Investing Together: How Oded Hermoni’s VC Strategy is Changing the Game

[00:00:00] Rahul: Welcome back to Understanding VC. I'm your host Rahul. Understanding VC is a perpetual MBA on a single subject, venture capital. And today I'll be having an in depth conversation with Oded Harwani on his community driven VC investment approach. Oded is a co founder and managing partner at JVentures, a community driven global venture capital fund based in Silicon Valley with a collaborative community of leaders, including top investors, executives, and founders.

[00:00:25] Rahul: Also, one quick note. Are you looking to refresh your digital presence? Digital Prism, the Singapore based digital transformation expert sponsoring this episode, has a fantastic offer. First 10 listeners to contact them get 20 free consultation hours. Just mention Rahul Senthi. And also learn more from the link in the show notes.

[00:00:43] Rahul: Now let's talk to a dead...........

[00:00:44] Rahul: hi Oded, thank you so much for joining me today.

[00:00:47] Oded: Hi Raul, good to see you.

[00:00:50] Rahul: Yeah, you often refer to JVentures as a capitalist kibbutz. So, what is a kibbutz?

[00:00:59] Oded: So [00:01:00] kibbutz is an Israeli word, but it's been used also as a metaphor for a collective of people that are doing things together. It's an equal community, so it's not, it's just the opposite of a capitalist society, it's more socialist. Where people are, working together for a greater goal. But if you want to think about a venture capital, resembles a kibbutz if the LPs are not limited partners, if they are also, involved partners.

[00:01:32] Oded: So, so when you look at the kibbutz and say, let's make it the capitalist kibbutz, let's make it where everybody's still equal, everybody's still working and contributing for the same bigger goal, which is making more money, but it's about investing in company and then the the very wealthy people and the engineers who invest in us or anyone else in this range between.[00:02:00]

[00:02:00] Oded: You know, have enough money to invest in a PC fund and have enough money to do whatever they want. If they are all equal and they all can invest the same amount of money, they contribute the most, important thing for them, which is time. So they contribute to the kibbutz, the time, the knowledge, the experience, the network, all those things above, and they work together to make a better fund.

[00:02:27] Oded: But during that part, because it's a kibbutz, it's a community and the relationship between the people is not less important. So people are becoming friends. They work together. They have business relationship together. They also sometimes match their kids together to be. Eh, we have kids who are dating each other.

[00:02:48] Oded: We have, siblings in our group. So it's much more than just a VC fund. We almost look at it as a, as a family in a way.

[00:02:57] Rahul: You say that this is a VC model [00:03:00] sort of inverted? Right.

[00:03:03] Oded: think about most VCs have a GP that makes all the decisions, right? Here's the central of everything. It's his roller desk. It's his experience, it's his knowledge, and when he invests one day in AI and the next time he invests in scooters, electric scooters or whatever, he knows the process of building companies or investing in companies, but not necessarily he's an expert for every vertical in the market.

[00:03:30] Oded: And when the market is evolved, he's not expert for everything. He's limited. In our case, we have 500 people who have, each one has his own expertise. So it's not about the GP as much as it's about the community behind it and the way they are engaged, the doors that they are opening. And this enabled us to have a very unique access to companies that most VCs don't have, but also to have a [00:04:00] screening of companies in a way that.

[00:04:02] Oded: No other VC that I know could do, maybe Andreessen Hovey for once, that they have a very strong bandwidth of people to do the due diligence. So when we do a due diligence on a company, we can bring the president of Box, and we can bring the GM of Google Cloud, or the CM of Google Cloud, or we can bring the a partner in Lightspeed or we can bring a partner at Wing or, or a C level at Salesforce or a C level at Uber.

[00:04:32] Oded: The fact that we can bring all those people to do the exact due diligence because of their knowledge is very unparalleled.

[00:04:39] Rahul: so what does this look like? Like, what does the kibbutz, the capitalist kibbutz of JVentures look like?

[00:04:44] Oded: So we don't have anything physical, if this is what you have in your mind, that we are Taking our building things. And we have a basically virtual and in person communities that the largest one is in [00:05:00] Silicon Valley.our community is based on, I would say five, backgrounds that could overlap one that you have about 250 executives or past executive people who've been VP and C level in big companies.

[00:05:17] Oded: Google, Facebook, Intel, Mobile, Google, you just mentioned Google and she's waking up. And then we have, 160 GPs that this is their day job. So they are coming from other VC funds and they invest in us, their own money, which is also very unique. I don't know any other VC fund that has so many VCs that this is their day job.

[00:05:42] Oded: another important part are the, that we have 100 plus serial founders and we invested in 15 of them. So we invest in our own LPs, which also creates a different dynamic between LPs and, and,and GP and companies. And then the last two is [00:06:00] that we have 40 family officers and about.

[00:06:03] Oded: 150 people who sits on, on, on NGOs board. So people who are not just coming from the, the business perspective, but on top of the business accomplishment, they also have things that they care about. And this is. Make them who they are. There are people who come with values. So the first thing we check when we enable people to join the kibbutz, we, by the way, people are coming word of mouth.

[00:06:32] Oded: So we have people who are just, um, usually would refer, and then their experience is that we check first of all, if they are match, you know, what is a match,

[00:06:44] Oded: a person with higher integrity. It's a Yiddish word, and we want to make sure that this man or this woman, their values. It's not just money and the ego is not too big for a community that they [00:07:00] can live with the community.

[00:07:02] Oded: could build companies of billions of dollars, but still have an ego in the right place. And then, the accomplishment. People come with very unique and very impressive accomplishments. And we see how this helps. When we have cyber, we have enough people who've been running big companies in cyber. It could be the CEO of CyberEye, it could be the CMO of SentinelOne.

