E186: Where’s the Alpha Opportunity in VC in 2025? w/Abe Finkelstein

So is European venture dead?

You're the first person that ever asked me that.

Look, I don't think so as a firm.

We don't think so.

You know, I think you saw it recently.

We actually added a partner in London,

our first partner outside of Israel.

So we're actually long European venture.

We've been investing in Europe for about 15 years now, done extremely well.

I don't want to just look backwards.

I am looking forwards, but I definitely think the best years for Europe are ahead of itself in terms of venture capital.

We can touch on that, but it might be a little bit of a contrary intake, but we're big believers in the opportunity there in venture capital.

And one of the reasons I wanted to ask you is because you're not stuck on a specific strategy.

You're in Europe, you're in Israel, you're in the U.S., so you don't have to be investing in Europe.

Why take the time to open up an an office in London today and why lean into Europe?

It's a great question.

I actually see

some parallels with what we saw in Israel over the past decade and a half, even 20 years.

So some of that is around a simple, you know, going to the basics of the basics, like the demographics and saying what's the future going to look like for people.

You know, in Israel,

you know, kind of being an entrepreneur, I always told people it's almost like a job, like any, you know, the way I would have thought of being a doctor or a lawyer or an investor back in the day.

So

I think when I look at Europe, and that's because there weren't, you know, there's not a ton of different alternatives to begin with, kind of going back way back.

And I kind of feel that way with Europe as well.

I think if you're a younger person in Europe,

you may decide to pick up stakes and leave, but I think one of the ways to get wealthy there is probably more likely to go the path of being an entrepreneur.

So I think that's a good thing that we're going to see more and more entrepreneurs coming to market.

Again, Again, just looking at a younger population and the opportunities that are afforded them.

And then the second thing is, I look back at Israel, if I go getting back 20 years, 15 years,

the foreign investors started coming over to Israel the way they started going over to Europe probably about five or six years ago, some even before that.

And it ultimately just raises the bar for the entrepreneurs.

You know, the foreign funds don't, you know, they're not satisfied with 100 million, 500 million, even a billion dollar exit these days.

So when they're putting money into your company, you better be aiming much, much higher.

So I think that's a fantastic thing that happened in Israel, and that's something that we see going on more and more in Europe.

And then finally, I think kind of, you know, success begot success in the sense that we've seen Spotify and then

we have Revolut, which now they're talking about being valued at, I don't know whether it's $40, $50, $60 billion.

I mean, these are very, very large numbers.

And then Klarn and a whole bunch of other ones

that can be expected to be public offerings.

So I think that entrepreneurs are seeing out of Europe that it's possible to build very, very large companies.

And that next generation, whether it's Lovable or

N8N or what have you, like, again, these are the next ones that we think can become bigger and bigger.

So I always say when...

an entrepreneur, you know, your neighbor sees how well you're doing, they say, wait a second, you know, that idiot can do it, then I can do it even more so.

So I think that kind of flywheel and ecosystem is developing in Europe.

It's not without its challenges.

It isn't going to be a walk in the park, but I do think we're feeling that.

And the last thing I would say is that we're seeing these larger companies, and we saw that in Israel as well,

spin off the next generation of entrepreneurs.

They were part of a company that got built to a very, very large scale.

And again, they say, wait a second.

I see this as possible.

You know, when you see something happen, you realize it's possible.

I'm going to go out and start my own company now.

So, you know, that's why we're excited about it.

The reason I asked you whether European VC was dead was not necessarily to be controversial.

It's the fact that most people, at least the consensus view, is that the future of VC, at least the next decade, will be driven by AI.

And in Europe, you seem to have this weird dichotomy where you have this regulatory landscape that's making it very difficult for AI companies to succeed, but also you have Paris, which is the hotbed of AI.

How do you weigh these two factors and how are they both affecting the European ecosystem?

That's a great question.

And by the way, I think most people

are skeptical about Europe and venture capital.

I'm not saying that I'm not also concerned.

I have my concerns, and we'll see how it plays out.

But I tend to think in general, and again, there's no doubt that

regulatory and government, and again, we saw that in Israel, we see that in the U.S., can be a big boon for investment in general, investment in technology, investment in venture capital.

And maybe Europe's not there around that.

And I think they do need to do a bunch of things, whether it's around tax incentives, whether it's bringing over

more of the large corporates to open up RD centers and things like that.

By the way,

tax incentives make all the difference in the world in a lot of cases, whether it's for startups or for corporates.

And so that can be a huge thing.

I know Europe is having challenges with that, and particularly the UK as well.

And it seems like in the UK, given some of what they're doing, the tax side is actually driving people out as opposed to having people come in.

But I'll put that on the side.

I think venture and entrepreneurship tends to live in a bit of a bubble.

You know, we thought regulation was going to kill Uber and Airbnb, and these are some of the largest companies in the world.

And I think that the talent will just ultimately you know get beyond that.

