startupmania

Several days ago, StartUpMania paid a visit to Gili Raanan, the partner who joined the new Sequoia Capital Israel.

You do not see this in the image to the right, but Raanan’s office is about 3 meters away from the Ocean Hotel’s swimming pool in Hertzelia. The only thing separating the sofas we sat on and the pool’s chilly water is a clear pane of glass. If I were to pick my investors based on the potential… “people watching” potential, the type that calms all spirits in a heated meeting, I’d go to Sequoia, no doubt. They even have free parking.

More importantly, however, according to Raanan, Sequoia has a little under $200 million to spread around in investments. All you have to do is organize a meeting, show up, enjoy the view and convince the four partners that your initiative will change the world and you leave with a much heavier wallet, and a strategic partnership with one of the world’s strongest venture capital funds.

The key words in the above paragraphs is “the four partners”. According to Raanana, Sequoia does not employ any additional staff you need to get through and impress before you reach the senior partners. You’ll be speaking directly to Raanana and his two partners: Haim Sadger and Shmil Levy. The fourth partner, Randy Ditzler, is in the U.S. Of course, it’s not as easy as it sounds, as you still have to show the three that you have a new solution for a large, global market to gain their support. The bar is set pretty high.

To this day, Sequoia Israel, which raised the $200 million at the end of the first quarter of 2009, has invested in GameGround by Itzik Ben-Bassat, Guy Margolin and Shaul Olmert (son of former Israeli prime minister). GameGround offers a personal portal with personal services for gamers. Sequoia has also invested in VisualTao, founded by Tal Weiss, Iris Shoor and Jonathan Seroussi, which aims to create a web-based AutoCAD application, and allow users to share CAD and GIS information across great distances.

Sequioa also invested in publically-owned company Dmatek by Yoav Resiman, and returned it to a start-up status by paying a premium to investors and removed the company from the English stock-market. This type of investment in “mature” start-ups is an increasing trend among venture capital funds.

Raanan, in 1997, founded Sanctum (then Perfecto), which created an Application Firewall which was sold eventually to IBM. He also handled a nice exit with the start-up NLayers, which was sold in 2006 to EMC. He was in the process of building a third, in the e-commerce realm, when he received the offer to join the three partners in Sequoia Israel, and decided to “cross over” and join the other side.

“I’ve yet to make my first investment in a project,” he tells StartUpMania. “I’m currently meeting and interviewing dozens of entrepreneurs a month. I spend a lot of time looking at new projects, but we’re in no rush, we’ve secured the investment in the fund for a ten-year period.”

Raanan is looking for the right investment, and would love to “invest in companies at all stages, but especially in the earlier stages.” He is interested in entrepreneurs which have identified a large global market and offer a new way of coming at it. “We’ve learned in Sequoia that we do not set policies, it’s not our job to tell entrepreneurs which market they should be aiming at,” he explains, “unlike the entrepreneur, we’re not in the business of thinking what’s the next best thing and tell him to do just that. I look at people’s creativity, make sure that they are aiming at a large-enough market, and check which advantage they have over the competition Usually, it’s a technological advantage that needs to be tested and assessed, as well as gauging the team’s ability to overcome technological speed bumps they may run into.”

It seems that, in light of the spirit of the time where Sequoia has “reached into the vaults” for the $200 million, and just as he himself did at NLayers, Raanan is not planning on drowning his entrepreneurs in piles of unneeded money. “Many start-ups are biting off more than they can chew,” he says and explains that at NLayers he only raised about $9 million, before selling the company to EMC for $50 million.

“If you give entrepreneurs a lot of money, you don’t get any more than if you would’ve given them a little money,” he details his future investment policy. “There are, of course, special situations, where you are familiar with the sales model, are well aware of who you’re selling to, have the business model’s statistics and you need to pay sales people to get you $1.50 for every dollar. If a start-up is not quite sure what its sales model is yet, then bombarding them with cash is not the solution.”

If this sounds reasonable to you, and you have an idea that may interest the partners in Sequoia Israel, and you don’t mind not being showered with cash at the first stage – let’s see if you can convince Gili Raanan that he is worthy of his very first venture capital investment.

Translated by Itai Rosenbaum