[00:07:30] Oded: If we do in, in Automotive, we have the same thing with Ford and GM and, and Nikola and others. So, so first of all, this is the community. But the community doesn't stop only with those definitions. We have 36 siblings. So a brother brings a si a brother. I would never bring a brother to something that is financial if I wouldn't be a 100 percent certain he would want to lose money, right?

[00:07:56] Oded: So this is part of it. And to see them coming up together, it's very [00:08:00] nice. Then you see roommates from college or you see business partners. So there's a lots of things that you pick the people that you want to bring with you down the road, because you're going to spend time with them. And then, we have sometimes requirements of how many we want from a specific geography or specific age group.

[00:08:22] Oded: So in the last fund, we decided that 25 percent are younger and sub 40, 25 to 40 and accomplished people who are working in VCs, people who sold the company, people who build the company and so, so we, we can decide that in this fund, we give priorities to people that come from New York or Boston or Singapore, for example.

[00:08:44] Oded: Because we want more people from those areas,

[00:08:47] Rahul: So, and this is the, the, the background of the community, but the community just doing investments, but they also do other things.

[00:08:57] Oded: I mean, we shared with [00:09:00] them, we have our J fellows, our kids have their own program. we just finished the third cohort, so 66 of our kids been listening to the CFO of or the head of a product of Palantir and Clinic that, and they learn how to be VCs, something similar to what we are doing in this podcast.

[00:09:20] Oded: And then we meet, we meet couple of times a month. It's over Zoom or in person in Palo Alto or in New York or in Tel Aviv. We have. different groups and we look at companies or we listen to people from our group and the companies we listen to are companies that have been screened by the community already.

[00:09:40] Oded: So we have a screening committee that has a lot of people from our community that are all VCs almost and operators and then we pick three or four companies to present. All of them are VC back when we see them. So we and we don't lead rounds. So this is why we always expect that there's a bigger VC to lead.

[00:09:58] Oded: we have invested with some of [00:10:00] the top TLBCs in Silicon Valley in Israel, and then the kibbutz meets with them. And we vote for one thing. The kibbutz is able to vote for one thing, which is, should we continue to a deeper due diligence? Should we look at this company and who will be the people who will be in this due diligence process with our team?

[00:10:23] Oded: And then once we, we get at this, we do a very deep due diligence. It takes us a couple of weeks. Some VCs ask for this due diligence report because the depth and the understanding of the industry is almost unparalleled. And then we go to the investment committee and we approve it, the amount and also if we invest in, but the next day is more important.

[00:10:46] Oded: This is portfolio success. How we take this Amazing community with this roller desk and how we make them help helpful for the companies that we have invested in. And this is a, I think even [00:11:00] more interesting. So the due diligence process is very crucial to make the right decision. Already in that process, when the founder meets the.

[00:11:09] Oded: This, those experts that he was reaming about, it's his worst dream. Then there's a connection, and at that point he says, we want you in, regardless if it will be oversubscribed or not. So 50 percent of the companies that we see are oversubscribed, and some of them already closed the round and they opened the round for us.

[00:11:27] Oded: Because it's so important for them strategically. In 28 out of 36 companies that we have invested in, we were the most instrumental and important investor from all the investors they had, and usually the smallest one. So this is very powerful for us. And then there is the portfolio success, the J advisory that comes after, and this is very, very effective.

[00:11:48] Rahul: Yeah. I have a lot of questions. Uh, I would like to go, you know, Each stages of everything that you do in deep. so you mentioned about building the community [00:12:00] and the sort of criteria that you have before you bring people in as your LPs, like ego, integrity, and special, special skills or demographic and things like that. but what is the process that, or the infrastructure that you have, once they're onboarded, to ensure that they all can contribute?

[00:12:19] Oded: Good question. But you know, when you were asking your question, I try even to ask, to answer a question that you didn't ask, how we know that they don't have an ego, right? Also, it's something that is, you know, I interview each person that joins us and The first thing I check if he talks more than I do.

[00:12:41] Oded: And we know if this is someone that wants all the time to show off. Because the nice thing about JVentures is that you don't need to show off. Everybody's accomplished. Everybody's successful. Everybody did things in their life. So it's a, it's a group of people who wants to listen to others, not to, to say all this.

[00:12:58] Oded: It's a very, very delicate kind of [00:13:00] difference.and the other thing that is also important, because everybody's equal, no one can come and say, Hey. I have ego, whatever I have, I'm putting 10 million. I want to see that you don't accept me because no one can invest 10 million. I had a situation like this, by the way, is a very, very successful investor and some of the largest companies in the world that just, I felt in the first conversation, it was very, very modest.

[00:13:28] Oded: He didn't want to say anything about himself. He just really liked the kibbutz, wanted to join. And I felt something is, Something doesn't work for me. I had another conversation with him and I'm talking about 100 to 500, 000. This is not a lot of money, but I wanted to make sure that I get, I don't get someone wrong to the book.

[00:13:45] Oded: The next call he was very, very arrogant. You guys do for me this and this and this and this and just Dr. Jekyll and Mr. Hyde. And then I said, you know what? Let's have a third [00:14:00] conversation. Now this guy is, is probably a billionaire. We did a third conversation and my suspicions was right. I felt that this guy doesn't fit our community.

[00:14:12] Oded: And he is very sensitive guy. He understood exactly what's happening and said, so I want to understand. You don't let me in? I said, listen, we're oversubscribed, which was true, by the way. And he said, you know what, let's see, I'm sending you now a check of 10, 000, 000 to join the fund. I want to see that you'd say no to me.