So Paris, for example, you know, amazing engineering schools, whether it's

companies like Mistral or even Hugging Face has Nexus there and

11 Labs, like we're seeing those companies come out regardless of regulation.

Now, some of them may start there and then move their operations to the US.

And we see that with the Israeli companies as well.

But ultimately, I think the opportunity is that those companies start in Europe and you can get many of the European VCs or the US VCs that are over there get there first and give them the seed capital.

So I just see that kind of stuff just operating.

It's its own own organism.

It's kind of like here in Israel that we've had a conflict going on.

Well, we've had a conflict going on for

75 years or maybe 3,000 years, but

we've had a conflict at least since October 7th.

And

venture capital investment is living in this bubble that's just doing amazingly well.

And I think in Europe, that's going to be the same thing with entrepreneurs who want to get something done.

They want to build something.

They're just not going to

listen to the regulation and what's going on.

Now, clearly, that can dampen the opportunities um so i do think that needs to be uh addressed but i just think we're going to continue to see amazing uh successes because there's just going to be more experienced entrepreneurs who've seen big companies getting built and will want to build one even bigger the next time around i mean even though i look at you know you know there's spotify i mentioned but look at stripe who founded stripe you know it was two Irish guys that had access to the capital to go do that.

They weren't from San Francisco.

They weren't from New York.

They weren't from Tel Aviv.

So I think it's possible anywhere.

Taking a step back, tell me about Vintage's strategy and how does Vintage invest in both funds as well as startups?

So we actually have three separate strategies.

We have fund of funds, where we invest in venture capital funds when they come back to raise their new funds.

And within the fund of funds, we have a number of different strategies I can touch on.

We have secondary funds, which is actually where we started back in 2003.

This was kind of the contrarian nature of Vintage and Allenfeld, who started the firm, who saw everybody exiting technology and venture after the dot-com bubble burst

and exiting Israel as well.

And he said, no, I'm the opposite.

I'm long technology.

And I think that's one of the reasons why he...

he hired me as employee number one because he saw I was also long technology.

So we have secondary funds that buy out investors from their investments both in venture capital funds and direct holdings in companies.

And then we have a growth fund.

The growth fund was actually the most recent strategy that we added.

That was back in 2011.

And the idea of the growth fund was to look back into the portfolios of the fund of funds and the secondary funds and cherry-pick what we thought were the best emerging companies at that growth stage and go in on a direct basis.

So if I think about everything we're doing, it's kind of covering the venture landscape from the earliest, early stages via our fund of funds, typically going into early stage funds, and then the secondary funds maybe going in a click later to much later, buying at LP interests, doing direct secondaries.

That growth fund is kind of somewhere kind of the B rounds up until the last round.

And it's a cross-venture.

So, everything is venture capital.

And in our fund of funds, we have multiple strategies.

So, we have a fund of funds specifically focused on Israeli funds.

We have a fund of funds for smaller funds in the U.S.

and Europe, merging funds in some cases,

and then a fund of funds for larger funds in the U.S.

and Europe, and a health fund of funds.

And they're all super synergistic.

You know, we can get to

a deal from multiple different ways and leverage each of the funds.

At the center of it, I would say, is our relationship, though, with the GPs of the funds.

You mentioned you have a fund based on small fund of funds or emerging managers.

How flexible is that mandate?

Are you looking for the funds that have a 50% chance to be a 10x plus?

Or are you looking for something to be diversified within itself and predictably deliver a 3x?

That's a great question.

So that fund specifically, the mandate of it is to invest in funds in the U.S.

and Europe, $200 million in size and below.

And typically the funds that are $200 and below are doing pre-seed and seed.

We,

you know, I would love a 50% chance of getting a, I don't know if it said 10x or 5x, but that would be great.

But they're definitely like, it's a mix of two types of funds.

It's usually funds that may be on their, you know, fourth, fifth, or sixth fund that just, they want to be small.

Right.

So it could be like a Ludlow out of Detroit or a Version 1.

These are funds that they intentionally want to remain small and may remain small forever or a Floodgate, for example.

So very, very experienced investors over multiple cycles as well.

And then, what we also try to do is find the next great versions of those funds.

So, it could be that it's somebody,

we only invest in investors that have some sort of track record.

So, it could be a first-time fund, it could be a single GP, it could be a first-time team, but we want to see a track record.

And the hope is that they can perform really, really well.

Some of these funds will grow up in size over time.

Like, we were in the $100 million fund of Primary ventures of New York, and we were in the $120 million fund of 0.9 out of Germany.

And they've scaled up over time and kind of moved out of that smaller fund of funds,

or our fund of funds targeting smaller funds.

But we're always looking for those new managers.

And yes,

what we see is that the diversification, we don't want to be over-diversified, lowers the risk.

And therefore, we can take big bets on these smaller funds.

And we've had, you know, these $200 million and below funds, we have a bunch that are you know, 10X's and above.

