 2017 opening of its incubator, which is seeking startups in innovative technologies, such as blockchain.
Artificial Intelligence (AI)
2016 was a record year for investments in artificial intelligence, with VCs dumping $5B into more than 658 AI startups. AI has the potential to reshape nearly every industry, and according to Microsoft’s Chief Envisioning Officer, Dave Coplin, “is the most important technology that anybody on the planet is working on today.” From virtual assistants like Siri and Alexa to bionic limbs and smart cars, AI has become integrated into our daily lives. In 2016, some of the world’s top technology companies joined forces to found the Partnership on AI to Benefit People and Society. Let’s take a look at what other companies are leading the charge in artificial intelligence.
Nvidia’s recent announcement to train 100,000 developers in deep learning artificial intelligence indicates the company’s clear and ongoing commitment to AI technology. Nvidia is readying itself for the age of artificial intelligence, and already has plans to use its AI supercomputer solutions to power smart cities, prevent diseases, and revolutionize the way we do business. Nvidia’s GPUs were originally designed to reinvent computer gaming experiences through enhanced graphics. Today, Nvidia GPUs have evolved from visual computing to deep learning neural networks and harnessing the power of simulating human abilities, which it provides to over 500,000 developers and 40,000 companies.
Intel’s AI program has been a large focus for the semiconductor giant, but Nvidia has grabbed the public eye. In March 2017, the California-based tech company grouped its entire AI program under the Intel Artificial Intelligence Products Group (AIPG), in addition to investing in a trio of AI companies: Cognitive Scale, AEye, and Element AI. Intel’s $400M acquisition of Nervana Systems, a deep-learning AI startup, is a huge leap forward for the company, which plans to incorporate Nervana’s technology in its server chips in the second half of 2017. 
Salesforce, the world’s leading CRM software provider, is also gearing up for a future filled with AI. Earlier this year, the company joined in a strategic partnership with IBM Watson to help companies make smarter, faster decisions. Einstein, Salesforce’s analytics platform dubbed “AI for everyone,” uses artificial intelligence to automate tasks such as data modeling, and offers recommendations and predictions based on unique business processes.  Salesforce advertises Einstein as a tool that can be used to improve everything from IT and marketing to sales and service.
The leading corporate innovators all have one thing in common–they embrace change. Whether it’s something tangible like self-driving cars or an intangible digital technology like blockchain, the most successful companies are the ones who are constantly adopting new technologies, investing in the future, and never getting too comfortable with the “here and now.”
Want to read more? Our Q3 Corporate Innovation Report is out now.
OurNetwork Q3 Innovation Report: Partnering with Corporates is Not an Option, it’s a Necessity
By Matan Bordo, The Junction by F2 Capital
The following is an excerpt from the OurNetwork Q3 Innovation Report, downloadable here.
“Corporate Innovation” is a phrase that has been thrown around a great deal over the past decade. For many reasons, it has become obvious to global corporations that an innovation model that relies solely on the R&D department or innovating internally will lead them on the path towards obsolescence.
This relatively newfound sense of urgency among corporates is prevalent due to various factors — one being that the cost of launching a startup decreased by 99.9% from 2000 to 2011. This paved the way for the widespread acceptance and practice of the “Lean Startup” methodology, introduced in 2008, within entrepreneurial communities — and even conglomerates like GE — around the world.
Sometimes, corporate innovation is real and has yielded tremendous outcomes for both the startup and corporation. On other occasions, it is just fluff — what CB Insights correctly dubs as Corporate Innovation Theatrics (introducing open floor spaces, trips to Silicon Valley to demonstrate that your firm embraces startups, emblazoning “Innovation is in our DNA” across your “About Us” section, etc.).
As the average lifespan of successful companies shrinks to an all-time low, one thing is clear: successful companies don’t adapt, they prepare. Nobody wants to be the next Blockbuster, MySpace, or Kodak, which went from 170k employees and 85% market share in 1998 to having their business model completely disrupted by digital in three short years.