[00:14:35] Oded: You know what, two things. One, I can't accept 10, 000, 000 checks. Second, I know that this is not a good fit. And I feel very sorry for it, because I really wanted to bring you in, because you have a lot of good things that you wanted. But I hope that you are a match and it feels that you are not. And sometimes we do [00:15:00] background check.

[00:15:00] Oded: So, so this is just about how we pick the people, how we make them engaged. I think the first thing is that we meet, we meet as a group and people get to know each other and we do breakout rooms so people can interact with each other and we meet in person and every year we have an annual conference where people can meet in person also from all over the world we have 40 different communities also in Singapore we have and in Australia we don't have anyone from India let's talk about it in a second then we do is that we When we see a company, we see about 2, 000 companies a year, that many of them have been sourced by our own community members.

[00:15:43] Oded: So if we have a partner in Mayfield or Matrix or,Tandy or Grove or others, they send the companies to us. And the other side are the experts. The experts are a magnet for lots of companies. So when someone is in, you know, Expert in cyber security. [00:16:00] All the companies were cyber security come to him.

[00:16:02] Oded: And then he knows what to suggest to us or AI or whatever. So you see those companies and this is one of the interaction. The second interaction is the due diligence process. People get to know each other in the same silo of experience, and then. We have also the activities that are not just about investment.

[00:16:23] Oded: So there's so many areas of activity from donations, philanthropics, and, and activities that are not just necessarily about, investing that people get to know each other. And about between 75% to 80% depends on the year of our investors being, at least in one event, 255 people did due diligence in 20 22, 189 people did in 2023.

[00:16:50] Oded: So this is a very high engaging kind of group. And they see it as, something that they like to do to do the diligence. It's also interesting to meet those [00:17:00] companies, but they're also interested in exploring each other's views and sitting together. I think that you can bring competitive companies. Like think about just in a general thing, C level in Google, in Amazon and Microsoft and Facebook to sit together or looking at companies together.

[00:17:18] Oded: They will never do it because they're competitors, but suddenly they sit together because they're all part of JVentures and they hear each other. Or we did think tanks of people who are coming from different experiences. So we did it in semi conductive. So we brought someone who's EVP at Intel, and someone who's Marvell, and someone who's the advisor of the CEO of NVIDIA.

[00:17:41] Oded: And suddenly, those people who are, they're friends, but they never sit together on business, sit together on business and think together, what is the most important thing that is happening in this, industry?

[00:17:51] Rahul: By the way, what you said about listening more than talking, I think that's a good quality for a good podcaster as well.

[00:17:59] Oded: I [00:18:00] had once a situation that someone, I met at his house in Phoenix, And then he was talking, talking, talking, talking. And then he asked and stopped and asked me, So Odin, how do you, how do you accept people? Why is this first test that you do? And I said, I'm checking if he speaks more than I do. So he's like going back and then says, Hold on one second, I was non stop talking.

[00:18:28] Oded: So I'm, I'm, I wasn't accepted, right? then I said, you know, The reason why you're talking a lot is not, It's not about your ego. It's about, I think you don't, you can't hear very well. You have a, you have a hearing device? How do you know? Only me and my wife know that I have a hearing device. Sometimes when people don't hear very well, they, they talk because they are afraid of the voice.

[00:18:56] Oded: Thank you. At the end, by the way, he didn't join [00:19:00] us, but, for a different reason. But that was a way, you know, not always when people talk, it's about ego. Sometimes you need to understand what's the incentive. That's it. It's a lot of psychology.

[00:19:13] Rahul: yeah, so has there been a scenario where, you know, you had some person join the community, but, you had to maybe kick him out or maybe not let him join in the subsequent fund or things like that? Is there a scenario like that that you've encountered?

[00:19:31] Rahul: we are now in our, have three funds and from the first fund, 96 percent of the people wanted to continue to didn't want to continue 2 percent and 2 percent we decided not to continue with and the main reason was arrogancy to companies. If someone, someone could be even a nice person in the community, but very arrogant to company.

[00:19:58] Oded: All the [00:20:00] time showing off how much he knows and not listening to them. This was a problem in the second fund. We had also two people. Um, yeah, it's very rare out of 500, but statistically it will happen.

[00:20:16] Rahul: So we, we came together to the understanding this doesn't work. And we just asked them if they want to be replaced. And the next day we have a waiting list of people. So someone else just joined instead.

[00:20:29] Rahul: Before we continue, I would love to know, like, why, why do you have, this approach? I would love to know the, the background on how you, uh, reached, this sort of unique approach in VC.

[00:20:43] Oded: so. There were two reasons. One, I've been a VC for almost 20 years now. Before I was a VC I had a startup and before that I was a journalist for many years. Covering tech in Israel. And [00:21:00] also, in Red Herring, only old people remember that newspaper, that covered the bubble of 2000. then, I worked, I always try to do mission driven things, you know, just making money is not enough.

[00:21:15] Oded: You need to do something that makes you feel, you know, let's say someone dies, you want to, on the grave, you put it there, he did money, he made money. You want to do something that is much bigger than that and important and that people will feel that you can really change the world. Even if it's a small world, not a big world, no one can really change the whole world.

[00:21:37] Oded: my first fund, My first startup, by the way, I found jobs for 5, 000 people who were unemployed and we were sold after 18 months to Yellow Pages, but the feeling that you can really make an impact on people was very important for me. And then when I sold it, I sold it when I was still a journalist. It was very interesting that they did it, you know, [00:22:00] after, after work in a different name, because the newspaper didn't allow me to do it with my name.