We have a bunch that are 5X's and above.

We even have a couple that are 20X's and above.

And then we have a few that haven't performed quite as well.

What we don't have a lot of, interestingly enough, is those that have actually lost money.

So obviously

we're not making an investment in a venture capital fund to do a 1x or 1.2x, but it's very interesting to see, you know, if you get an experienced manager,

you know, who's made money in the past, has a track record,

it's rare that they'll actually lose money for you.

It happens, but it's pretty rare.

But for sure, that's the vehicle that's a bit more high betas, the way I would put it.

And

every LP will say they do first-time funds.

Most will not, and most like to track the fund over time.

Give me

the thesis for why fund ones are good investments.

Why should somebody invest in a a fund one?

We actually had a discussion about it today in one of our investment meetings that sometimes we've seen this a lot where the fund one isn't good.

It could be timing, it could be portfolio management, and then you have to make an assessment.

Do I go into fund two?

And fund two turns out to be amazing.

And we've had that.

There's a bunch of well-known groups where their first fund was terrible and then they went on to do amazingly well.

But you're saying, you know, if I say, why invest in that first fund?

It's because, you know, first of all, like an access issue.

Like if we see something that's amazing and we really believe in that, like, we want to be there from day one.

It'll give us the ability to, you know, have ball control, so to speak, to be able to increase our allocation over time.

And it also might be if we're not there from day one and they do extremely well, we may not be able to get into that fund too.

Now,

it's kind of rare that you know how strong a fund is within kind of those first couple of years before they come back and raise that next fund, but that's always a risk.

But the main idea is to get there, get in early, get a toehold in the fund.

And then again, if they do well, you can scale up over time.

And that's the main reason to do it.

And again, sometimes, you know, sometimes being in the fund can teach you a lot.

So it could be that I say, okay, I'm going to skip fund one, but then I'm going to come to fund two,

and then fund one looks sideways, or maybe it looks great for some reason, but you know, and that can make me invest or not invest, but it might having been in the fund one and known and see how it behaves and how the partners and the types of investing they're doing, that could actually change my opinion versus fund two.

So, being on the inside is also worth something as well.

I mean, we don't do a lot of fun ones, um, we do do them, but that's why we keep the bar like super high on those.

There's really got to be, I would say, there's got to be like one sentence that you can describe the fund in as why you think it's like super amazing and differentiated for you to go do it's that edge, yeah.

We might start with a million-dollar check, by the way, and that million-dollar check could become a 30 million dollar check over time, right so

said another way if you can't simply explain the edge then there is no edge or you know i it's not being conveyed to me properly or i can't interpret that so again we've made mistakes and we've missed things because i couldn't discern uh the edge but i would say even the ones that i didn't do and i made mistakes on i saw the edge i just didn't have the uh you know maybe the guts to go uh do it for whatever reason but i saw the edge and i'm you know so that kind of tells me like if you can see the the edge, then there's usually a good, like a real, there's usually a good case that it's going to turn out well.

Obviously, fund one is extremely risky, even from an entity level, whether the team stays together.

What are some ways that you could de-risk investing into fund one?

The first one, the model that we do, it is a way to de-risk it.

Again, we're probably investing in that vehicle in about 20 funds, about 10 to 12 of them I would call core checks.

And then another, you know, six to eight are sort of these toe-in-the-water ones.

So, by having that diversification, it tends to de-risk it.

So,

that's the main thing.

I think also, and again, I don't want to toot our own horn, but we've seen what works, what doesn't work, managers, and staying close to these early stage managers,

giving them guidance, not telling them what to do, obviously.

But I do think we have contributed over the years to making some of these groups, maybe giving them a better chance to

be successful.

So, that's another way

de-risking just because we've seen so much.

But at the end of the day, you're taking a big risk, right?

But I would say

the main de-risk going in is I always like to,

I mentioned it before, is to say that we're not doing first-time investors.

We're doing people that have made investments.

Maybe they haven't done it in kind of a classic fun sense, but they've made investments.

There's feedback from entrepreneurs about them.

You can kind of read something into the tea leaves from what they've done before.

So it doesn't mean that somebody couldn't come out of some large organization and start just making investments and do amazingly well.

I'm sure it's happened in the past, but I think we de-risk it by avoiding those and focusing much more on the ones that have had some investment experience and at least a decently robust track record.

You've repeated this multiple times, the benefit of having the toehold in the fund, but also the information advantage of being an existing investor versus observing it from the outside.

What do you see on the inside that you can't see from the outside?

You see how people make decisions.

You see whether they're careful with them.

You see whether, you know, how deeply they go on things.

They see

you can see, again, how they interact with you.

what information they're willing to share with you or not, how transparent they are.

Again, these things are real partnerships.

Again, we're not running these funds, but you're involved with these people for,

I say 10 years, it's probably more like 20 years in many cases.

And ultimately, you want to be involved with people that you can trust, that you have fun working with and interacting with.

