Investing during COVID-19: Where are we now?
We spoke with Nicole Priel, VP at Ibex Investors, a US based investment firm located in Denver, New York and Israel about her background in VC’s, her insights and outlooks and where she believes the investment market is going in these complex times.
Nicole can you give us a brief background of your involvement in VC’s in Israel:
Back in my University days I worked at BlackRock and Flybridge Capital Partners in Boston and even spent a summer working for Jonathan Kolber at Koor Holdings in Israel in 2006. In 2011 I moved to Israel and joined Ion Asset Management, a Herzliya-based hedge and VC fund which invests in public and private Israeli companies. In January 2020 I joined Ibex Investors to launch our new early stage Israel strategy.
What are your general insights into the Israeli VC market and Ecosystem?
The fundamentals are robust and the startup engine keeps clanking. The ecosystem is very rich and supportive of new technologies and players. We also find the market to be extremely collaborative, but similar to other markets, we'd like to see more investments in minority-led businesses.
Can you give us some details about Ibex and their place in the market?
We're doubling down on Israel and continue to be excited by the pace and breadth of innovation coming out of this tiny country. We are interested in companies across all sectors and stages (seed through to IPO and Public), so we see virtually everything and have a broad view of the market. Our value add is our active approach, dedicated support to our portfolio companies, and broad LP (Limited Partner) network. We are actively investing today and continued to invest throughout COVID-19, funding a seed stage cloud security company in March of this year.
Can you give us some details about your particular fund in Ibex and what you think is important in terms of funding?
For early stage companies, we look for hungry founders, early signs of revenue traction, big markets, and revolutionary ideas.
What are the challenges and opportunities for both potential investors and startups in the current environment?
Opportunities abound. Investing now and in the near term is equivalent to buying the dip. We believe that 2020 will be considered a terrific vintage year for venture. Consider that many of today’s hallmark companies were founded in the depths of the '08 recession (Airbnb, Uber, Stripe).
Startups can capitalize on the situation in several ways. They can look to new markets (Europe, Asia) before the US, where COVID-19 challenges are more pronounced at the moment. Advertising costs have dropped while viewership is at record highs, so companies with budgets can capture key placements for less than it cost a few months ago.
Companies can also take this time to accelerate their R&D roadmaps as customer onboarding has slowed and freed up resources. They can secure great talent as the talent market has shifted more in favour of the employer. They can focus on selling to verticals that are accelerating during this time: cyber, gaming, and health, to name a few.
As for challenges, enterprise budgets are contracting, and sales cycles are lengthening, meaning it will take longer and be more expensive to complete a sale. Funding will also be harder to come by as several funds have frozen activities, especially foreign VCs, but some funds are moving upmarket and other funds are moving down to do more seed investments, so some doors are openings while others close.
What do you believe the impact of the current situation will be on the funding environment?
The most stark outcome is likely that startups will learn to stretch further with less funding. Seed rounds have grown significantly over the years, so we may see a reversion to more modest rounds. Some funds will halt investing altogether while some will focus either only on seed or only on later stage, depending on their capital availability and risk appetite.
Lastly, can you leave us with a word to investors and a word to start ups?
Investors: Be kind. And remember what Buffet said: “Be greedy when others are fearful.”
Startups: Competition is always right around the corner. You have to define yourself by having either a great product, great technology, great price, or great service. Pick one and become the best possible purveyor of that value in your category.
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