[00:22:06] Oded: I was the editor of the high tech section. And then I, I joined. a group of investment in Israel that invested only in the periphery of Israel, only in the south and the north of Israel. And for me, it was very important because we invested, first of all, in, in a geography that usually doesn't bring unicorns and it's much harder, but also you're only one of the only investors there.

[00:22:31] Oded: So you have a And more ability to look at companies that others can't. And there are diamonds everywhere. We had one company that was acquired for 1. 3 billion by a, by a big, a pharmaceutical company in Japan. And the company raises nothing. And it was very, very small and came from the South. for me, that was a very interesting way to think outside of the box of VC, to think how you look at people.[00:23:00]

[00:23:00] Oded: And then, um, and we invested a lot also in companies that were what we call today clinted companies who have an impact companies who are, doing coating of fruits that enables them to longer shelf in supermarkets or water treatment and lots of other things, batteries. And then, after that, I, I also led the Israeli high tech industry and venture capital association, which is the largest umbrella organization of the Israeli tech called IETI.

[00:23:33] Oded: And then I moved to the U S and joined the family office of a friend of mine, Tania Rekanati. Uh, Rekanati family used to be one of the largest family offices in Israel. They had 30 percent of the Israeli economy or so. And I was the partner in the U S it was also a different kind of VC fund because it was a single.

[00:23:53] Oded: LPE fund, and we were three partners, very good friends, doing things together and [00:24:00] investing, thinking differently. So all this gave me a good understanding that I want to do something else. I want to do something about people. And then one of the top Israeli investors in Silicon Valley, I had the, is one of my investors also, but I had a conversation with him, and I had an offer to be a partner in one of the largest San Hiro funds, and he said, oh, that you won't enjoy it.

[00:24:28] Oded: Too much ego, too much politics, it's not, you like to do things that are close to your heart. You like people. So he encouraged me. And at the same time, we also wanted to connect American Jews and Israelis, because they look like one tribe, but they are very, very separate. And they are very, very strong. If you look at Silicon Valley, Facebook, Google salesforce, there are lots of companies that, and the lots of VC funds that choose, didn't identify themselves as this way.

[00:24:59] Oded: They just, [00:25:00] this is their background created. There are also a lot of Israeli companies that have been created in Silicon Valley in Israel. So this kind of matching was very natural, how we create a new community that brings people together with different backgrounds. So all those things came together for me, and I can tell you that I'm a very, very happy person with what we are doing.

[00:25:22] Oded: It's just the energy there. Yesterday we had an LP meeting talking about the last four years of JVentures, and I don't think many, many managers of VCs get emails from the LPs saying thank you for being part of it. Thank you for this is, you know, it's, it's one of the most important identity that they have today.

[00:25:47] Oded: and it's amazing to see how people react to it, how people feel connected and included.

[00:25:56] Rahul: Yeah. So, just one more [00:26:00] thing on JVentures. what is your investment mandate? I think your sector agnostic, and you invest from early stage, from seed stage, I guess.

[00:26:08] Rahul: Uh, 80 percent of our companies are early stage.

[00:26:12] Rahul: okay. And just one more thing. Do you guys exclusively only invest in, let's say Israeli or Jewish founding teams?

[00:26:20] Oded: So one of the mission of the fund is really to connect the Jewish world. We really want to do it. We have non Jewish people in our group.they're very, very welcome.we don't ask them even to convert. We had one.

[00:26:35] Oded: Someone from Hong Kong who joined us and then he called me and said, Oh, did I convert it to Judaism? I said, it's not, it's not mandatory. He said, Oh, okay. but he's a, you know, he did it anyway. He wanted to do it. Not because of the group, of course, just, it's an anecdote.So we have many non Jewish people in our group who contribute a lot, and they feel part of this kind of Because Judaism for us is about [00:27:00] values, it's not religion.

[00:27:02] Oded: It's about believing in helping, believing in talking good about others. Doing well for this world. A third of our companies were in impact areas. So we invested in companies like, be hero. We, he was one of the top 100 Clinton companies. They do AI for beehives,

[00:27:22] Oded: I mean, hundreds of percent, and they currently cover 10 percent of all the. acres of pollination in the U. S. After four years of operation. So we care a lot about doing good and doing well. We also have a dedicated fund for impact called J Impact. That is part of the kibbutz in Iran. Sanders is managing this.

[00:27:47] Oded: With the kibbutz, but, for us, it's, what we decided, for example, that the next time, which would start in a few months, we'll have the, if you think about it, [00:28:00] the two largest and most influential groups, ethno groups in Silicon Valley and Silicon Valley is very ethno oriented. So when you're a young Indian entrepreneur, you would likely go to an Indian partner in any VC.

[00:28:14] Oded: It would be your, your natural thing or to a Jewish or to Israeli. If you're Israeli or Jewish. So, and if you look at Silicon Valley today, it's very much, there are two very strong groups. One are the, the Indians. And the other one are Jewish, people that they don't define themselves separate. The Indian Americans do define themselves as the Hindu.

[00:28:39] Oded: But they are very similar. We are very similar to the Indian ones. There's lots of collaboration. And one of my partners is, uh, Milesh, who's also, uh, very good, uh, graduates in the Indian community there. And so what we thought is that in most of the [00:29:00] VC funds, we have either Jewish or Indians or both together.

[00:29:03] Oded: Almost 35 percent of all the startups are Indian, founders. And we never measure the Jewish, but I would say it's another 30%. So I think that together, We have a unparalleled access to companies, but overlapping of executives and VCs. And so we wanted to invite a group of 70 people who asked to join JVentures in the past years.

[00:29:29] Oded: from the Indian community and all executives, amazing people. And so we decided that the next time we'll have them, but it's also about Israel. And we really see this kind of, there's a lot of overlapping of interest in Israeli technology and companies. Most of the companies that we invest are.

