Yoav Andrew Leitersdorf starts a venture capital fund

10 May 2007 TheMarker (www.themarker.com ) and 13 May 2007 Haaretz Newspaper print edition

English translation

A new venture capital fund in Israel: YL Ventures.  The fund was founded by the entrepreneur Yoav Leitersdorf, and it focuses on investments in start-up companies in Europe and Israel.  According to Leitersdorf, the fund already had a first closing, and it intends to raise $30 million in total in the near future.  Other partners in addition to Leitersdorf are Boaz Misholi, cofounder of Comverse and today CEO of Aura Investments, and John Quigley, cofounder of Nassau Capital.

“This fund’s business model is different from that of other funds, because we focus on medium-size exits”, says Leitersdorf, “when a start-up company goes with a big fund, it enters a relatively long journey: current statistics indicate a period of approximately six and a half years and investments of $10 million in a company, whereby the goal is to obtain a very high company valuation in order to recoup the investment.  The problem is that in some cases the funds won’t want to sell the company because the sum that is offered to them will not return their investment”.

Leitersdorf adds: “we offer a different model, faster, that is not dependent on a big exit.  Our strategy is to invest at a stage in which the product is complete or almost complete, and in technology that is interesting to relevant large corporations.  In medium-size exits, at roughly $20 million for instance, the acquisition process is much quicker – one of the reasons for this is that the decision process of such an acquisition could oftentimes occur at mid-level management in large corporations”.

What kind of start-ups is the fund looking for?

“We look for companies with unique technology that is protected with patents as much as possible.  At the moment we are slightly more focused on companies within the Internet, digital media and mobile sectors.  It is very important for us that entrepreneurs are realistic about what they’ve got – we look for people that do not fantasize about exits of hundreds of millions, but rather prefer to earn a few millions with less risk.  It is also important to note that usually when the companies are sold, the entrepreneurs can double the money that they earn from the deal if they stay and work for the corporation that acquired them for a period of two to three years.  The minimum amount of equity that we want to hold in a company at the time of exit is one third, and the maximum investment that we provide to a company is approximately $2.5 million”.

When do you expect the first investment to occur?

“I believe that within two months there will be a first investment in Israel.  I do, however, meet with European companies in parallel, but the quality that I see in Israel is so high, that I believe that it will happen here”.

Is there a connection between the new fund and Jonathan Leitersdorf’s fund?

Jonathan is my cousin, but the two funds are not related in any way.  His fund is much larger and addresses a different type of companies.  The deals that he does and the size of the companies with which he works are totally different”.

The model for the new fund Leitersdorf founded is based on his own personal experience in the field: “In 2004 I founded with partners a start-up company called Movota.  We developed unique technology for mobile devices, and eventually received an acquisition offer from Bertelsmann.  Our technology was better than that of competitors, we were not backed by a fund, and we understood that it was time to sell.  From this came the business model of YL Ventures.

Leitersdorf, age 31, says that before founding Movota he founded together with another partner in New York the company ExchagePath, which provided online payment services.  According to Leitersdorf, the company was sold to CMGI in ’99, and Leitersdorf continued thereafter to operate within the entrepreneurial and high-tech sectors.  “After the bubble burst I decided to study at Columbia University, and in parallel I worked at the venture capital fund DFJ.  After graduation I moved to Europe, and in 2004 I founded Movota.  After the company was sold I worked another 9 months at Bertelsmann.  Six months ago I started working towards the foundation of this venture capital fund”, he said.