It’s been 5 years since Team8 launched its venture-capital fund, Team8 capital. The rationale for establishing an investment arm was clear – as part of Team8’s distinctive “venture-creation” process we identify and validate core problems and needs in our target markets. We then partner with founders to launch entirely new companies from scratch, addressing these needs. However, there are occasions when great companies, founded outside of Team8, are already innovatively addressing these needs. Recognizing that we have already developed a thesis about the problems these companies aim to solve, we realized that we have a significant advantage in identifying opportunities to effectively partner with these companies by providing support through an investment arm. In addition, the synergy between our venture-creation model and the “classic” venture capital model is huge, since we can tap into Team8’s deep subject matter expertise, vast network of potential clients & strategic partners, and strong operational support capabilities in core needs such as marketing, HR, BD and technology.
With that rationale we raised our first investment-focused fund, which totalled $160M. We made 12 investments in companies we believe are among the most promising startups in Israel and have already begun to see the fruit of our investment approach, with the two successful recent acquisitions of portfolio companies Talon and Dig Security, for $625M and $315M respectively.
As we completed our first batch of investments from our first fund, we took some time to reflect back on the decision to expand Team8’s focus to also include investing. Were we truly able to capitalize on Team8’s strong subject matter expertise to pinpoint the best investment opportunities? Were we effectively utilizing Team8’s vast support structure to empower our portfolio companies? And perhaps most importantly, was there room in the Israeli ecosystem for another early-stage VC firm aiming to make top-tier investments? We strongly feel that the answer to the first two questions is yes, but we’re even more confident about the third question, simply because the scale of innovation we’ve witnessed in the Israeli ecosystem is immense. Despite any temporary setback in recent years, such as difficult global macroeconomic headwinds or periods of local uncertainty, Israel has consistently produced groundbreaking innovation that is at the forefront of the global tech industry – second only to Silicon Valley.
As someone who has been investing in Israeli companies for over a decade, and has been part of this ecosystem for three decades, it’s not new to me that Israel is full of innovation. But the acceleration of the last few years has been stronger than anything we’ve ever seen before. From an ecosystem that was focused on a couple of key verticals, we’ve transformed to an ecosystem that is innovating across almost every vertical possible. What once relied heavily on innovation from the IDF has now evolved into an ecosystem that breeds innovation everywhere – with talent coming from various places such as mature tech companies, academia, Israelis coming back from abroad and the IDF too, of course. From an ecosystem where founders were focused on selling their companies, we’ve become an ecosystem of founders dedicated to scaling their companies.
This acceleration was not a “2021 thing”, part of the global tech bubble. It holds true even today, despite the global financial downturn and recent events in Israel, simply because the underlying factors that make the Israeli ecosystem so dynamic and exciting remain unchanged: there’s still immense technical and entrepreneurial talent everywhere, Israelis still have a risk-taking mindset, and they still have the now world-renowned “chutzpah” that empowers Israeli entrepreneurs, sitting in their apartment in Tel Aviv, to genuinely believe they can revolutionize a global industry and take their company public on Nasdaq – and then eventually fulfill that dream, defying obstacles with big vision, determination and resilience.
That’s why we view our second fund as a strong doubling-down on the Israeli ecosystem, which we believe will continue to produce world-class innovation for years to come. The fact that we were able to raise a significantly larger fund this time, totalling $235M, with over 50% coming from institutional investors including marquee global firms, underscores the immense potential our investors also see within Israel. They also believe that we, as the investment arm of Team8, with the unique support we can provide which includes access to an unparalleled network of potential customers, partners and acquirers, are the right partners to help identify and support the most promising Israeli startups. We promise to take this task seriously. With the large number of promising Israeli companies we met (over 600 this past year!), we recognize that we have a lot of work ahead. Nevertheless, we are eager to roll up our sleeves for this demanding yet incredibly exciting task!