And again, being on the inside,

you can feel that.

And also being on the inside,

it's the job of the GP at the end of the day, the fund manager.

But you can also see some interesting things like bubbling up in the companies, right?

You can see a little bit more detail than a post saying, okay, three years from now, start telling me about what happened.

You can kind of see that time series of how things are progressing.

I also say, and again, I think we have okay judgment on entrepreneurs as well, but we get to interact with the entrepreneurs that they've invested over the years, listen to them, hear what they're saying, and that type of stuff, as opposed to, again, just at one point in time when you're due diligencing a fund, to have to make a decision in or out based on everybody being prepped to say wonderful things about the fund.

So being on the inside can just make a

tremendous difference.

It's also what you're not seeing, which is you're not just seeing a backwards applied narrative to why you did X, Y, and Z.

You're seeing in real time before the decision is made.

And that's just a whole different way to view a fund versus through a narrative that the GPS weaved.

100%.

100%.

And again, like I said, this isn't, you know, at the end of the day,

it's working with people in an insanely dynamic market.

And like, so that's the thing.

Like you really, you want to be in the trenches with them.

And

that's really critical.

Again, we've invested in fund twos as well, but in many cases, it's been people that

we've been tracking for that first fund and even before.

Like there was one fund in our portfolio where we didn't do the first fund.

because we didn't like the strategy related to the timing of the market, but we loved the person.

And also there was some team dynamics as well.

These two partners, when they came back for the second fund, the strategy had shifted a little bit, the market had shifted a little bit, and they came back as a solo GP and we're like, great, you know, I'll back that person and it all worked out.

And we had kind of been following it relatively closely along the way, also because the fund manager you know, very graciously was in touch with us, giving us updates as well, which is also, that's great.

You know, like, like i appreciate that also even though again we had passed on the first fund

and you mentioned that oftentimes the fund one is okay and the fund two is great what would make a fund two suddenly pick up and be a good fund where it wasn't as a fund one great example i you know it's it literally was one of the first um

fund to fund commitments we did uh

we did back in our first fund to fund so the situation was the first fund to be fair this was uh the first fund was raised in 99 99, 2000, which was like, or maybe 2000, right?

That was one of the worst vintage years ever.

So ultimately, I think the fund did a 1x.

So I don't know if that was top quartile or, so they didn't lose money, which I'll give them credit for.

But what was really interesting, when we were analyzing the first fund, we saw that out of the whatever, you know, hundred great exits over whatever period of time, you know, they were in, you know, they had picked four out of the 20 portfolio companies that they invested in.

I was like, wow, you know, these guys seem to know what they're doing about picking.

But we analyzed the portfolio, we saw they entered with very low percentages relative to their fund size.

And a lot of their follow-on capital was used to help,

let's say, the more challenged companies survive versus putting more capital into their great companies.

Now, when we talked to them about fund two, we sat down with them and we were going to pitch them that that's what we saw.

in the first fund like okay so why we wouldn't do the second fund and they literally came to us and said look you know we see where we made our mistakes.

We want to change it.

We think we picked good companies.

Where we went wrong was around portfolio management and construction.

And that's what we plan to do differently this next time around.

Now, it could have been, they would have screwed it up, but it turned out that that second fund ended up being, I think it was something like a 4X net fund.

So again, I think it was that it was picking up on some of the, you know, what they were doing well and where they weren't being able to exploit that and take advantage of that.

So again, it doesn't always work that way, but but I do think, and also, by the way, I think it also says a lot about managers when they see

what they did wrong and they want to correct that.

Something that isn't necessarily public information,

and I blame myself as being here in the beginning, but Vintage's first fund was our worst fund so far.

And I think a lot of it is, okay, you think you know what you're doing,

but there's a lot of learnings.

And

we do three off-sites every year where we beat the crap out of ourselves to figure out what we did wrong and what we need to do better.

And that's something that we started

way back in the day in 2003.

And again, you know, fun one

of ours should have been much, much better for a few clear reasons.

And we changed that.

And, you know, so far, the future funds have been, the subsequent funds have all been better than that first one.

First one was okay, but the next ones have been better.

I think the top LPs, like the top VCs, look at the managers' rate of change.

You mentioned that fun.

Not only did they react to feedback quickly, they actually

internally generated what was wrong with the strategy and

improved before they even met with you.

That's even better than being reactive to feedback.

So you also have to look at the trajectory, not just the point in time.

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100%.

And that could be around things even like sectors that you're investing in.

This fund was also very interesting because,

you know, they were invested in a particular sector because they had a a view on it.

And again, that first fund did a 1x in a period of time where again 1x was not bad.

But a lot of it had also to do with the sector they were investing in.

And they said, okay, this next one, we're going to have a thesis around these three sectors, and that's where because we believe that's where the puck is going, where the world is going.

So that's also something like to think about.

We're seeing

that more and more with funds, and I respect that more and more.

