YL Ventures, a 12-year-old, Mill Valley, Ca-based, seed-stage enterprise agency that invests narrowly in Israeli cybersecurity startups, simply closed its fourth fund with $120 million in capital commitments, bringing the entire capital it now manages to $260 million.
It’s an attention-grabbing agency in quite a few ways in which set it aside from a lot of its similar-size friends. Most meaningfully, although it backs founders on the earliest levels, it doesn’t unfold its bets as do many seed-stage outfits, as a substitute funding simply two to a few groups every year. Meaning it can unfold its latest fund throughout an estimated 10 corporations.
It’s a concentrated strategy, and one which appears very a lot to be working. YL Ventures was the largest shareholder within the container safety startup Twistlock, for instance, which bought to Palo Alto Networks final month for $410 million. Twistlock had raised $63 million altogether. YL Ventures wrote the corporate a $2 million verify to begin, then invested one other $10 million over its four-year run as an impartial firm.
YL Ventures was additionally the largest exterior shareholder in Hexadite, an Israeli startup that used AI to determine and shield towards assaults and that bought two years in the past to Microsoft for a reported $100 million.
A more moderen wager is on Orca Safety, an Israeli startup led by two former Examine Level Safety executives that’s making an attempt to unravel the issue of securing purposes within the cloud with out an agent. Orca lately introduced a $6.5 million seed spherical led by YL Ventures; what wasn’t reported on the time was simply how a lot YL Ventures invested: $6.1 million.
Value noting: nearly all of founders in YL Ventures’s portfolio haven’t solely served within the Israel Protection Forces however particularly inside its 8200 Unit, an elite a part of the group that has grow to be the coaching floor for a few of the buzziest cybersecurity corporations on this planet. It reportedly accepts lower than 1 out of each 100 highschool graduates; enterprise companies with a cybersecurity focus then try to cherry-pick amongst these when their service is accomplished.
We talked with agency founder Yoav Leitersdorf lately about his 12-person agency, which is funded by household workplaces and ultra-high-net-worth people from largely the U.S., Europe, and São Paulo, Brazil, he says — relationships he says he can hint again to a handful of relationships struck in 2007. (As a serial entrepreneur who was prepared on the time to strive his hand at investing, Leitersdorf says he “went to some individuals I knew for capital, they usually launched me to their pals.”)
Leitersdorf additionally has demonstrated a penchant for networking in one other means, too. To assist vet groups that curiosity YL Ventures, the agency has shaped a enterprise advisory board that’s comprised of greater than 50 safety professionals from heavyweight corporations, together with Andy Ellis, who’s the CSO of Akamai; Adam Ely, who’s the Deputy CISO of Walmart; Netflix’s Director of Safety, Brooks Evans; Rob Guertsen, the Deputy Info Safety Officer at Nike; and Spotify’s head of safety, David Hannigan.
Not solely does this community get a have a look at what’s brewing in Israel, however they assist steer YL Ventures to the startups that the majority straight handle their very own ache factors.
They may also be useful in getting Israeli entrepreneurs to cross over from Israel into the U.S., which can be very a lot part of YL Ventures’s technique. As Leitersdorf explains it, the “corporations originate in Israel, however inside a yr, the CEO and a few of the administration staff transfer to the U.S. and we assist them construct gross sales and market and hand all their follow-on funding.” This oftentimes consists of introductions to frequent syndicate companions like Bessemer Enterprise Companions, USVP, and ICONIQ Capital.
We requested Leitersdorf what — past expertise within the IDF, past the suggestions of its advisory board members — YL Ventures appears for in a promising startup and he says, unsurprisingly, the staff, however extra particularly, their expertise.
“Most of our founders have spent 5 to 10 years within the trade already,” he says, together with at Microsoft or the community safety firm RSA or at Examine Level, the Israel-based software program large. “They’re pretty mature, with the common age within the late 30s.” In addition they handle an area that YL Ventures cares deeply about based mostly on what its enterprise advisors inform the agency is a large want.
“Then, when a staff comes by means of, we attempt to steer them into these areas.”
YL Ventures closed its first fund in 2007 with $17.2 million, its second in 2013 with $41.5 million, and its third with $75 million in 2017.
Leitersdorf leads the agency from the U.S., alongside one other associate, John Brennan. the agency additionally has an workplace in Tel Aviv headed by associate Ofer Schreiber.