Wednesday, November 26, 2008

The Israel Practice Page at BVP

BVP updated its web site today and for the first time, there is an Israel Practice page that describes a summary of our views on the Israel opportunity from a venture perspective. Some of you may note the divergence between our sectors represented by our existing Israeli portfolio and my interests and directions going forward. BVP is firm with a long history, but that has not stopped it from looking forward and initiating the change necessary to stay ahead of the pack. This is not about clairvoyance, but rather agility on the firm and partner level. In fact, one of great strengths of BVP is the ability of its partners to adapt an investment focus to ensure new a steady flow of new opportunities that may be overlooked by others. By definition, this also means abandoning market segments that we have spent a lot of time analyzing and scrutinizing, but which regrettably no longer offer venture returns at an appropriate risk level. The reasons vary, but include market segments where:

- start-ups don’t fare well anymore due to obstruction by much larger players and their often obtuse customer base
- total required capital nears or exceeds the likely exit value
- new market opportunities that already suffer from overinvestment

That areas such telecom hardware or chips are no longer my focus does not mean all companies are doomed. On the contrary, it means that I have sufficient exposure to the opportunities I like, and a recognition that too much of one good thing can actually be bad. For instance, I have complete confidence in my wireless portfolio(Siano, Altair and Axis), becomes they command market leadership, have highly differentiated products that are shipping, and are more or less fully funded.

The Israel page of our website now points primarily to several areas of software, which has attributes that are appropriate for leaner times. As these roadmaps evolve in my mind, I will write more about each one of them. At this point, it is sufficient to say that I seek highly efficient companies that accomplish a lot with very little, and then leverage initial traction to achieve rapid economies of scale in product development and sales. This might sound nebulous and dubious, but this should at least prompt entrepreneurs to think about their business plans in a new light.

Finally, for those of you unfamiliar with BVP, I wish to point out the celebrated Anti-Portfolio on the BVP website. This page highlights those opportunities that we neglected and rejected, only to become resounding success stories. We don’t claim to invest is every great opportunity, but want to make sure that those we do invest in are among the most successful.

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