I would say, if I had to go back 20 years, you asked me, I said, oh, if

funds are changing the areas and the sectors that they're focused on, I'd be like, I'd be a little wary about that.

I'm a little wary about that.

But even if I'm a fintech fund, but within FinTech, I got to always have new, you know, themes that I'm looking at.

So I think that's critical.

A lot of times these labels we've put on things like strategy drift versus changing strategy or evolving strategy, it's only clear in retrospect whether that was a positive or negative.

And people kind of paint these narratives to try to highlight or

de-emphasize parts of the strategy.

You guys have these off-sites every year where you're constantly just rigorously debating your own strategy.

Tell me about the process on that.

How do you evolve your strategy year over year?

And what have you found that works best as a fund?

It's a great question.

You know, just

from a specific process point of view, you know, we pick a number of topics.

Some of them return on themselves all the time.

Are we handling our reserves properly

in our growth fund?

In our secondary deals, should we be buying LP interests and managers that

we don't think quite as highly of?

Things are always going.

We're always doing analysis to understand that.

But

the whole idea is to focus on a few different topics,

dive in deep, and then out of that come back and say, hey,

let's try to implement that in what we're doing.

So, I'll give you a great example.

Over the years,

we may be able to be accused of being, and this is even me personally, a bit too conservative.

And when we would price companies, for example, when we were doing growth deals or when

we would look at LP models on the secondary side,

we would hone in on the winners and and we'd often put in like what we think the outcomes could be, you know, low base high.

And we always found with the best companies that our high case was always too low.

So, you know, and again, in the moment, you look back, you're like, you're saying, okay, wow, we put

a billion-dollar exit on that company.

And you know, now it's back then, that's crazy, right?

And now it's a hundred billion-dollar company.

And then in another case, it might be, oh, we put a $500 million exit.

Oh, and now that's going to be an IPO at $9 billion.

So, you know, a lot of that work is then to say, okay, when we look at deals,

if we feel good that we've honed in on who we think the great companies are,

let's figure out if we're not being too conservative around pricing deals.

So that's just one example, but that's the idea is that

we take the data of the deals that we've done, we look at the analysis at the off-site, and then we come back and try to implement it in

our workflow.

We had things around like

diversification of portfolios, where if we're buying on a secondary basis, like how to think about that, if is a more diverse portfolio a much better opportunity than one that maybe has a couple of you know amazing companies in it, uh, or at the time that we think our amazing companies are not, and so on and so forth.

So, it's really like practical things that we deal with when we look at transactions and then do the analysis and see what the outcome should be, and then come back.

Now, a lot of it ends up being, as always, more art than science, but it's just it's important to go through that.

And then we also just talk about strategies in general, like our fund of funds, for example.

You know, our fourth fund of funds, you know, we started with an Israeli fund of funds only and then started investing outside of Israel.

By the time we got to our fourth fund of funds, it was Israel funds, big funds, small funds, U.S.

funds, European funds.

It was this big mishmash of, you know, 50 or 60 different lines in our fund of funds.

And, you know, what we realized, it didn't make sense to...

have all that in one fund of funds.

And that's why we ended up breaking it up into different vehicles, just because, A, they behave differently, and also to give more flexibility to our investors you know to pick and choose what type of strategy they might want so it's also those types of topics as well um so yeah and then now by the way like we're we're gonna have an off-site where a lot of it is around like how do we you know want to play what's going on in AI you know again we this is a conversation that we've been having for the past two years and it comes up each one but we're gonna have another one to say hey you know where are we today in the market with that because we've invested in a bunch of different companies we're doing well with a bunch of different companies.

But we want to dive deeper and see where we're making money and where our investors are making money in the sector thus far.

So

it's those types of things.

We'll get right back to the interview.

But first, we're looking for the next great guest.

If you or someone you know is a capital allocator and would make for a great guest, please reach out to me directly at david at whispercapital.com.

It sounds like a lot of what you're doing in off-sites is you pick these sacred cows, these things that you're never supposed to question.

Diversification, conservativism, valuation, and you attack it systematically.

And the off-site gives you the mind space to have everybody in the room talking about these things.

And I'm sure a lot of times the takeaway is we're doing things how we should be doing them.

It's not always let's change this, this is that.

Sometimes you double down on your strategy, which itself could have value.

Yeah, for sure.

Although most of it is just us beating ourselves up for the stuff that we wish we would have done better.

But it's interesting.

Another part of it, I mean, again, is that Alan, who started the firm, you know, says that when he comes to the offside, he likes to be the first one to talk and talk about all the mistakes that he made.

So it kind of sets the tone and just gives it kind of that space to say, hey, you know, that's really, you know, we want to get better.

And you're right, it's not just about like, let's beat everybody to a pul and depress everybody, but it's like saying, okay, let's take a serious look, like you said, these sacred cows and, you know, and figure out how do we get better at

what we're doing.

