Retaining a long-term view, Flint Capital insists on investing in younger startups

Flint Capital Partner Sergey Gribov. Photo: Courtesy

A report launched earlier this week by the IVC Analysis Heart and ZAG S&W legislation agency highlighted an issue that’s protecting many Israeli entrepreneurs awake at night time. Whereas the tech sector normally confirmed its energy as soon as extra by elevating $2.74 billion in 151 offers within the third quarter of 2020, it’s changing into ever extra evident that the Covid-19 disaster is wreaking havoc amongst early-stage startups aiming to get off the bottom. The report confirmed that lower than $100 million has been raised in a mere 95 seed offers within the first three quarters of 2020. The seed median funding displays the change in latest quarters, dropping from $0.9m–$1m in 2016–2019 to $0.15m in 2020. There’s little doubt that the coronavirus and its monetary implications have resulted in an additional cautious strategy by many buyers and early-stage startups are paying the worth.


There are nonetheless these VCs that are not permitting the pandemic to maintain them down, sustaining a long-term outlook regardless of the uncertainty and investing in startups that they consider could possibly be the unicorns of the longer term. One such VC is Flint Capital which has made six investments over the previous six months, three of them on the seed stage. Flint additionally led two of these rounds, with 4 of the businesses being Israeli. On an organizational degree, Flint was ideally positioned to take care of the pandemic having already beforehand labored in a distributed distant format, with the three companions working out of three completely different places: Boston, Silicon Valley and Europe. Flint additionally has a Tel Aviv workplace and greater than 50 p.c of its investments have been in Israeli firms.

Flint Capital Partner Sergey Gribov. Photo: Courtesy Flint Capital Companion Sergey Gribov. Photograph: Courtesy

“Covid-19 did not change our course of in any respect as a result of we labored remotely from completely different places anyway,” Sergey Gribov, a associate at Flint who presently operates from Boston after residing in Israel for a few years, informed CTech. “Many funds needed to undergo a transition and we did not have to try this. The one factor that has modified is that I am not touring to Israel the best way I used to. Nevertheless it would not actually matter as nobody is assembly different individuals anyway.


“We do not make investments in accordance with geographic location. However in our second fund we now have thus far invested in 13 firms and greater than 50 p.c are in Israel,” Gribov added. “We have now a superb title in Israel so we now have an awesome influx of startups. We do like Israel lots as a result of it’s a very attention-grabbing ecosystem and there are quite a lot of attention-grabbing firms. However we write checks to firms wherever on the earth.”


Flint began its first fund in 2014 and is presently investing from its second fund which was began in 2018 and raised within the area of $70 million. The corporate is planning on beginning a 3rd fund subsequent 12 months.


“The truth that we now have been working remotely in a distributed method since day one helped us be energetic up to now few months,” added Adi Levanon-Chazan, a principal at Flint Capital who relies out of Tel Aviv. “Being on the bottom is essential to any deal you do in Israel. Flint has carried out over 20 investments in Israel and quite a lot of offers simply come from any individual being on the bottom with the community we now have. We get quite a lot of offers from individuals coming by way of the community of firms we invested in earlier.”


Flint invests in a wide-array of tech sectors together with: digital well being, cybersecurity, fintech, devops, voicetech, and extra.


“We’re pretty energetic so we lead quite a lot of investments,” famous Gribov. “We primarily do seed and A rounds, with the primary examine being something from half one million to $2 million in seed.”


Out of 13 investments within the second fund Flint led eight of them. It’s having fun with early success from that fund, investing in CyberX’s early rounds earlier than the Israeli IoT safety firm was acquired by Microsoft in June in a deal estimated at $170 million.