There are, of course, many reasons where corporates and startups working together would be a recipe for disaster that are oft-mentioned. These are boiled down to cultural dilemmas — a prime example is the corporate “bear hug” of startups, where corporate processes and 100-page “Terms & Conditions” sheets end up stifling the startup’s autonomy and freedom of action.
However, as growth in Deep Technology (AI, Machine Learning, Drones/Robotics) startups begins to surge — the number of AI startups in Israel alone has nearly tripled since 2014 — the imperative for startups and corporates alike to work through these cultural differences is more critical than ever.
The Case for Startups
The “lean startup” methodology doesn’t apply to Deep Technology startups…yet. Due to its blending of science and technology, they face unique problems that a majority can’t simply solve from their garage or with the help of a group of mentors.
These problems, according to a BCG Research Report on Deep Technology Startups, can be boiled down to (1) a protracted time-to-market, (2) complexity of new technologies, and (3) a crucial need for capital early on.
The first two problems can be — at least partially — remedied via partnering with corporates, as AI & Machine Learning startups need large amounts of data to train their algorithms & execute on their vision — and corporates have a substantial supply of it. Additionally, finding that “killer app” or product-market validation can be achieved via commercial pilots with large companies.
The complexity of the technologies involved and the deep expertise of the teams required also necessitates the demand for more capital early on than mobile startups of the past decade. The dilemma is that as the size of Series A rounds have increased so have the milestones required to obtain that money. This has made raising money an even more hellish experience than it already is for Deep Technology startups, considering that many require expensive equipment to experiment and prototype.
The Case for Corporates
In 2016 alone, according to a recent McKinsey Global Institute Study, tech giants including Baidu and Google spent between $20B to $30B on AI, with 90% of this spent on R&D and deployment, and 10% on AI acquisitions.
According to McKinsey, “AI’s dependence on a digital foundation and the fact that it often must be trained on unique data means that there are no shortcuts for firms. Companies cannot delay advancing their digital journeys, including AI.”
The roadblocks towards corporate innovation in this new technological frontier are, of course, the same as they have been in the past — lack of support from C-level management, innovation-hindering corporate processes, and more — but the implications, like with the introduction of digital and social media, are the same.
Early adopters who’ve already begun marching on the path towards AI development and capabilities are starting to build competitive AI moats via data network effects. Eventually the gap will be too wide for those arriving late to the AI party to catch up.
How We Facilitate Corporate Innovation
Unique among early stage investment vehicles for the breadth of its network, F2 Capital maintains strategic partnerships with global giants like HP, SAP, Munich Re, Enel, Deloitte, as well as broader corporate partners eager to facilitate “win-win” commercial pilots. For startups at the cross section of Big Data, Artificial Intelligence, and Connectivity, this translates to access to huge data sets and global customer traction.
As part of its core investment strategy, F2 Capital also set up and operates The Junction, a six-month execution platform (and Israel’s first commercial accelerator) for deep technology startups. Corporate partners are heavily involved in the selection process of the 5 startups that participate per wave for the program — from initial scouting to interviewing and ultimate selection. Partners then influence the development roadmap to ensure resources are prioritized for the biggest commercial opportunities.
This unique model for corporate early stage collaboration has seen the development of new forms of insurance, digital transformations of supply chains, and next generation cybersecurity solutions developed and deployed with end customers. F2 Capital provides $100,000 to each company to cover the practical expenses of flights, as well as R&D, and stands ready to deploy roughly 10x more capital in the next financing round of companies that execute and validate their product market fit.
Wrapping It Up
Despite the very real threat of being made obsolete for not innovating fast enough, conditions are ripe for win-win partnerships and the opportunities are out there. While 95% of 400 deep technology startups surveyed by BCG wish to develop long-term corporate partnerships, only 57% have done so. We believe that the latter percentage will climb to meet the demand for partnerships, and aim to expedite the growth of these partnerships in Israel.
