General partner Danny Cohen of Gemini Israel Funds was born in Haifa, spent most of his adult life in Tel Aviv, but now lives in Menlo Park where he manages the firm’s U.S. office. As you might imagine, he has a strong understanding of how the U.S. meltdown is impacting life elsewhere, particularly in Israel.
Earlier today I asked Cohen, who invests in both Internet startups and enterprise software, about the fallout he’s seeing and what he’s personally experiencing.
To what extent has the Israeli market been rocked by events here?
Right now, news travels fast. I think it’s pretty much the same there as here. People are laying off. They’re getting ready for the so-called nuclear winter. I think Israeli venture funds are even more cautious than their U.S. counterparts. I see some funds here that remain aggressive about their desire to invest. In Israel, I’m seeing more conservatism.
How seriously do you think Israeli funds took Sequoia’s much-publicized R.I.P presentation in October?
Very seriously. It was a global thing.
What do you think Sequoia’s broader motivation might have been in releasing that PowerPoint?
I think their interest is in having the venture market behave well. It’s in their interest for valuations to drop and for everyone to ride out what’s happening so the venture industry doesn’t crash completely. The worst thing would be for everyone to go wild and for the whole industry to collapse. Did they realize they impact it would have? I don’t know. But I think most VCs would agree that there’s the day before that information was released, and the day after.
And has your life changed in the last month or two?
Wow. Too many board meetings, too many layoff conversations, many different strategy discussions. On the bright side, every company in the market is now interested in investment. A few months ago, they’d say, “we’ll see you next quarter.” Now, every company will accept venture capital. It’s a great opportunity on the one hand but it’s a bit overwhelming.
How so? Are you actually seeing more business plans than before?
It just seems like every company in trouble is trying to raise money, although the interesting deals, you don’t get sent business plans. You look at the fund next door — at your neighbor’s portfolio, and you decide what are his best companies and approach them.
That’s an interesting approach. I’m guessing you’re not going to get invited out much now by other VCs. Speaking of which, have any had to bow out of deals involving Gemini? Everyone is in a panic about LPs not making their commitments. How real is the problem?
I know of one case where right after the market crash, a VC said his firm was holding back on investments, but in general, I haven’t been hearing that. I think everyone is expecting it to happen. I think everyone expects that we’re not past the low point yet in the private or public markets. But I haven’t heard it so far.
It’s not a concern for Gemini?
No, we’re actually just finalizing a new fund. [The fund will apparently be bigger than the $140 figure in Thomson Reuters’s database, but Gemini isn’t disclosing how much bigger yet.]
Has anyone at the firm suggested any belt-tightening to the partners?
Not really. We’re not a big fund so we haven’t been too crazy to begin with. I don’t drive a fancy BMW or anything like that.
How have your portfolio companies been impacted by the downturn?
One closed a round just before the market crashed, so that was great, and we have a few others that are well-funded. If you have cash, you’re obviously in a great position because so many others can’t raise money right now. But across the board, everyone is trying to reduce their burn, their business plans have turned more conservative.
I’m guessing there are some that won’t make it. Are you making those decisions now?
I’d be lying if I said the answer is no, that all of our companies will survive. Anyone who tells you their companies are doing better than ever isn’t being truthful. We’re not there yet [as a firm], but the reality is that fundraising is going to get harder and we need to be smart about what are good companies and what are bad companies. The reality is that a lot of great companies emerged from the last bubble but a lot died along the way.