Whereas Gribov stated Flint is all the time targeted on the long run in its investments, he admitted that a minimum of 4 of the investments made over the past six months have been in startups that benefited from the pandemic. “There are a bunch of tendencies that existed earlier than Covid-19 like distant work and telemedicine. It’s simply that with Covid-19 it accelerated actually rapidly,” famous Gribov


Gribov stated that round March-April each VC went over their portfolio and made positive their firms are correctly capitalized for “nuclear winter.” “Everyone was their firms and saying to themselves that they want a minimum of two years of runway in each firm. So if an organization was supposed to begin elevating in This autumn of this 12 months, this firm bought some type of bridge to increase its runway to the top of subsequent 12 months. In order that took a few of these firms off the market,” defined Gribov. “Right this moment the market is wanting robust due to that. However these rounds have been pretty straightforward as a result of they have been inner rounds. I feel firms are extra nervous by way of new rounds as a result of it’s exhausting to know if VCs are actually intent on investing. Everyone says individuals are investing much less, however you do see a bunch of rounds.”


Levanon-Chazan stated there was a shift out there, however that it stays robust. “There have been firm cutbacks, however offers are nonetheless being carried out,” she famous. “I feel the resilience of the tech business each in startups and VCs is wonderful. Covid-19 hasn’t dramatically shifted offers and there’s nonetheless some huge cash out there.”


Adi Levanon-Chazan, Principal at Flint Capital. Photo: Chen Galili Adi Levanon-Chazan, Principal at Flint Capital. Photograph: Chen Galili

Gribov stated that a number of of Flint’s portfolio firms are receiving a lot curiosity that though they weren’t planning on extra rounds they’ve begun discussions with VCs. He additionally spoke of the sectors Flint is specializing in transferring ahead.

“We simply did our first funding in an agetech firm. We have now checked out this area for over a 12 months now as a result of, if you concentrate on it, the inhabitants is growing older and folks need to age at dwelling and extra of those individuals are acquainted and comfy with know-how, they usually have cash,” stated Gribov. “So should you look 5 years from now I am fairly positive you should have a number of unicorns on this area. And from one other side, it is not a sector that’s sizzling as a result of younger people who find themselves beginning startups do not care about these issues but so it’s not pure for them to consider this sector. There are much less firms focused on this sector however it’s altering slowly. On the whole, digital well being is a really attention-grabbing sector as there are quite a lot of issues in healthcare and it’s one sector that bought fully disrupted by Covid-19. The entire system wasn’t prepared to offer distant healthcare. Out of six investments we made within the final six months, half of them have been in agetech or digital well being.


“The VC recreation is a long-term recreation. We aren’t investing in startups that can be profitable tomorrow. If we’re investing in one thing now it’s as a result of we consider it will likely be huge in three to 5 years, and even later.”


Gribov believes one of many benefits Flint offers entrepreneurs is that they’ve ft on the bottom within the U.S. “I might help them with issues like elevating the subsequent spherical or the logistical stuff as a result of I’ve carried out it myself,” stated Gribov. “We’re very pleasant in direction of founders and really pleasant in direction of different buyers. After I speak to founders I inform them that I am not going to attempt to persuade them and that they need to simply go seek the advice of with different startups that we invested in. I do not need to know who you’re asking as a result of it would not matter. Whoever you ask, you’ll get the identical reply.


“There are quite a lot of methods through which buyers can add worth. If you’re keen to take calls from a founder at midnight or 6 a.m. and generally simply speak to them like a shrink and calm them down, on the finish of the day, they worth that,” added Gribov. “One other factor we might help with is follow-on rounds. Should you take a look at our portfolio we now have quite a lot of co-investments with prime VCs like Bessemer Enterprise Companions, Accel and plenty of different funds.”


Levanon-Chazan echoed the same sentiment. “’Founders pleasant’ means quite a lot of issues, however one of many issues that I actually recognize, as somebody who labored in lots of funds in Israel and the U.S. and is aware of how funds work, is that we’re long run companions. Like with CyberX, Sergey led the A spherical and we saved investing till the corporate was bought,” she stated. “I feel it’s actually uncommon to have an early stage fund keep so lengthy with firms and we now have carried out that additionally with different firms within the U.S. While you meet a founder they usually know they are going to have wind of their sails for the long run, that could be a huge benefit.”

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