[00:29:52] Oded: Happened to be Israeli entrepreneurs or Indians entrepreneurs in Silicon Valley. It just happened to be So [00:30:00] when you cross border when you cross paths of the interest and you are exposed to other things if you live in your silo The other time see only those kind of entrepreneurs only those kind of companies But if you cross border and you open it Then you see others, and I saw it.

[00:30:16] Oded: I was 10 years on the investment committee of Thai Angels in Silicon Valley. I was a charter member of Thai.I was co-chair of one of the tracks of Tycon. I was very much involved with Thai, just for that reason. I was the only Israeli on Thai, uh, worked with amazing people. Just really heads off for each one of them.

[00:30:38] Oded: They're very close friends. And together we always thought how we build this something together. This was my dream, to make the Hindu, Israeli, Jewish VC fund. So this will be the next one.

[00:30:51] Rahul: Cool. Yeah. So I have a couple of questions on like how you source then [00:31:00] the whole, sort of selection and due diligence process. And then finally, sort of working with the portfolio companies. So starting with,the sourcing, right? Like you, I've often heard you mention that you invest in a company that wants you rather than needs you. First of all, what do you mean by that? Sound off in the comments.

[00:31:19] Oded: So, I don't see us as a bank, per se. So many VC funds, the main role is to bring money to the company.I think our role is, is more about bringing value to the company. So I don't want to be measured by the check side. We had, we invest half a million to a million and a half, but we complete the other VCs.

[00:31:42] Oded: So let's assume this is a 6 million round. We will put the 1 million that is, that is a complimentary to the rest of the round. But I think what we bring in is, is really, So if a company needs us for the [00:32:00] money and they can't raise it from elsewhere, you're not a good fit. You want the ones that are able to raise money from the top investors that they have investors chasing after them.

[00:32:10] Oded: But they won't ask because of the value. That's what I mean by that.

[00:32:14] Rahul: And, uh, how do you source for, these startups? It's, it's through the LP network, I guess.

[00:32:23] Oded: So it comes from different angles. One is, first of all, we are partnering with lots of VCs in Silicon Valley, in Israel, and they send us companies because they know the value that we bring in. So whenever, every year we have a meeting of GPs from other VC funds, it's usually like 100 people that come over.

[00:32:43] Oded: Those are the people that we partner with. Second, it's the people from the community. They are responsible for about 50, 60 percent of the deals that we, that we see.it's either the experts, the VCs or the serial founders that come from them. Many of them invested already in the [00:33:00] company, so they invested and then they say, Hey, this is a good company of ours, come and check it out.

[00:33:05] Oded: And the biggest obstacle and conflict that we have is how to say, no, assume one of the VCs brings us a company. Now he has a very good conviction in this company and we decide with bringing the right experts that this is probably not the right market or not the right valuation. And we had this kind of situation that they bring us the best companies and we decide not to, it's a very conservative VC fund.

[00:33:33] Oded: Not, not saying anything wrong about the other companies. Just our fund is extremely conservative compared to other VC funds because it's a community empowered VC fund. so this is how we source the companies. There are many founders who approach us also, they know someone in the group, so they say, Hey, we know this one and we wanted to present to you.

[00:33:56] Oded: So we see a lot of companies, we invest at the end in 5 to 10 [00:34:00] companies per year. So out of 2000, if you look at the pipeline, it shrinks out to about 5, 10.

[00:34:06] Rahul: Okay. So let's say, one of the LP GP or, a founder brings you a company, then what is the sort of selection and due diligence process like?

[00:34:18] Oded: So first of all, he tells, he sends us the deck and he says, Oh, listen, Nilesh, GM, I think this is an interesting company. And then, usually back on this, we, we say, this is a good fit or not. Just when we look at the stage of the company, what they're doing, the valuation, the, the, the team, if we know, so we do an initial screening of about 1200 companies, and then we bring about out of that, we talk with them.

[00:34:46] Oded: We meet with them. We look at the things we bring about 600 to our, screening committee. Sometimes it's 400, sometimes it's 500 over the year. everybody's on that screening committee looks at the company. So we have a lots of gut [00:35:00] feelings from industry experts. Many of the processes of J ventures is based on gut feelings because we've seen so many companies, you know, when it's a good fit and when it's not.

[00:35:10] Oded: So I think that, those companies already had. A VC inside who did the video. So someone already said that this is a good company. Then it goes all those processes of people who know the industry, who know this kind of a founders. And sometimes we saw companies of top tier VCs that one of our members in the screening committee said, Hey, but I know the entrepreneur wouldn't work.

[00:35:33] Oded: You wouldn't take them anywhere. So we have the inside information and then we bring it to the keyboards. And this is really just like, you know, AI. There's so many points there of, of understanding. People sometimes ask about the code. It's really, people are shocked by the level of the questions that people ask.

[00:35:55] Oded: And then we have the due diligence. And this is where the gut feelings ends. And we really, [00:36:00] people that understand this kind of industry, and we do a very comprehensive report. It's about 50 pages. Thank you. And then there's the investment community. So there are so many, seven parts of, of due diligence in way of, of getting confirmation that this is a good company.

[00:36:16] Oded: this is also one of the problems that when it comes already to the kibbutz to meet this company already had one of the best funds, various, usually serial founders, already have revenues in early stage. The chances we say no are, are, are small. So a third of the companies will get to the kibbutz, we approve usually.

[00:36:40] Oded: Between, between 10 percent to 30%.

[00:36:44] Rahul: so initial screening is by every member of the LP community.