Interested in more content like this? Download the Innovation Report here.
It’s been a big international week for OurCrowd, especially with our friends down under.
OurCrowd portfolio company mPrest, a startup that has developed expansive system solutions and monitoring, among which was developing the system behind the life-saving Iron Dome technology, has attracted international attention to the tune of $10 million dollars. They received
this investment from Vector limited, New Zealand’s largest gas and electric conglomerate, an introduction that OurCrowd made.
mPrest is at the forefront of updating and rethinking monitoring technology for energy use, which could lead to expansive money and energy savings. The startup is a leader in IoT, and has focused considerable resources into becoming the major “internet of energy” software player. This investment from inside the energy industry shows how seriously these solutions are needed. They will start implementation as early as May.
If you have noticed a lot of Aussies and Kiwis in the holy land this week, it isn’t a coincidence. This week marks the 100th anniversary of ANZAC Day, the significant World War I victory of capturing Beer Sheva from the Ottoman Empire by Australian and New Zealand forces. 4,000 global visitors along with Australian Prime Minister Malcolm Turnbull and New Zealand Governor-General Dame Patsy Reddy arrived to mark the occasion.
As part of this momentous celebration, OurCrowd Australia and Asia managing director Dan Bennet led a delegation of high-level investors to explore tech in Israel. Including 30 investors from Australia, Hong Kong, the U.S. and New Zealand, corporate representatives, and business leaders, the delegation went on a five day technology tour, and met dozens of companies, including many promising OurCrowd portfolio companies, in sectors ranging from MedTech and disruptive tech.
And finally, we had another major breakthrough with global epicenter, China.
Chinese technology is taking off according to any measure, but oftentimes VCs and western investors have difficulty accessing the market. OurCrowd has expanded its reach beyond Israel into global territory in order to find the most cutting edge and relevant technology for our investors. Beyond the traditional tech hubs of London and the West Coast, we have invested in India, with car-sharing leaders Zoomcar, in Singapore with Near, and are constantly on the hunt for companies all over the world.
This week, we made our first Chinese investment, making the burgeoning Israeli-Chinese mutual affinity for technology actionable. The investment is in all-in-one travel platform Klook, which has shown major traction in the Asian market, with 1 million monthly bookings. We happy to be investing alongside Sequoia Capital China, Matrix Partners and Goldman Sachs.
These exciting international developments have only highlighted just how eager the international community is for new technology. OurCrowd is proud to be strategically poised to reach and provide a meeting point between east, west, north and south.
In this post, we bring you the top 5 tech events you can’t afford to miss across the world. With the 2018 OurCrowd Global Investor Summit coming up, we know the value of a fabulous tech conference. Been to some of these? Let us know what you learned, and don’t forget to sign up for the 2018 Summit!
This conference switches cities regularly, attracting a varied and supremely startup friendly crowd. With several unique events like thier famed startup battlefield to bring fame and fortune on the winner of the Disrupt Cup, and startup alley, a chance to hear from the latest and most brighteyed new companies, TechCrunch Disrupt is a great event.
Dec. 4-5 2017 Berlin, Germany.
SXSW is one of those events you have to experience at least once. This larger-than-life Texan bonanza is largely focused on interactive film, media, and music, but is a boon for technology surrounding those industries. With multiple tracks, SXSW Interactive shows off emerging technology to the hottest audience.
March 9-18 2018 Austin, Texas.
This conference is held in eight cities across North America, from Dallas to Miami, highlighting the best of their local ecosystems. With their angle on what they deem “Hero Companies”, aka those companies making an impact towards growth and sustainability, it looks beyond the flashiest new startups and recognizes many local upstarts.
Varying dates. Detroit, Toronto, Chicago, Kansas City, D.C., NY, Dallas, LA and Miami.
