2024 VC Survey"Anytime we’re threatened, we become more Israeli"
2024 VC Survey
"Anytime we’re threatened, we become more Israeli"
Pitango First’s Eyal Niv joined CTech to share insights about Israel and its tech sector as we settle into 2024
“The solidarity we’re seeing around the world only further inspires and drives our entrepreneurial spirit,” said Eyal Niv, Managing General Partner at Pitango Venture Capital. “Israel has always needed to fight and break barriers, and now we see this is truer than ever. Anytime we’re threatened, we become more Israeli — meaning we become stronger, more dedicated, and more resilient.”
According to Niv, October 7 has only made entrepreneurs more motivated. “The collective determination, sparked by last year's challenges, has ignited an even deeper passion among Israeli entrepreneurs,” he added. “This passion, this relentless pursuit of excellence that investors look for in founders, is what sets Israel apart as it crafts a future where technology offers new horizons of hope and opportunity.”
VC Fund ID:
Name of the fund: Pitango First
Total assets: $3B+ (all Pitango Funds)
Leading partners: Eyal Niv and Ayal Itzkovitz
Latest investments in Israel: Finout, Open Eyes, 2x Stealth Mode
Selected latest portfolio companies: AI21, Graphcore, Finout, FrontEgg, Optibus, StreamElements, Swimm
From your perspective, was 2023 a ‘lost year’, or can the events that happened during itbe seen as a springboard for opportunities in 2024?
Despite the challenges of 2023, Israel's vibrant spirit and unparalleled expertise in technology have not just weathered the storm but soared. The startup nation, fueled by an indomitable entrepreneurial drive and a profound technical acumen, is on the cusp of setting the standard for the global AI landscape. From revolutionizing digital health to fortifying cyber protection, Israeli innovations are not just participating in the AI era—they're leading it, and this is only the beginning. Israel will be providing the global market the digital infrastructure for every business, hotel, hospital, insurance company, etc. If they were only using 20% of technology in their business, that has now dramatically changed with companies guaranteed to use technology in 50-100% of their business.
I have to say the solidarity we’re seeing around the world only further inspires and drives our entrepreneurial spirit. Israel has always needed to fight and break barriers, and now we see this is truer than ever. Anytime we’re threatened, we become more Israeli — meaning we become stronger, more dedicated, and more resilient. The collective determination, sparked by last year's challenges, has ignited an even deeper passion among Israeli entrepreneurs. This passion, this relentless pursuit of excellence that investors look for in founders, is what sets Israel apart as it crafts a future where technology offers new horizons of hope and opportunity. Far from a 'lost year,' 2023 has laid the groundwork for a 2024 rich with innovation, unity, and a renewed sense of purpose.
Which type of companies stand a better chance of garnering increased attention from VC funds this year - early-stage or advanced rounds?
It’s difficult to predict. On the one hand what you see with more advanced stages due to the unique market condition—an arbitrage exists between the reduced valuations yet improved company performance. This scenario presents a golden opportunity for late-stage investors to secure investments in companies with robust product-market fits at reasonable valuations, a rarity in the often inflated tech ecosystem. On the other hand, the birth of an AI-native generation presents significant opportunities to create breakthrough products and drive unparalleled efficiency within companies, resulting in incredible outcomes. This nuanced understanding of the current investment climate encapsulates a strategic pivot towards valuing substance, sustainability, and scalability, making it a particularly thrilling period for venture capitalists and entrepreneurs alike.
What do you believe is more crucial to the state of Israeli tech: the influence of global processes and the global economy, or the local events ranging from the political protest to the war state?
Definitely global processes and the global economy rather than local events. Yes, temporarily there’s been a big impact by what we’ve seen in 2023. However in the long-term, what is most important for the Israeli tech scene to see is that the global economy continues to be strong. The demand for new technologies for transformation is only increasing, so while the war and protests have an impact, especially psychologically, the local base of talent is here and we are ready for long-term growth.
What changes will you implement in your approach to evaluating investments in startups in the coming year, compared to the previous two years? What practices will you abandon, and what criteria will you now demand from founders?
One of the strongest lenses to evaluate a startup is the barrier to entry, which has now dramatically changed due to the paradigm shift of the AI revolution. This shift has dramatically lowered the barriers to entry in technology development, making it easier than ever to build products. What used to take months of development with a team of engineers, can now be accomplished in weeks thanks to AI's ability to streamline and accelerate the coding process. This democratization of technology development means that access to code writing, engineering resources, and smart technologies is no longer a scarce commodity but almost a given. This evolution is challenging investors and creators alike to search for new barriers to entry that will define success in this rapidly changing environment.