[00:36:50] Oded: If any LP can, can be involved.

[00:36:53] Rahul: Yeah. I mean, all of them can be involved.

[00:36:56] Oded: Not all of them are involved. I think, [00:37:00] I told you, it's like every year is different. Some people have the startup, so they are very, very busy at that point. And then they sell the company and have time. And then they are putting more efforts. But we call out. We say, Hey, Hey, you are the VP of a table. Can you look at this company that is right in your area?

[00:37:17] Oded: And he said, Yeah, I'll spend a few hours about this.so many of them contributed over the past years. We had 880 people who've been doing due diligence to our companies. In many cases, it was more than one time. So it's not 800 individuals at 880 situation of doing due diligence.and we had over 120 meetings over the past four years.

[00:37:44] Oded: So people really had a chance to, and we have about 100 to 150 people on every zoom call.

[00:37:51] Rahul: So a lot of people are exposed and engaged and interested and they really help. I mean, we have companies that we bought 20, 30 percent of the revenues. [00:38:00] We have companies that. We bought all the next round. We bought, pivoting.

[00:38:05] Oded: They talked to us yesterday. For example, we had in our LP meeting, we had fourth hour for further companies to talk about J ventures. And the one just raised 32 million. The other one, raised 67 million. So far, the third one is closing our 14 million round. And the fourth one was just yesterday chosen as one of the, most promising Israeli companies in, Close to 25 million, but they all engage in.

[00:38:31] Oded: Some of them are also our LPs. Two of them are LPs in JVentures. It's a completely different kind of story.

[00:38:37] Rahul: They could choose everyone else. They wanted us. This is what is important.

[00:38:42] Rahul: and you mentioned, uh, about the initial screening process, which you said is like a gut feeling. love to know, what, what makes up your gut feeling. So what are like the personal values or like the principles that guide your decision making when you see a team? [00:39:00] I

[00:39:00] Oded: think both me and Nilesh and Jim, Jim invested in dozens of, venture capital, uh, funds in the past. And also individually invested in Sequoia and Iconic and others. Nilesh been many years at Cisco, M& A and product and in seeing a lot of company. And I've seen thousands of companies over in my life So I think many people that have been in this industry for a long time, either from the industry perspective or from the VC perspective, investment perspective, they know, they know after five minutes, they know, they see the deck, they see the, the, the problems, they see the opportunity, they see the team and they see if this is someone who can take a company forward or not. there's a lot of gut feelings that is happening, very few times that the VC sees something that he thinks wouldn't work and then changes his mind. [00:40:00] It's happening. Usually you know it from the first, the first look, and You know, we are not focused on the companies that we missed. We are focused on the companies that we did invest in.

[00:40:11] Oded: out of 40 companies, we had only two write offs in four years. One of them became a unicorn, raised 400 million after we invested. The other one was a very simple, no market fit, but out of 40 companies, we usually pick winners and we continue to invest in those winners and the help that they need is not only in one state.

[00:40:41] Oded: So I think that if a seed company comes to you and the gut feeling works, you already decided that this is, you feel the chemistry with the entrepreneur. You feel the chemistry with the industry. He will also need it. A different help in A round, and in B round, and in C round, and you grow with him. He needs different kind of help.

[00:40:58] Oded: The first [00:41:00] seed, he needs design partner. Then he needs GTM. Then he needs kind of other help. finding the right executives, for example. And sometimes the best help they can get, you just hug them and talk to them. We, we are just good in, we don't have anything to interrupt them. We can just help them. And we usually, I never take a boat seat, which is also different from other VCs or my past VCs, there's a boat seat, we usually give it to one of the experts because this is a win, win, win, this is the person that the company would like to have in their dream list.

[00:41:39] Oded: But usually not for the equity because we are not the, the, the leading investor in the, the round. So it gives us a lot of flexibility to be the supportive part. And founders are very, very lonely leader there. They need all the time to perform against the board, against the company, against the other executives in the [00:42:00] company.

[00:42:00] Oded: And there we. You know, nonjudgmental, just be with them and help them and support them.

[00:42:07] Rahul: You mentioned, uh, when you take a board seat, it's usually one of the LPs who will be representing, you. Okay.

[00:42:14] Oded: always the LPs

[00:42:16] Rahul: Okay, that, that is

[00:42:19] Oded: also. right. You know, I said that the fun, the LPs in our group don't, shouldn't have this kind of ego that puts others aside. They have ego, by the way, they're accomplished people, but not one that is overtaking the group. It's also about me. I can't have this ego. I don't think JVNG is about me.

[00:42:40] Oded: It's about us. And this is why I don't take boat suits. I don't care if it's my name on, it's lots of ego game that I don't need. the companies do invite me to the boats just to sit there because they see the value, but we don't have a formal position.

[00:42:58] Rahul: [00:43:00] Yeah. And, uh, just going back, to how you assess, founders, right?

[00:43:06] Rahul: what is, what are some of the signs of a founder, who can really take a company far no matter what, what the company does?

[00:43:15] Oded: So listen, the easy answer is always serial founder, because we saw it in shaky water, they know how to navigate the boat better than anyone else. And, many of the founders that we invested in. I think 20 out of 36 are serial founders who sold at least one or two companies. The problem with those founders, by the way, is a bit different.

[00:43:36] Oded: Their appetite is a bit lower. They have already a lot of money in the bank. And so it's more about accomplishing a big company and finding something to do rather than making the bank bigger. So this is not always the only incentive. The other way when you see [00:44:00] someone That you like, romantically, you just feel it, right?

[00:44:06] Oded: So there are people that get in through the room and you know that they will be successful. I don't know how to explain it. I remember that, I invested in a company called in 2013, 14, and my partner said it was a company. Two large competitors, it was a small company from Israel, two large competitors that merged together and went public.