One of the oldest tech conferences, CES is essentially a tradeshow on steroids, and is the largest event of its kind. With thousands of exhibitions, 170K attendees, and everything tech from hardware to new tech delivery system, this event is a mainstay for conference junkies. It is closed to the public, so be sure to register.
Jan 9-12 2018, Las Vegas, Nevada.
This conference features the best of what the famous Israeli tech ecosystem has to offer, with 100 speakers, 70 exhibition booths and many more surprises, this high-energy one day event shines in the heart of the startup nation. Every breakthrough in AR/VR, AI, deep learning, MedTech/digital health and of course new Israeli darling Mobility Tech, the Summit is a remarkable event put on by equity crowdfunding leaders OurCrowd. Bringing a more international vibe, tiny seed stage startups share the spotlight with corporate giants in a delightful futuristic mashup. And unlike its counterparts, which can run upwards of $1,000, the event is entirely free. Apply here.
Feb 1, 2018, Jerusalem, Israel.
The technology landscape in India is growing, and not without help. India has developed an organized ecosystem that is enabling startups in every step of their growth journey.
India has the third-highest number of startup incubators and accelerators in the world after China and the US, according to a report by IT industry body NASSCOM. And business is booming- in January and June of 2017 $5.5 Billion dollars were invested in Tech startups in India.
While traditionally the prowess of state universities, a host of corporations are now starting to encourage such innovation programs. The FinTech area in particular is benefiting from patronage from banks, co-creating solutions bank-sponsored in accelerator or incubators. OurCrowd is proud to be partnering with one particularly promising Indian accelerator from YES BANK, India’s fifth largest private sector Bank, to enhance their January 2017 cohort of startups for their new accelerator, YES FINTECH.
YES FINTECH, which has graduated a successful inaugural Cohort, in which 9 out of 10 startups ended up with a successful PoC and 5 are preparing to go to market, offers unique benefits to startups. YES FINTECH does not take equity in their startups, but supports key milestones like business expansion and access to funding, both in initial and scale up phases. Moreover, YES FINTECH provides access to a potential banking client- YES BANK, including the YES BANK corporate, retail and SME customers. FinTech solutions can be tested directly with the Bank, and the startups also get access to the bank’s more than 200 APIs.
YES FINTECH is also providing a co-working space for a year after the cohort program ends in their Indian headquarters, a great perk for global startups looking to expand into the Indian market. In their summer cohort, YES BANK ended up working with Paykey (Israel), which is a digital payments solution, across all social media platforms, and soCash (Singapore), which is building a cash distribution network via merchants.
Other YES FINTECH partners include MaGIC (Malaysia), Lattice80 (Singapore), Nestholma (Finland), Holland Fintech (Netherlands), and QC Fintech (US), amongst other major global Fintech hubs. These bridges are mutually beneficial for startups, both sourcing FinTech potential from these countries, while also providing YES FINTECH affiliated startups an opportunity to expand into these markets.
OurCrowd encourages Israeli Fintech startups to look into this tremendous opportunity- the Autumn cohort applications are open now!
See more from our partner and apply now at www.yesfintech.com.
Become a Self-Aware Investor
“Time is the friend of the wonderful company, the enemy of the mediocre.” This famous quote by Warren Buffet – who is currently valued as having a total net worth of $78.7 billion – reflects the well-known tendencies of this wildly successful investor to make incredible stock picks, and then to hold his stocks for a long time.
But how does one identify what Buffet terms a “wonderful company”? What drives an individual’s investment decisions? With so many companies and markets to choose from – and endless “expert” advisors offering advice – how does one cut through and identify the right investment route?
Blueprint for Success
As with other situations where there are just too many choices, and you need to weed through the options and figure out find what you’re really looking for – for example, as a student choosing a university or deciding on a career – it’s partly a question of self-definition: understanding what you want, what you believe in, and what your strengths are.
The key to effective decision-making in these circumstances is to develop a personal strategy, i.e., to write out a roadmap that reflects your philosophy and approach.