Right now, data has emerged as the new gold barrier to entry, transforming the way we evaluate potential investments. The ability to generate unique datasets or to leverage data in innovative ways has become a critical determinant of a company's value and potential. Companies that can harness data effectively, whether through the creation of proprietary datasets or by enhancing their datasets through user interaction, are setting new standards. Of course, there is also the physical layer of products, such as in hardware development, which remains a significant barrier to entry.
At the founder level, the focus has shifted towards building comprehensive companies capable of deep innovation, market penetration, and sustainable growth. This holistic approach requires founders to possess or develop a full stack of skills, from product development to market strategy, underscoring the profound impact AI has on not just technology creation but on the very fabric of entrepreneurial ventures.
Do you think it is likely we will witness encouraging IPOs, the emergence of unicorns, or remarkable exits in 2024?
The IPO 2024 landscape will be discerning, and over the next year or two, we expect to see some of the most exceptional public offerings we've seen in years. This anticipation stems from a unique confluence of market conservatism and the exceptional quality of companies making their debut. Recent IPOs, such as ARM, Mobileye, Monday.com, and Global-E, have set a high bar, thriving in a conservative market environment that traditionally offers lower multiples on IPO valuations. This trend not only makes IPOs more attractive due to the significant room for growth post-listing but also reflects the robust and mature nature of companies stepping into the public domain.
In this discerning market, the rarity of IPOs only amplifies their value, with early offerings in a conservative cycle being particularly prized. This dynamic creates a scenario where low initial pricing meets the predictability and solidity of mature companies, making for a compelling investment proposition. Companies like ARM, which has seen its market cap soar, and Monday.com, enjoying a substantial increase in market price, exemplify the success achievable in this climate. The 2024 IPOs are expected to not only be lucrative for investors seeking growth opportunities but also represent a milestone for companies that have meticulously prepared for this moment, ensuring they are not just ready but ripe for public investment. This combination of conservative valuations and company maturity heralds a year where quality trumps quantity, setting the stage for some of the most solid and successful public debuts in recent history.
Practical and current tips for founders planning upcoming money-raising efforts
- Take the validation stage seriously. Speak to as many representative companies that represent the ecosystem you’re targeting and make sure you’re documenting your calls/analysis to use in your fundraising process. If you’re speaking to serious, category leaders in your space, leverage this.
- Use the local ecosystem when validating. Some of our best founders were introduced to us by other founders who were a part of their validation research. This is the most solid introduction you can obtain.
Two Portfolio companies that will thrive in 2024:
AI21 Labs
Sector + Description: AI and Natural Language Processing. AI21 Labs is at the forefront of artificial intelligence research and development, specializing in natural language processing (NLP). Their products aim to transform how machines understand and generate human language, offering tools that can write, analyze, and comprehend text with human-like versatility.
Investment Amount + Total: Specific investment figures are proprietary, but Pitango's involvement has been crucial in supporting AI21 Labs' ambitious R&D efforts and market expansion.
Founders + Year of Establishment: Co-founded by Ori Goshen, Yoav Shoham, and Amnon Shashua in 2018.
Reasoning for 2024 Success: AI21 Labs' innovative approach to NLP is poised to revolutionize numerous industries, from automated content creation to intelligent virtual assistants and beyond. As businesses and consumers increasingly rely on AI-driven solutions for efficiency and scalability, AI21 Labs' cutting-edge technology meets this demand with unparalleled sophistication. Their potential for growth in 2024 is underpinned by the expanding applications of NLP and the global push towards more intuitive, AI-powered interactions.
Finout
Sector + Description: FinOps and Cloud Resource Planning. Finout provides businesses with a powerful tool for monitoring, managing, and optimizing their cloud expenses. In an era where cloud computing is ubiquitous, Finout's platform offers invaluable insights and automation to control spending across multiple cloud services and platforms.
Investment Amount + Total: While detailed financials are not disclosed, Pitango's investment is instrumental in fueling Finout's growth trajectory and product development initiatives.
Founders + Year of Establishment: Founded by Roi Ravhon, Yizhar Gilboa, Asaf Liveanu in 2021.
Reasoning for 2024 Success: Finout is uniquely positioned for success in 2024 as companies of all sizes continue to escalate their cloud usage while seeking ways to optimize costs. The shift towards cloud-native architectures and the complexity of managing expenses across different platforms make Finout's solution not just relevant but essential. Their ability to provide real-time insights and cost-saving recommendations is a game-changer in the FinTech space, addressing a critical need for efficient financial operations in the cloud era.
