Start-up tips, by Face­book’s backer

The Jewish Chronicle - - & Business Finance - BY CANDICE KRIEGER

MOSHE MORis the man for as­pir­ing en­trepreneurs to im­press. A part­ner at pri­vate ven­ture cap­i­tal­ists Grey­lock — the back­ers of Face­book — his job is to in­vest in tech­nol­ogy start-ups in Is­rael and Europe.

Founded in the US in 1965, Grey­lock has more than $2 bil­lion-worth of com­mit­ted cap­i­tal un­der man­age­ment and has pro­vided eq­uity cap­i­tal and sup­port to over 300 growth com­pa­nies. Mr Mor, 46, heads up Grey­lock Is­rael — a $200m in­vest­ment fund to fo­cus on lo­cal in­vest­ment op­por­tu­ni­ties, plus those in Europe, par­tic­u­larly the UK. The Is­rael fund has in­vested around $100m in more than 20 com­pa­nies and hopes to close its first UK in­vest­ment in the next few weeks.

What does Mr Mor look for? He says there are three fun­da­men­tals: the tech­nol­ogy; the mar­ket; and, most im­por­tantly, the peo­ple.

“We try to en­sure that ev­ery in­vest­ment will have at least some record on all three of th­ese. Firstly, there is the tech­nol­ogy prod­uct. We are looking for things that are not go­ing to make just an in­cre­men­tal im­prove­ment but have a fun­da­men­tal in­no­va­tion and deep in­tel­lec­tual prop­er­ties.

“Se­condly, we look at the po­ten­tial of be­com­ing a large mar­ket. If the mar­ket is grow­ing but you are not the great­est on other fronts, you can still be­come suc­cess­ful. But you can have the best com­pany in a niche that’s not neces- sar­ily go­ing to get you too far.” But the most im­por­tant fac­tor by far, he says, is the en­trepreneurs and the team. “We are looking for peo­ple who ideally have had en­tre­pre­neur­ial ex­pe­ri­ence be­fore, but not al­ways. They need to have stay­ing-power and in­no­va­tion. So, we are first and fore­most in­vest­ing in peo­ple who will make it hap­pen.”

Mr Mor says that Grey­lock re­ceives ap­proaches from up to 200 com­pa­nies a month. Only one-fifth are taken fur­ther. His port­fo­lio in­cludes Fare­cast, an air­fare-pre­dic­tion web­site, which was sold to Microsoft in Fe­bru­ary; soft­ware com­pany ClearFor­est, ac­quired by Reuters; and Siliquent, a de­vel­oper of eth­er­net hard­ware which has been ac­quired by Broad­com.

In­vest­ment i n start-ups con­sti­tutes around 75 per cent of Grey­lock’s ac­tiv­i­ties. “This could be $200,000 for a pro­fes­sor and his idea to get go­ing. That’s our bread and but­ter and Grey­lock’s fo­cus.”

The re­main­der is ploughed into ma­ture com­pa­nies, where there is an op­por­tu­nity to add value. The main area of out­lay is in IT: soft­ware, mo­bile tech­nol­ogy and the web econ­omy.

Over the past two years, the firm has started ven­tur­ing into clean tech­nolo­gies: so­lar, wind and en­ergy sub­sti­tutes. “We think that over the next five to ten years, that will be­come a ma­jor in­vest­ment area and we will con­tinue to in­vest heav­ily in that space.” Grey­lock does not in­vest in life sciences or biotech­nol­ogy.

What have been the most suc­cess­ful in­vest­ments? “Ob­vi­ously there is Face­book. I think it would be a lie for any­body to say, in­clud­ing the founder, that they ex­pected it to be such a huge suc­cess, but that’s the beauty of the web. If you are suc­cess­ful, it can be very quick and very sig­nif­i­cant.”

He cites busi­ness-ori­ented so­cial­net­work­ing sites LinkedIn and Data Do­main, a data-backup spe­cial­ist that had been trad­ing at more than $1 bil­lion, as other ex­am­ples.

A for­mer cap­tain of the mil­i­tary in­tel­li­gence branch of the Is­rael De­fence Forces, where he served for six years, Mr Mor com­pleted an MBA at Har­vard Busi­ness School in 1992. Two years later, he co-launched soft­ware com­pany SPL World­Group. He led it through rapid ex­pan­sion to reach around 900 em­ploy­ees and $150m in rev­enues world­wide.

He joined US-based Grey­lock in 2000, to front its Is­raeli in­vest­ment ac­tiv­i­ties — the com­pany’s first ma­jor over­seas op­er­a­tion out­side of the US. “Grey­lock had pre­dom­i­nantly in­vested in North Amer­ica. It was an op­por­tu­nity for me to get closer to Is­rael and the en­tre­pre­neur­ial scene here.

“We felt that Is­rael was the clos­est to Sil­i­con Val­ley and very com­pact. You could fly to Is­rael for three days and cover all the cen­tres of tech­nol­ogy. It was an ef­fi­cient way for us to start in­vest­ing over­seas.” Mr Mor re­lo­cated to Is­rael in 2005 when the Is­rael fund was launched.

He ac­knowl­edges that times are tough in the cur­rent eco­nomic cli­mate. “The sit­u­a­tion ob­vi­ously has an im­pact. First and fore­most, it im­pacts upon the com­pa­nies we in­vest in. They are fac­ing a tougher en­vi­ron­ment out there. Our ad­vice to them is to be proac­tive and be cau­tious. We are try­ing to raise more cap­i­tal for our com­pa­nies so they will be well-stocked for rainy days. We ad­vise them to be con­ser­va­tive in terms of ex­penses, and we are try­ing to drive the more ma­ture com­pa­nies to prof­itabil­ity — of­ten at the ex­pense of growth. We want them to be prof­itable rather than fast-grow­ing at this time.”

He adds: “The en­vi­ron­ment is def­i­nitely go­ing to make it hard to raise cap­i­tal for ven­ture funds and cre­ate a nat­u­ral process of fight for flight, where the strong funds will get stronger and the weaker funds will find it hard to raise money.”

Ear­lier this year, Grey­lock re­cruited a Lon­don-based part­ner to help its Euro­pean busi­ness de­velop- ment and form closer ties with lo­cal ven­ture com­mu­ni­ties in the UK.

“It never ceases to amaze me how much in­no­va­tion is out there,” he says.

But he ad­mits there are draw­backs. “It’s tough to sift through all that and de­cide on a few. You say ‘no way’ a lot more times that you say ‘yes’.

“It’s hard to say no, be­cause al­most all en­trepreneurs are en­thu­si­as­tic about their ideas. It’s a tough call, and any ven­ture cap­i­tal com­pany who tells you they have never missed any­thing would be ly­ing. We all make mis­takes and miss good op­por­tu­ni­ties, but this isn’t about the com­pa­nies you miss but the com­pa­nies you do in­vest in. Just make sure that they are suc­cess­ful.”

Mr Mor di­vides time be­tween his home in Her­zliyah and Sil­i­con Val­ley, where Grey­lock’s head offices are lo­cated.

Ven­ture cap­i­tal­ist Moshe Mor of Grey­lock says clean tech­nol­ogy is now a ma­jor growth area

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