Every famous investor has a personal strategy. Kevin O’Leary, with a net worth of over $400 million, wants his money to bring back what he calls “prisoners of war.” Peter Thiel, with a net worth of $2.2 billion, talks about identifying disruptive technologies that change how we live, work, and play. And Carl Icahn, with a net worth of $16.6 billion, believes it’s best to buy something no one wants and then get actively involved in the company, bringing about whatever changes are necessary to deliver more value to shareholders.
Bottom line: By creating a personal strategy of investment – what’s known in the trade as an investment thesis – it becomes easier to figure out just where you should invest.
Investing in the Startup Space
An investment thesis is particularly significant in the startup space, which is more risky than other kinds of investment options – and where your investment is, by definition, medium to long term.
As Fred Wilson, co-founder of NY-based VC firm Union Square Ventures, pointed out, “So many folks in the venture capital business are sheep that just want to follow the herd.”
It’s easy to ride a trend and get lured by the unicorns. By first formulating – and then following! – a well formulated investment thesis, you avoid the trends and maintain the ability to keep your eye on the big picture.
So Let’s Get Started
The first step in creating an investment thesis is simply to brainstorm by opening a fresh Word document and reflecting on what is important to you. Think about how and where you are interested in investing, what kinds of companies attract you, and where you feel a natural pull.
Do not self-edit. At this stage of the process, just go with your gut.
It is important to formulate your thinking about the full range of variables. These include parameters such as industry, team profile, investment stage, investment amount, co-investors and partnerships, and target market.
Next, start doing some research. Get into the details: Is there a particular region that attracts you? How much risk can you stomach? What would work for you practically?
At this stage, it is important to put any personal expertise or experience “front and center.” Leverage your professional background or training, where relevant, to your advantage. For example, do you have your finger on the pulse of a specific industry? Do you have insight into a particular sector? If yes, check you are using that information as investment criteria.
Become an Expert
Once you have articulated the ideas that sit at the basis of your investment thesis, educate yourself by reading extensively about the ecosystem you are interested in – both from the perspective of the incumbents, and from the position of a startup.
Publications like the Wall Street Journal, the Financial Times, and Bloomberg provide plenty of information about incumbents. Each major publication has a technology section featuring innovation as well as columnists covering specific areas. For example, Matt Levine from Bloomberg provides invaluable insight into the financial markets and fintech.
For the startup perspective, the main information hub is CrunchBase, but there are other valuable resources out there. Silicon Valley legend Eric Reis’s blog “Startup Lessons Learned” and Mattermark Daily are great places to start. And there are publications and blogs dedicated to specific industries as well. For example, CoinDesk and Ethereum Blog are good sources on blockchain, while medGadget has the latest in medical technology.
They say that death is in the details. In developing a solid investment thesis, you need to explore the specifics of your strategy. The following sections outline some of what that includes: a company’s sector or industry, stage, region, and management.
Identify a Sector
For some, the choice of a sector or industry is obvious. For example, you may feel that you want to stick with an area you know well. Doctors are frequently attracted to medtech deals for this reason.
If you know good people in an industry, that also “counts” as expertise. Or, you can choose to rely on investment professionals and consult with people in your network.
Alternatively, you may be drawn to invest in an area that you feel passionate about. For example, for some, something like drones or robotics are a real pull.
What’s important here is to make sure you have solid expertise in the field and are aware of market trends in the industry. In assessing a sector or industry, there are many parameters to take into consideration. Some of them include assessing barriers to entry, the growth of the entry, what the profit margins are, and whether there is the potential of obtaining a high return on capital.
The Question of Stage
What is the optimal stage of the company that you would consider ideal for investment? Do you want to invest in seed, early, or late? While investing in later stages often means less risk, some investors prefer earlier stage startups, when the valuation is lower.
However, when it comes to early-stage startups, comprehensive research is crucial. You will want to make a very careful determination regarding the company’s chances of success.