[00:44:29] Oded: They were a monopoly by the antitrust in America. And this company in Israel wanted to compete against them. And I said, guys, it wouldn't work. So they say, come and meet them. And I met them. And those two guys, it was so clear that they're going to do whatever they will do. They will be successful. And now it's a couple, a couple of billions of dollars a company.

[00:44:54] Oded: And it's, and they're bigger than the antitrust really forced the [00:45:00] other company to get two parts. And they are, you know, they are the market leaders. And yesterday I was just thinking about your question, when two of our, uh, three of our members. Of our companies presented. And those are kind of people that the people in the room said, those are the people that when you get, you know, that they will be successful.

[00:45:25] Oded: Um, who is the founder of nimble way. The serial founder, also one of our investors is one like that. Um, , who founded Bihi, another serial founder is someone like that. Alex and Gilly from Sense. Were also one of our investors are also one of those, you know, it's not about, you know, sense is doing vertical lon mats.

[00:45:50] Oded: Serer is the largest investment in this company. But you know that even if you wouldn't do vertical SAS of lats. He will be successful in cyber, [00:46:00] or in healthcare, or in any other area. Um, just have this kind of, you see someone with the charisma. And also, last thing about that is the connection between the founder, which is very, very important.

[00:46:17] Oded: To see that the, the founder's in the right position, so the, The CEO shouldn't be the VP product and the CTO should be the CEO. Sometimes it's not right. see the connection that are coming together and they complete each other. It's like a married couple. And we once did a research on it and we found that really the first most important things to successful of the companies was not the technology.

[00:46:44] Oded: The founders and the relationship between the founders.

[00:46:47] Rahul: Yeah. Yeah. So, I mean, you're, in your website, you mentioned that you're often the smallest investor, but with the greatest impact on the portfolio company. [00:47:00] So I'd love to know, like, how do you. Help support the portfolio company. I think you briefly, briefly mentioned about, opening doors and, bringing in the revenue, certain percentage of their revenue and things like that.

[00:47:14] Rahul: Yeah.

[00:47:15] Oded: It's very, very broad and we never know how this community will help. For example, Behero is an active company. I didn't know we have ways to help in active, but we have people in South America and in Australia who could open the market for them. And then we knew people in the soy market and we introduced them and then we introduced them to investors who invest in the company and brought value to them.

[00:47:44] Oded: So it's very broad kind of network that you never know if this roller that's where it can help. There are companies that we bought. The CMO or or we bought the CFO, in companies, some companies, we [00:48:00] bought the first customers, the design partners, the next customers. In many, we bought DC to invest. But the work with startups is not on a onion on one vertical of succeed of helping it's be to be giving feedback about the product.

[00:48:20] Oded: For example, let's say the company in Chicago in New York, you don't know so much how people look at things in Silicon Valley or an Israeli company. So the way I think it's. It's very helpful if you are outside of a specific geography and, and you get the feedback from the other geography, and, and it can work on the other side.

[00:48:41] Oded: So we look, we invest in enabling technology and sometimes Silicon Valley is so self centered that they think that we know everything about that technology, but the customers are elsewhere, right? You know, the insurance companies are not based in Silicon Valley. They are based outside of Silicon Valley.

[00:48:58] Oded: The financial institution, [00:49:00] the real estate. A contract with, so there are lots of issues that if you have people outside of Silicon Valley, you get feedback that otherwise you wouldn't get. And sometimes we say we, we, we directed them to the right direction.we have them get there. And 85 percent of our companies get 1 million ARR in the first year of operation.

[00:49:25] Oded: Some companies, it's not the business model to make the revenues that they build a technology for a long time. But other than that, how you bring the, the head of growth of Google. To a company that is doing, games sometimes those kinds of things. And because we have all those people that are in high position that saw this kind of journey, it's very helpful to those entrepreneurs and usually serial entrepreneurs listen more than first time entrepreneurs, first time entrepreneurs are afraid that if they listen.

[00:49:59] Oded: They [00:50:00] lose some of their power. They are weak. Serial entrepreneurs, they understand the process. They know how to build a company. But they know that they are limited in understanding each industry. And they want to listen. And they listen as much as they can.

[00:50:15] Rahul: Yeah. One question regarding, getting first time founders to listen. How do you do that?

[00:50:20] Oded: so this is one of the first things we check. If there are people who are listening or just people that know what they, they, they think they know what they are doing. it's a dialogue. And I think all, almost all the founders that we have invested in our listeners are people who want to learn and to improve and do better.

[00:50:41] Oded: And they understand that they don't know everything. They just call you and ask you and ask others, not me. I mean, I'm telling them, okay, listen, I want you to speak with those three people. I think they can give you a good advice. And they, this is the thing that they like the most. They want to hear those [00:51:00] experts to, to make less mistakes.

[00:51:02] Oded: Listen, I think entrepreneurship and investments are very much about psychology. It's about people. At the end of the day, it's people. Because there are so many macro events that change everything. You know, we've been looking at it for the past four years. We had the pandemic and then we had the supply chain issue.

[00:51:21] Oded: Then we had the bubble. Then we had the bubble burst. And then we had SVB Bank. There's a lot of things that are happening that has a macro effect, and you can change it. Right now, you're in insurance, and people lost money, and no one wants to invest in insurance. It's not about you and your company, it's just right now, the market is not, uh, tolerant for this kind of, industry.

[00:51:44] Oded: So we are very diverse, first of all. But how you overcome those things, it's very much working with the companies, and with the people, and the people need a lot of support.

