Zohar Gilon and Yossi Vardi are at the apex of angels - private high-tech investors who usually participate in early-stage financing rounds in companies - but are a mirror image of each other in character and business. Vardi is well known, has frequent media exposure, and diversifies his (usually very small) investments among a large number of early-stage companies, and often loss the money.
Gilon is media shy, refuses to give interviews, acts discretely, invests various amounts in companies at different stages, and his name has come up in connection with quite a few past and present Israeli high-tech successes. His standing has changed in the past few years. Few are the entrepreneurs who have not heard about him, and quotes and interviews already appear in the press. Yet, to hear Gilon speak openly and for the record about his experiences from more than 20 years of investment in 160 Israeli high-tech companies is very rare indeed.
Gilon's investments include Allot Communications Ltd. (Nasdaq:ALLT; TASE: ALLT), Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT), Conduit Ltd., Galileo Communications, Metalink, Oberon Media, Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT), Outbrain Inc., and Taboola Ltd.
"I think that entrepreneurship cannot be taught," said Gilon at the Alumni Association of the Recanati School of Management at Tel Aviv University on Tuesday. "It is possible to be helped and add knowledge for people with natural characteristics, but someone without the basic characteristics of an entrepreneur cannot be taught them."
Gilon strongly believes in the interpersonal approach, which is especially valid for companies' early-stage financing rounds, where most angels operate. "I receive a lot of calls, 50-80 a month," he says. "I ask for an executive summary of one or two pages, a very detailed CV, and the value at which they want to raise money. Most entrepreneurs don’t understand finances. I want to see if they've done their homework before coming to me."
The next step is fast. "If it passes the test, I'll meet them. I don’t do due diligence, I don’t bring a lawyer, but I ask about the lawyer who advises the company. You can't raise money from me with PowerPoint. I want to see the entrepreneurs and I go into personal details. I want to know everything about them, including which kindergarten they went to, and their families. I break them apart. The entire process lasts from one day to two weeks, and I make one or two investments a month."
Since Gilon's decision-making involves no due diligence, at least as far as the company's business is concerned, the question arises about the company values he adopts. "I don’t negotiate on the valuations of companies, because this is an emotional matter for the entrepreneur" he says. "If an entrepreneur comes to me asking for $500,000, and did not do his homework on the company value, why should I work with him? Who knows what he'll go ask for from Google. It's hard to estimate the value, and if someone says that he knows it, I don’t believe him."
Gilon's list of criteria for an entrepreneur he wants to invest in includes "ego, but not too inflated, stubbornness, also in proportion, the ability to think fast, and to change when necessary (he mentions Galileo Communications founder Avigdor Willenz who called him after ten months, saying, "I'm throwing everything into the trash and starting over" - S.S.), the ability to persuade people, which begins with other entrepreneurs and later business partners, and finally, maybe a sale to Google or an IPO. That's the recipe for good entrepreneurs, but it's in the DNA, not something that can be learned."
Commenting on serial entrepreneurs who have become investors' darlings, Gilon says, "You have to define what a serial entrepreneur is. [Check Point Software Technologies Ltd. (Nasdaq: CHKP) founders] Gil Shwed and Marius Nacht are not serial entrepreneurs, but they're doing OK. A serial entrepreneur is someone who founds six start-ups, raises $30 million of which investors will not see a dollar back, but wins the title. Avigdor Willenz and Shlomo Kramer have a 50-110% ability to succeed with a start-up are also called serial entrepreneurs. Zohar Zisapel would be too, had he continued, but they are the exception."
Asked to define "innovation" and "vision", Gilon's practical answers are anything but academic. "What vision can you bring to the global field? In the past two years, I've invested in 35 companies, and I haven’t seen a vision. I tried to invest in cleantech. There is a vision there. You invest and discover that you need $800 million to build a factory, and your vision vanishes."
Gilon says that investors also have a problem, because prices have gone up. He also has a poor opinion about statistics on angel investors. "Israel has only four or five active angels. There are few successful investors," he says, citing several problematic angel investments. "A very well-known person was called to the Income Tax offices because he succeeded in losing money in 30 companies without making a profit even once. They thought he was fabricating something."
Published by Globes [online], Israel business news - www.globes-online.com - on January 23, 2014
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