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The Kumara Foundation was established in 2014 and is led by Boaz Dinti, Erez Shachar, Sivan Shimri Dahan and Daniel Slutsky. The fund is in fact the first growth fund established in Israel and since then has invested in 15 groundbreaking Israeli growth companies, including: Fiverr and JFrog issued on the American Stock Exchange, and at Riskified, AppsFlyer, JoyTunes, IntSights, Minute Media, Guardicore talkspace and more.
“We planned to start raising money for the fund in April and then the world went crazy,” Erez Shachar, a partner at the Comra Fund, told Calcalist. We had a round of talks with the key investors in the fund and told them that although it seems right to us to be with a new fund in the market right now, we are not sure it can be raised. They greatly encouraged us and gave us the feeling that they would be happy to invest, this is what pushed us to start recruiting in May.
‘All the raising has been zoomed in, and we have not met with any of the new investors. It was a strange process and we were surprised that people agreed to take such a commitment. Investing in a fund is investing trust in people because you are not investing in something you see. Before that we believed that raising a fund requires a lot of face-to-face meetings, but apparently the world has changed because it is actually the easiest and most agile recruitment we have ever had. Much more efficient than recruiting at other times, where we spent most of our time on planes. ‘ Shahar adds that 80% of the capital came from existing investors and the rest are new: “Almost all existing investors came in and some increased their investment.”
The caravan and the crisis that followed caused you to make some change in the way you would work with the third fund?
‘Our strategy has not changed, what has changed is the local market. When we started Comra 1 we were the first fund in Israel to invest in growth companies and at first they looked at us a little weird, because some growth companies were already in the country. We had to convince the investors that there is a market here, today there is no doubt about that. The market even became more competitive and more entities entered that were not here or did not invest in these stages.
“We invest in companies with sales of over $ 10 million a year, and most importantly in entrepreneurs who have ambition and can go all the way and build an independent company. Although the market is becoming much more competitive, our position in it has only strengthened, because we have a portfolio of companies some of which have already reached where we wanted and some of which are on their way there; When there is such a portfolio, which produces a success story, then it is easier to reach companies. We focus on taking Israeli companies from the first million to 100 million in sales. We are well acquainted with these stages, half of our companies have already passed this stage, which is a very challenging stage, especially for an Israeli company – you move from a company whose center of gravity in the country to investing efforts to build the organization around the world. “
Did you mention the entry of new investors, most of them international, into growth investments in local companies, in fact this means that an Israeli fund can no longer lead investments in advanced rounds?
‘We always take turns. We typically enter Round C, which is a $ 20-60 million fundraiser and the company has over $ 10 million in sales, and we lead them safely. We record 20-25 million checks in these rounds and usually do them with existing investors. From time to time we lead jointly with other funds, the rounds after us are such that we no longer have any ambition to lead, in which the leading funds register checks of $ 100 million.
“Once rounds were public, today they are private and companies remain private for longer than before. We see the entry of giant funds as a very important development of the ecosystem built here, which allows us to give companies several years of construction before they become public. “Fiverr and JFrog) are companies that once had to issue a tenth of the amount and build themselves on their own after the IPO.”
The two exits of your portfolio companies were not a sale but an issue, is this something you are aiming entrepreneurs for?
‘Because we invest in entrepreneurs who want to build large, independent companies, so this path is very natural. Obviously some will sell, but even then it will only happen at a much greater level of maturity than it has been in the past. Most will be issued and some will continue to be independent. It is no coincidence that our first two investments are in public companies, and we have a significant pipeline of companies that we believe will become public. ”
Some of your companies, like Tabula, are relatively old in the market, do you make scandalous deals at some point?
‘We do not have much pressure to exercise because it is still a young investment. Our first fund is 8 years old and two of its members are already public. “Usually we don’t realize before the company realizes and we stay the whole way.”
How does the current period affect Israeli high-tech?
‘It’s hard to argue with the fact that this is the best period here in terms of magnitude, and most of the successes of the period are the ability to scale the company. Before Kumara, we were all in the field of early investment and one of the harsh criticisms of the Israeli market was that Israeli entrepreneurs sell early to the first strategic buyer who knocks on the door. We believed that there was potential here for entrepreneurs who have no less good ability to build companies than in Silicon Valley, but they do not have the ecosystem that allows it. ”
“Entrepreneurs realized that selling was the only thing they could do because it was very difficult to finance such companies and most of the growth money in the market went to American companies. We believed that once the right ecosystem was created here we would see a lot of companies doing it, and indeed that is what happened. There is a real realization here of the vision we had in the beginning – the market was very hungry to build the ecosystem and then all the glass ceilings were broken. This is the biggest revolution that has happened here. ‘
This big money you are talking about comes in more and more early stages, only recently we saw Assaf Rapaport’s Wise raise $ 100 million in the first round.
“I think it’s part of the sense of security created in the market, both by investors in Israeli entrepreneurs and by the entrepreneurs themselves. It starts in the later stages of membership and permeates early society as well. It is clear that when investing 100 million dollars in the first round, the expectation of investors is that a huge company will be built here, and a few years ago this would not have happened. There have not yet been many entrepreneurs here like Assaf, who recruit before sales, and I think there are not many of them in the valley either. But in my opinion, we will also see early investments in superstars and also the conventional route of entrepreneurs who recruit in stages, and from both of them large companies will be built. “