[00:51:55] Rahul: yeah. And you mentioned about, bringing, initial [00:52:00] 1 million revenue, for one of your portfolio companies, or a percentage of that revenue. But, don't you think it's, more important to teach, that portfolio company how to get to that 1 million rather than just doing the work for them? because only when they, so even the same person.

[00:52:18] Rahul: Yeah. Argument that I have is also with opening doors like it's important that they learn how to open the door themselves. So Yeah,

[00:52:30] Oded: are enabling them the right doors. They open the doors themselves. And we say in Hebrew, you can bring a host to, to the water, but you can't force him to drink. And so I think this is because all we work with very, amazing entrepreneurs, really amazing different rules.

[00:52:48] Oded: and I want to say a word about the Israeli entrepreneurs, because. Any immigrant, by the way, not necessarily Israeli, anyone who comes from outside to a country to [00:53:00] establish his company or to increase his company presence are people who are, you know, pioneers. They come with this, they, they, there's a lot of trade off.

[00:53:10] Oded: If they have families, they bring their family. The wives usually don't have the work that they had before. The kids have a new environment. They struggle. But when they see a door and they can't go through the door, they will get through the window. And this kind of entrepreneurs that we work with and that's good people.

[00:53:29] Rahul: Yeah, so, building this community and executing this I mean, it's still a challenge, right? Like, so,what are some of the challenges that you've encountered, so far? And like, how have you navigated them?

[00:53:44] Oded: I think the, the biggest challenge we have is, is, is the time zone. We didn't let the world and we have people in Australia and people in London and people in New York and people in [00:54:00] LA and people in Silicon Valley and people in. In Brazil and people in other places and to find the right time for all of them to meet is very challenging.

[00:54:11] Oded: And, also we try to find the right time. I'm in Silicon Valley, you're in Singapore. So, so this is a big issue. How you, how you make everybody in the same time zone mentally also, not just the time and keeping the engagement is always a challenge. How you, how you are relevant always. The third one is to always see good company.

[00:54:38] Oded: There's nothing, there's never enough of seeing good companies. I mean, you think you see good companies, but you always want to see better companies, regardless, you want to see the best companies in the world.

[00:54:49] Oded: and, and and the last challenge I think was really that we were into so many macro events.for example, we managed to take the money out of SVB [00:55:00] Bank just the day before the collapse.

[00:55:02] Oded: But this was very stressful. You know, it's not up to you. You, you hear rumors, you, you managed to take the money out.you managed to let the CEOs and the LPs know that there's a problem in the bank, but at the same time, it creates also the, the, the snowball. So,there are lots of things that we did. I think it was really navigating a boat in, in those storms.

[00:55:27] Oded: And those are big storms. So when the market is a bubble, it's not a good time to invest. The valuation is just doesn't make any sense. And you sit with founders and say, no, really, it's not, doesn't make sense to raise that valuation. We are being offered to get those valuations. So how you still invest in good companies and you find them, and not in crazy valuation, how you keep this discipline, which we had from 2020 to 2024.

[00:55:56] Oded: It's the same discipline how we look at companies, what the valuations [00:56:00] then the bubble burst. And suddenly you see good companies, but they are falling down. So I think it's, it's, it's not just choosing the right companies. It's having luck because luck is a big issue in JV in, in, in all the VC industry, I mean, you need luck.

[00:56:19] Oded: So I get the lack of 500 successful people. So this helps me, but it also timing and macroeconomics and there are so many people. being there, and I think that the best thing for a VC GP is to have a wallet desk. If there's one, one, area that if you ask yourself if a VC will be successful or not, is how big is his wallet desk?

[00:56:49] Oded: How lucky is he? If he's a very lucky person, that's always good. But after that, it's the wallet desk. Because wallet desk enables you to source deals, to have enough money. [00:57:00] It helps you to screen deals because you have enough experts to help you doing it. It helps you to help the company. Those are the three most important thing a VC can really, can really do.

[00:57:12] Oded: So my intention was to have the largest role as I can as a GP, not to be limited.

[00:57:19] Rahul: Nice. so one last question. Do you think, the community led model that you have, is superior or is better than the traditional VC model, especially in terms of returns, or is it too soon to say that?

[00:57:35] Oded: It's interesting. I think because we are very conservative and we can't tolerate failures because of the community. So I think different than, than VCs I was partner before. I'm not, we are hardly taking risks. We're investing alongside top tier VCs. We're not investing in companies who already have a path to make revenues, investing serial founders.

[00:57:57] Oded: So those are three areas that we really [00:58:00] don't take much risk. But the problem is it is that we don't have a lot of equity in those kinds of companies because everybody's looking at those companies. So when we invest in those companies, we don't have a lot of equity. I think in bed times, we would definitely be one of the best funds because we are very conservative.

[00:58:18] Oded: We already have bright thoughts and, We are not taking risk. It means that we don't have the companies that gets to 150 X. We have companies who did 15 and 20 and 25 X multiples. So I think, in terms of returns would probably would be one of the top And higher, but in, in bubble days, we probably won't be, we will be good fun.

[00:58:45] Oded: We always return great, but I think there will be always better funds in us in, in crazy time, in moderate times, we will be very, very good just because we are very conservative.

[00:58:59] Rahul: [00:59:00] Yeah, yeah. Yeah, this was great, Oded. Thank you so much for taking the time to do this.

[00:59:06] Oded: Thank you very much. Yeah.your early, my early also. so, thank you so much. Great questions. Really enjoyed it. Really enjoyed it. Whatever you do is great. So, thanks. You say Toda, Abba and Hidvu. So, thank you very much.

[00:59:21] Rahul: Thank you.