So it's, yeah, so it's a really important part part of what we do.

One of the things that makes you guys unique is you use the same team against different strategies, which sounds kind of intuitive, but then you look at you have fund of funds, you have growth investment, you have secondaries.

Personally, my bias is I consider secondaries a completely different animal from the rest of the industry, but you guys have it in one team.

Why is that?

It's a good question.

I'll say this.

From a bottom line perspective, it's just...

It's like data and information flow and intelligence.

My partner Soph likes to call us an intelligence organization.

You can tell he was in the Army here.

But that's really the idea is that if we had a fund-to-funds team and a growth team and a secondary team, you would just have siloed information.

And it's just so super synergistic.

Like there's not a phone call that I have with a GP where somehow something doesn't come up.

around potentially doing a secondary,

maybe even a growth round in a company.

It could be a secondary company, could be even an LP interest.

And I think if it was then, like, okay, I have this relationship with the GP and then, okay, let me go turn it over to the team that does secondaries.

I just think some people get lost

along the way and maybe even lost in translation.

So again, it's all super synergistic.

At the end of the day, it's venture capital.

You know, the companies are the building blocks.

You know, the fund managers are at the center.

And, you know, if I look at

a secondary deal,

at least the way we do them,

They're very curated, you know, this kind of rifle shot, secondary, smaller deals between $1 and $10 million typically.

They're usually things where we're working together with our GPs because they might have an LP that wants to sell, and we know the portfolio because of the relationship with the fund.

I would say, as a team, there are some people who spend a bit more time working on the Fund to Funds deals and working on the secondary deals and working on the growth deals, but

it's just too synergistic to separate all that.

At the end of the day, it's about making, you know,

it's about evaluating the underlying companies and the fund managers who are involved, whatever way you want to get to it.

Even when we're doing a growth to own a company, we look at just as much as who else is invested there.

You know, it's not going to cause us to make an investment or not make an investment, but that's also a critical part.

Are these trusted partners around the table or not?

And again, that just might get lost.

You know, if somebody then had to come over to me and start asking me about, hey, you know, there's this deal and there's these funds in it, and I know you're closer to them.

like those conversations do come up naturally, but if there's that separation, I think it wouldn't,

you know, be as we wouldn't be as successful and it wouldn't be as efficient.

You recently had a successful generational transfer with Alan Feld, who I previously interviewed.

And just to give you a sense for that, I tried to interview him again and he introduced me to you.

So

he lives by his generational transfer.

He's a man of his word.

That's right.

What are some of the behaviors or processes that the firm went to in order to have this successful successful generational transfer?

Yeah, so

it's a great question, and

I appreciate Alan highly.

I'm going to do all this future podcasts, I guess, but

with pleasure.

But

no, it's really like kudos to Alan.

Basically, about 10 years ago, the trigger was actually,

I mean, I'm sure Alan had it in his head before that.

I mean, Alan's a very visionary type person.

But, you know, when Asaf Horace joined us as a principal and then quickly became a partner and then

promoted to general partner,

he was, I guess, in his early 40s at the time.

I was somewhere when he joined, probably in my mid-40s to

late 40s.

And then

Alan said, look, I want vintage to last forever.

I guess he saw, he felt between a meet, myself, and Asaf, there was a good core.

that could take it going forward.

And he ended up doing research among other funds, both that had successfully handled a succession and those that hadn't.

I forgot the number that he spoke with, but I think he came away with a few core ideas.

One was that

things need to be put down on paper, right?

Both to sketch it out and also just legally, right?

And then

you had to really make clear lines of demarcation.

So in the case of

what Alan decided at Vintage,

was that at the age of 62,

you're no longer involved in new funds.

And it just made it a clear line.

You've raised these prior funds, you've been investing out of these prior funds, you're involved with those over time.

You know, there's maintenance.

Again, it's probably more than maintenance.

That's probably belittling what you have to do, but still, it's much less.

But 62, you're not involved in raising the next funds.

That's what happened in the year that we raised our fourth growth fund,

now our eighth fund of funds.

So Alan isn't going to be involved in those going forward, but it just set the process going forward.

So when Amit hits 62 in a couple of years, the same thing will happen with him.

And then when I hit 62 in about a decade, that'll happen with me, and so on and so forth.

And it just makes it clear to everybody.

And that's something that we've told everybody within the firm that that's how it works.

And we've told that to our investors as well, which is extremely important.

And we've now been telling that to our funds as well and other people and so the idea is to you know

set it down on paper make clear lines of demarcation and then start to message that well in advance of that happening and you know so far uh that's working it's been an important thing for myself and amit and usaf as well because we've

that must help with recruiting as well right because you have You have a clear path for the next generation.

Yeah, yeah, 100%.

And again,

most people aren't going to get there, but we have enough proof points in the firm.

I always say, like, you know, technically, I don't even remember what my title was, but I started as an associate.

Amit was a venture partner.

Saf was a principal.