You may also want to consider reducing the risk of early-stage investment by diversifying –investing in a larger number of startups. Alternatively, you can reduce the risk by going for multi-stage investments, which provides a nice blend.
Not the What but the Where
In the course of your research, you may discover that your industry is particularly hot in a specific geographic region or even in a single country. Some countries and regions develop unusual specializations or gain expertise in a particular industry.
Alternatively, your decision might be ideologically or emotionally motivated. You might want to invest in your own country out of a sense of patriotism, for example. Or it can go the other way: You may have a particular passion for a country on the other side of the globe – a personal connection to a more remote region.
Israel is a good case in point. Out of the many investors who show interest in Israel, some opt to invest in Israel out of a sense of identification with Israel’s people and history. Others choose to invest in Israel for purely business reasons – perhaps, for example, because they are interested in cyber, and know Israel is the world leader in this field.
And Don’t Forget the Who
In defining an investment strategy, it’s important to consider the significance of a company’s team. Are they first-time founders, or serial entrepreneurs? Do they have the necessary expertise? And, no less important – do they work well together?
Many startups start out with a good idea and may meet your definition in terms of industry, stage, and region, but successful development of an idea also requires an A-team. It can make a big difference if you take the time to study the track record of both the team and its leadership. Elements of good management to look out for include high insider ownership, clean accounting, infrequent restating of earnings, and effective allocation of capital.
Milk the Ol’ Network
After you learn as much as you can from reading articles online, seek out experts who you trust. Find people through your own network, as well as through your network’s network.
Find inspiration through the stories you hear and gain an understanding of what peers and experts are doing. Most important, get solid, critical feedback about your ideas and approach.
Don’t minimize the importance of bouncing ideas off of friends. Bill Gates and Warren Buffett employ this strategy, regularly bouncing ideas off each other. It’s is a crucial stage in the process and a key element in building your success as an investor – because if you can’t convey to a friend why you’ve come to a particular conclusion and defend your position effectively, it’s time either to do more research or to go back to the drawing board.
Keep an Open Mind
While you are reading and consulting, don’t stay married to your original thesis. Once you learn more about the industry, region, or market that you initially targeted, you might discover that it’s not the right place to invest your money, after all.
At the same time, don’t be too concerned about breaking away from conventional wisdom. You may have a gut feeling that goes against what most experts are saying, and that’s fine.
However, if you find there are solid reasons to open everything back up and re-assess your initial strategy, this is the time to do it. Dig up the courage to tweak your original approach.
Stay the Course
The advantage of doing an excellent job in developing a solid investment thesis is that it helps you avoid making the kinds of mistakes that result from rushed, excited, or inconsistent decision-making. An investment thesis gives you a plan of action that is carefully researched and explored.
Let’s have a look at Uber, for example. In recent years, it has been all too easy to get excited about Uber. We’ve known for a long time that the company was heading toward unicorn status.
However, that does not mean Uber is the investment that you’re looking for. If your investment thesis included “the early-stage mobility space with huge growth potential,” the Uber of today is not your intended investment target – though it may seem enticing. Uber is late, and it’s big.
Instead, by following your thesis you can avoid riding the trendy wave of one hot company and opt to invest in an early-stage company that you believe has real potential.
Put It into Action
The thesis helps increase your chances of investing in a big win by forcing you to define a strategy that incorporates your own expertise, personal perspective, and vision of the future. These elements combine to differentiate your thesis. But at the same time, it’s the hard work of dotting the i’s and crossing the t’s – conducting the research, networking, and giving all of it time and thought – that makes it precise and reliable.
Once you finish, it is time to take the plunge. Start investing! Follow the guidelines of your thesis when you choose which companies or funds to invest in – that’s the crucial piece. Successful venture capitalist Reid Hoffman perhaps summed it up best when he said: “It’s useful to be able to recognize whether you’re on track or not. To have the belief, but also paranoia about am I tracking against my investment thesis.”