After the flotation of cybersecurity company SentinelOne, and the huge financing round by HoneyBook, venture capital firm UpWest, founded by Shuly Galili and Gil Ben-Artzy, is raising a fourth fund, of $70 million. This appears a small amount, only a third to a half of what Israeli startups raise on their way to becoming unicorns.
UpWest’s gain on SentinelOne’s flotation was not reported, since its holding in the company was not substantial, but it is estimated to have been in the tens of millions of dollars on an investment of a few hundred thousand. UpWest’s first fund, which amounted to $2 million, thus yielded its investors a handsome return.
SentinelOne was floated in late June, and quickly became one of the most successful Israeli flotations of 2021. Since the IPO, the company’s share price has risen 58%, and with it the returns of the investors, some of whom are still in the lock-up period.
For a fund that invests in companies at the seed stage, when the investment is between a few hundred thousand and $4 million per company, $70 million is not a modest sum, and, considering that UpWest’s third fund raised just $18 million, it represents a substantial jump.
“The size of the fund is right for our investment strategy, which so far has enabled us to be the first check in many companies that wanted to break into the US market at the pre-seed and seed stages, such as HoneyBook and SentinelOne,” Ben-Artzy told “Globes”. “This is despite the fact that there were much larger funds than us in the market at the time when we made our investments in these companies. Following the success of the portfolio companies, we received many applications to invest in the fund, but we decided to close at the current amount in order not to distract ourselves from the kind of companies that we look at and the stage at which they are.”
UpWest has already made four investments from its fourth fund, from which it will invest in no more than 25 companies over the next three years.
You founded UpWest with the vision of bringing Israeli companies to Silicon Valley through an accelerator program, but that vision has been somewhat challenged in the past two years by the Covid pandemic, which has enabled Israeli entrepreneurs to work from anywhere. In addition, we’re seeing a wave of migration of entrepreneurs and technology workers from Silicon Valley to the center of the country and to Texas.
Ben-Artzy: “We still believe that physical proximity is very important if entrepreneurs are oriented towards the US market. The world is steadily exiting Zoom, and there’s no substitute for face-to-face meetings in the US. What’s more, the online meetings have created a situation in which entrepreneurs from all over the world approach US customers and follow-on investors on Zoom, which makes it hard to stand out and create a business relationship with customers and investors.”
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After toing and froing between Tel Aviv and Silicon Valley, UpWest’s founders chose to set up a permanent branch in Israel, and two years ago appointed Assaf Wahrhaft as a local partner and Lia Cromwell as investment manager (principal).
Besides the investment in SentinelOne, which was the first investment in the Israeli cybersecurity company, UpWest also invested in small business management platform HoneyBook, which yesterday reached a valuation of $2 billion, and in invoice management software company Stampli, which raised $50 million six months ago.
From 85 investments made so far, UpWest has so far seen 25 exits (some more successful than others) in companies such as CyberX, Qlika, Neura, and Airobotics, but it has also seen 22 of the companies close, according to IVC.
Published by Globes, Israel business news – en.globes.co.il – on November 4, 2021.
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