A Frank guide to corporate investors’ hearts, and wallets

Foreign investors are often blown away by Israeli entrepreneurs’ confidence and willingness to take risks – but sometimes, those entrepreneurs can go a little too far.

“Many entrepreneurs with a good product or technology approach large corporations with the attitude that they are going to reinvent the wheel,” said start-up expert Ed Frank. “Corporate investors who are looking for good start-up technology are not impressed with that attitude. Entrepreneurs need to be a little more realistic, and realize who they are talking to.”

Corporate venture capital, according to Frank, is a largely untapped resource that Israeli start-ups, even those at the seed stages, can and should connect with. But succeeding with corporate venture capital investors requires some attitude adjustment – and Frank hopes to be able to prompt that adjustment and connect start-ups with investors from some of the world’s biggest tech multinationals at the upcoming Axis Tel Aviv Corporate Edition event.

Frank, a veteran of the Israeli tech industry, heads Axis Innovation, which connects start-ups with VC investors – both the better-known “financial VCs,” the companies that invest in start-ups for a living (Genesis Partners, JVP, Pitango, etc.) and the VC departments of large corporations, such as Intel Capital, Microsoft Ventures, Qualcomm Ventures, and others. He himself has worked “both sides of the room” – co-leading Bootcamp Ventures, which teaches start-ups how to sell themselves to investors, and as former head of IDT Venture Capital, which invested in start-ups in the United States, Israel, and Europe.

“Corporate VCs often come to Israel after their company acquires an Israeli start-up,” said Frank. Often a company will shop around for a technology or product to solve a specific problem or issue, and end up acquiring an Israeli firm. Exposed as they are to the Israeli start-up ecosystem, they start looking around at other start-ups, which they may acquire, or just invest in.

“In the old days, a corporate VC wouldn’t invest in a company that had dealings with their competitors – Coke wouldn’t buy equity in a firm that supplied key technology to Pepsi, for example. Nowadays, though, corporate VCs are interested in any investment that can make their company money – and if the technology that company produces can help them solve problems, then that’s even better.”

Ed Frank (Photo credit: Courtesy)

There are over 1,000 multinational VCs in the world, only a few dozen of which are in Israel – and Frank wants to introduce more multinationals to the possibilities in Israel.

“We’re holding the Corporate Edition event in conjunction with the Tel Aviv Stock Exchange. We’ll have panels, speakers, and pitches by start-ups to the representatives of corporate VCs in the audience, some of whom are based in Israel – working for companies that have already invested here – and companies whose investment departments are not yet represented here.”

Among that latter group will be Ford and MasterCard, both of which have expressed interest in Israeli technology in the past but have yet to take the plunge into the Israeli start-up ecosystem.

Most Israeli entrepreneurs who have worked in the tech industry or who have graduated from accelerator or incubator programs will have gotten some training on how to pitch an investor. But the investors they have experience with are most likely financial VCs, not corporate VCs. Among Frank’s goals is helping start-ups understand what that latter group is looking for. During the sessions, investors representing multinationals will describe what kind of companies they invest in, what impresses them the most, and how to approach their departments. Start-ups, meanwhile, will make their own pitches, hoping to catch the attention – and, perhaps, money – of the investors in the audience.

Entrepreneurs who want to make a good impression would do well to be cognizant of the differences between corporate and financial VC investment strategies, said Frank. “The financial VC is interested in an exit, and while a corporate VC may be interested in one too, they are much more likely to be interested in the technology they are investing in and how it can help their business goals.

“We had a big multinational investing in an Israeli start-up that made a huge exit, and while the financial VCs were celebrating, the corporate investors were wondering what the brouhaha was all about,” said Frank. “For them, an exit of hundreds of millions or even a billion dollars is no big deal, because they may be worth $50 billion or $100 billion themselves. Obviously it was this start-up’s technology, not its business model, that the multinational was interested in. Israeli entrepreneurs who want to appeal to these people are going to have to adjust their presentations and demonstrate their value to corporate investors, and that is an important goal of this event.”