Again, we brought on a couple of partners as partners as well, but the idea that

you can stay here forever and move up over time if you want to,

it's 100% the case.

And I think, you know, the other thing is that,

you know,

Alan,

like say he's in the process of retirement, but

probably next year sometime he's going to go down to one day a week.

And

we have an equal partnership now.

And there's no,

after

there's going to be no long tail of the founder, so nobody's going to get that going forward.

So he's really, you know, somebody who's set the tone also around that, that you have somebody, you need that.

Because if you don't have that, I mean, you've seen other firms that there's somebody who just holds on forever.

And

that can work too in some cases, but I don't think that's not what Alan wanted, and it's not what we want either.

Let's talk Israel just to give you a sense for how quickly this has evolved.

When we had our pre-interview chat,

it was before

Israel and the US had taken out Iran's nuclear program.

That seems to be very positive for Israel.

Tell me more about Israel's ecosystem today post kind of the dismantling of the Iranian nuclear program.

so first of all, it's like, you know, there was that, and now it's on to the next problem, right?

Like we have to deal with hostages and what's going on with Gaza.

So it's sort of that's never ending.

But what I would say, like, even, you know, day before that and day after, I mean, I know it was only 12 days,

I don't think, like, and even since October 7th, I don't think that the Israeli ecosystem has like skipped a beat.

Like, it's pretty incredible.

Like, we talk about all the time the resilience and things like that, but it's actually only getting more

and more active.

I'm losing my track of time, but I think immediately after that, there was the announcement of Melio getting bought for $3 billion.

That's an Israeli company.

A few months back, Wiz was bought for $32 billion.

Next Insurance, $2.6 billion the same week.

We had the IPO of eToro, which was the first VC-backed IPO.

This year, it's an Israeli company.

But now that kind of Iran has happened, you know, I don't know if more, you know, we're going to have to do something else.

there's gonna be additional conflict.

I actually think, like, when I look at the whole region, it's probably been de-risked dramatically from where it was on October 6th, 2023.

And maybe de-risked to the point, you know, where it's been less risky than ever,

to be frank.

So I think that's fantastic.

And I definitely think there's renewed momentum to end the war in Gaza.

And then there's renewed momentum to actually have peace with more of our neighbors,

which when you take a step back, it's pretty incredible.

And if I had to make a bet, I suspect that within the next 12 months, you know, the war with Gaza will be over and that, what, peace with Saudi Arabia?

And that's the craziest thing, maybe even with Syria.

And like, you know, who would have thought?

So

I'm not naive enough not to worry about the next thing that's coming around the corner.

Like, who knows?

But I definitely think like all that's been de-risk.

With all that being said, in the middle of a war, Sequoia reopened up their office here, Greylock reopened up their office here

we had these massive exits and IPOs and you know tons of money getting invested here just yesterday NVIDIA announced they're going to build a massive R ⁇ D center in the north here in Israel I mean incredible right so I don't know it just keeps

it just keeps going on the Tel Aviv Stock Exchange was the best performing stock market I think over the past month including during the time of the Iran war.

Again, I'm not sure that's the best barometer in the world to judge things, but it just tells you.

So I think again, the shekel is like the strongest it's been in a couple of years, probably.

So

things are chugging along here.

That's for sure.

And I'm pretty optimistic.

As an asset allocator, investing, you guys are obviously based in Israel, but you're also investing in Israel.

Do you see a peace premium, a post-Iran and maybe a post-Saudi peace deal premium to the Israeli market?

Or is that already priced in?

Unfortunately, yes.

I don't know as an investor, I do think there's this new generation of people who are going to be coming out of the

war that had a type of really unique bonding that may lead to a real

ramp up in the number of startups, which is amazing.

We're seeing startups getting started in new eras, whether it's quantum or defense.

But what we're seeing is, again, have a have-nots.

So we're seeing it's much harder to raise.

And again, I feel this is in all the markets.

It's much harder to go from a seed round to an A round in general.

For, you know, it's not like 2021 when anybody who raised the seed round got to an A round, pretty much.

So that's the challenge.

With that being said, we're seeing tons of money flying into the best companies and tons of MA.

And companies are continually raising $100 million rounds, $200 million rounds, $300 million rounds at amazing valuations.

So I do think there's already a premium on the market, and I do think there's a chance it only goes up.

And it's just simply going back to the basis, it's kind of supply and demand.

There's only a finite number of companies to invest in every year here.

And the whole world is investing here.

And as soon as things calm down even more, more people will come over to seek investments.

So there may be something macro that goes on globally that for some reason depresses investing in venture.

But the supply-demand dynamic in Israel is only just, I think there's going to be more demand than the supply will be able to match.

and that's just going to cause prices to go up.

Perhaps the ultimate champagne problem, but

just to take the counter of that is if there are no wars, if Israel is in peace with all its neighbors, will Israeli entrepreneurs still have that same edge that they currently have?

