2022 VC Survey“Companies should prepare for the worst and hope for the best”
2022 VC Survey
“Companies should prepare for the worst and hope for the best”
Firstime Ventures Partner Keren Kopilov joins CTech to discuss her predictions for 2023.
“Companies should prepare for the worst and hope for the best,” said Firstime Ventures Partner Keren Kopilov. “First and foremost, CEOs must be in control of their businesses and have real-time information on cash flow and runway. Cuts are unavoidable to extending their runway.”
This is the advice that Kopilov gave to companies who expect to prepare for the year ahead. As war, pandemics, and economic downturns continue, it is important for companies to remain realistic about the challenges they face. “Companies should make expense budgets that are aligned with conservative growth plans. Unit economics should make sense to prove sustainable business models. We can expect longer due diligence processes that are based on numbers, and hesitant investors,” she added.
Firstime Ventures invests in companies that relate to the climate crisis, energy, and agriculture.
Name of fund/funds: Firstime Ventures
Total sum of fund: $250 million AUM
Partners: Jonathan Benartzi, Nir Tarlovsky, Keren Kopilov, Itamar Weizman
Notable/select portfolio companies: Pixellot, Securithings, Clarifruit, Matics, BeeHero, Hygieia
Kopilov recently took part in CTech’s “2022 VC Survey” where she shared insights about what she expects to see in the year ahead.
If 2020 was the year of the pandemic, and 2021 was the year of record, how would you define 2022 in the VC sector?
I think of 2022 as “back to basics,” where companies are evaluated by their performance in getting a clear plan and path to profit.
“Growth at any cost” no longer exists and entrepreneurs are starting to understand that they must grow valid business models and generate real income. The difficulty in marking private companies’ valuations to their comparable in the liquid financial markets will make it difficult for companies to raise equity.
We are worried whether it will be possible to raise equity in later stages (C, D), and we expect growth capital to be provided mainly through mezzanine or debt. In accordance, there will be adjustments in companies’ pricing, at the Seed to B rounds.
Who are the big winners of 2022 and why?
The big winners of 2022 are companies that have completed financial primary and secondary rounds that allow them certain liquidity and means to operate in the next 2-3 years. In order to complete their win, these companies must continue and adjust their working and business plans.
Sector-wise, we believe Health and Climate are the big winners of 2022 given market adoption and interest while new government regulations supported the growth of these markets.
Who are the big losers of 2022 and why?
The main losers are companies merging into SPACs that are less likely to survive the crisis. A lot of the Israeli Tech workforce woke up in 2022 to realize that most of their ESOP value will never reach their own pockets.
What do you expect in the VC sector in 2023?
2023 is expected to be hard for tech companies and this may impact their investors including VCs. VCs will have to take hard measures while debating whether to invest additional capital in their existing portfolio.
Market data shows that there is a lot of dry powder out there. It's too early to say whether this capital will be directed to existing or new companies. Historically Seed and A rounds are suffering less in crisis times, however, these will be directed into companies that are expected to make a significant market impact in 5-10 years.
VCs will be more hesitant about new investments – we expect major changes in valuations to enable funds to go back and invest in companies with sustainable business models.
What global processes will affect (positively and negatively) the Israeli market?
Inflation, interest rates, the Ukraine war, and China’s policy all affect global capital markets and hence the Israeli market. According to economists, the downturn is not close to its end and a recession is yet to come. Recession expectations and an increase in the costs of capital are fertile ground for industries that have not yet been disrupted. Industries like healthcare, food, agriculture, and energy require major changes and will search for new solutions. Governments, institutions, and corporates will direct funds to solutions that will solve major problems.
How should different companies (large, medium, early-stage) prepare for the coming year?
Companies should prepare for the worst and hope for the best. First and foremost, CEOs must be in control of their businesses and have real-time information on cash flow and runway. Cuts are unavoidable to extending their runway.
Sales in scale are most important- but not at any cost. Companies should make expense budgets that are aligned with conservative growth plans. Unit economics should make sense to prove sustainable business models. We can expect longer due diligence processes that are based on numbers, and hesitant investors.
The positive point is the ability to attract the best talents at reasonable salaries and strengthen your HR capacity. These are times to get the best people to join your team!
What will be of the dozens of unicorns born last year?
I have to say that market correction of valuations is not necessarily bad and valuations should reflect a good business and not be disconnected from the business. Companies that focus on execution and prove sustainable business models will gain the market’s trust. Others will lose their status and that’s totally fine.
What sectors in high-tech should we look out for in the coming year - and why?
All technologies around the climate crisis will accelerate due to enormous funds directed to these sectors. Renewable energies, carbon deductions, food security, health equity, population health, treatment or prevention of major health problems, solutions for shortage in clinicians - all of these require action.
HR: Do the layoffs, those that have already happened and those that are coming, help to fix in any way the distress experienced by companies over the past 2-3 years?
Layoffs definitely help to correct inflated employment conditions. We already see the impact of layoffs on the ability to recruit good employees, who are now changing their priorities and seeking stable workplaces. Best talents will still be priced higher, but overall we can already see a market correction in HR as well.
BeeHero, Hygieia - Firstime Ventures’ notable portfolio companies
BeeHero
Pollination – In hive sensors that enable non-intrusive data collection from millions of hives that enable remote monitoring of the strengths, health, and activity of beehives used to deliver crop pollination inputs on a commercial scale.
Founders: Omer Davidi, Itai Kanot, Yuval Regev
Founding year: 2017
Number of employees: 56
Explanation behind investment:
There is a clear need for pollination services to continue the global supply of food and produce demands. The company increases pollination by collecting and analyzing data from hives. Already generated revenue and proven sustainable business model and clear go-to-market strategy.
Hygieia
Digital health - Diabetes: The company’s FDA-approved app transforms the treatment of T2D patients by determining insulin dozes patients should inject each time, making it safer, more accurate, and more efficient than ever.
Founders: Dr. Eran Bashan, Dr. Israel Hodish
Founding year: 2008
Number of employees: 40
Explanation behind investment:
Hygieia is the only company that gained FDA approval for the direct treatment of patients that replaces physicians. The product shows improvement in clinical results within a few weeks. The company has a valid business model and a very clear go-to-market strategy in scale.