Because they are literally battle-tested.

VCs love battle-tested entrepreneurs.

Israeli entrepreneurs are literally battle-tested.

That's a great take.

I mean, look,

unfortunately, I don't think all of our conflicts are going away.

You know, I think, for example, if I take like

cyber,

it's just going to get more and more intense globally.

You know, there's always going to be enemies from somewhere.

They don't need to necessarily be your neighbors.

So I think that

that's something.

I also think when we see how AI is just changing the world, like Israel realizes that it can't fall behind on that.

So it's going to continue to invest tons of money around that.

That's going to become a bigger, bigger part of warfare in the future, for example,

and quantum.

And so I think Israel is always having this mindset and

to be ahead of the curve on things.

But you're right.

I mean, I don't want to, obviously, I would love a world where there are no wars, but there's no doubt.

that the conflict in the region has been a big boost for the entrepreneurship in Israel.

But I don't think the conflicts are going to, I think some of the conflicts are going to calm down locally, but I don't think they're going to go away completely

forever.

That's for sure.

And I would just say, I also think, again, we're in an ecosystem where

the Israeli teenager gets up and he sees that somebody just sold their vibe coding one-man company for $80 million.

you know,

that's something to aspire to, right?

Or that, again, that Wiz gets sold for $32 billion or, you know, eTor, which

they use on a daily basis, goes public.

So

they have a lot of examples of what to aspire to.

And I think that

that's going to drive them as well.

But I don't think we're going to be, unfortunately,

dismantling our military anytime soon.

You've been in Venture now for 22 years, which I mentioned earlier,

countless cycles, countless paradigms, countless ventures dead, now Venture is the hottest thing, now Venture is dead again.

What is one thing that you wish you knew when you started in 2003 in venture?

What advice would you give to a younger Abe right before you got started?

Wow,

that's a tough one.

You know, it's funny.

I probably would say, like,

don't let the stuff you get wrong eat away at you too much.

Maybe within our business model, that

we could probably be a bit more risk tolerant, is the way I would put it.

Take more swings on certain things.

And I would also say, if it's advice, I would say the key thing is just building close relationships with people as much as possible that you like and working with people that you like.

If there's somebody who

you don't totally gel with, find another deal, right?

Like, and there'll be something else that

comes down the pipe.

I went to a dinner with one of the local, was a local GP at a fund here, and I was trying to figure out how long I know him for.

And it's like, when I say, wow, it's been 20 years already, it's like, it's fantastic.

And it's somebody who like I'm glad I got to know for 20 years.

I would say, really focus, you know, you can make good investments in people that you like, and you can avoid, you don't need to make in, you know, there'll be good investments in people you don't like, but you don't need to make them.

It's all right.

For some people, 20 years feels like two years, and for some people, two years feels like 20 years.

That's right.

You mentioned you don't want to be overly critical.

I struggle with this as well.

I'll listen to a podcast or look at a deal, and I'll look at the one thing.

I might get everything right, but I sold three months early in the public markets.

Have you found a solve whether as a team at your

off-site?

How do you operationalize being kinder to yourself and giving yourself more benefit?

It's not easy.

Again, on the hand, like we said, we want to start off with the mistakes.

So I guess it does make it sort of like a safe space in that sense.

Because,

you know, if the person,

if the the people at the top of the firm are talking about their mistakes then uh you realize that uh you should talk about them and admit them and not just you know brush them under the rug but um look we also celebrate our wins and we celebrate as a team and uh

um

you know i find that maybe that's the challenge is that i if i had to give advice to somebody is that i find that very fleeting is that i enjoy the wins for you know, until I have to go on to the next one and the losses just eat away at me for a very long time.

And that's, uh you know that's

it is what it is but we try to celebrate the wins as well um

you know ultimately again we've been in business now for over 20 years i i'm um you know i'm very happy about uh you know even the relationships with our investors which i hold dear dear to myself you know they they put us in business and they continue to put us in business so i uh I try to focus on much of that, like doing the right thing for them and, you know, ultimately making them the returns that they want to make.

And, you know, so far we've been able to do that um but it's hard I don't know you know it's just very it's it's very very hard I'm not sure I have a great answer to say how to you know not let it either it's it it's something it's something I think about often

it is hard to make those losses eat away at you less so I think you have to do the opposite which is spend time doing things that you love spend time with people that you love and let that

let that take up more space in your life than the losses which will be painful and maybe they should be painful maybe that's how you learn from them.

Yeah, totally.

And again, occasionally I'll look back and I'll see some deals and I'll be like, oh, wow, that was a good one, you know, and then I'll chuck it up to luck and move on.

But yeah, it's not an easy answer for that.

That's another podcast, maybe.

Well, we'll leave that for the next podcast.

Abe, this has been absolutely wonderful.

Thanks for jumping on the podcast.

My pleasure.

It was great.

Really appreciate it.

Thanks for listening to my conversation.

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