Lee Moser breaks down Israel’s VC scene
The venture capitalist spent three years in Washington, D.C., as chief of staff to former Amb. Michael Oren
Israel has a much-deserved reputation as a “startup nation,” having become home to some of the best and brightest tech entrepreneurs in the world. The tech innovations that have come out of the country, from cybersecurity to agriculture, attract businesses and investors throughout the Middle East, making the sector a place where Israel has been able to collaborate with its neighbors in the region.
Though investments in Israeli startups fell sharply in 2022 amid global economic headwinds, the sector is nothing if not resilient. Lee Moser knows this firsthand. As managing partner and founder at venture capital AnD Ventures, Moser is on the ground floor, working to redefine investing and help the companies she works with continue to grow.
During a recent episode of Jewish Insider’s podcast, Moser sat down with co-hosts Rich Goldberg and Jarrod Bernstein to dissect the ins and outs of the Israeli VC scene. Moser, who served as chief of staff to former Israeli Ambassador to the U.S. Michael Oren, also touched upon her time in Washington and some of the pressing geopolitical issues facing Israel and the U.S.
Below are selected portions of the conversation.
What venture capital is: “So we all know what high-tech is, or a startup is, right? A company that develops a technology that potentially can be huge and change the world in many aspects, and we use it in our life every day. Venture capitals, basically, are the financial groups or financial people that are looking for those startups or those tech companies in various stages, and fund them. So basically, what we do is we buy equity, we buy shares, when we invest, and we hope to create a very successful portfolio that will grow along the years. We will make money from our investors and our investors will make money from our investments, and the companies will be able to have money to fund their growth.”
The Israeli VC scene: “There are many VCs in Israel, more than 400. Just to remind you, [Israel has] a population [of over 9 million]. Basically, we have two different types of VC: we have the local and we have the international. And then we have different types of stages. For example, [Moser’s VC, AnD Ventures, is] a very early-stage VC, we invest first money into the company when there is an idea, a little bit of traction and presentation. [Seed investment actually grew in 2022, despite the overall slowdown.] But there are later-stage VCs [that] invest in a company when they have tens of millions of dollars. So the risk is lower when investing later, but also the reward is lower. So high risk, high reward. [The] difference in Israel, I think, is a few aspects. First of all, the culture of the entrepreneurs that are in Israel, we’re all talking about Israelis being very, very creative and also gaining a lot of experience from the army, mainly from the intelligence units. And then two, the culture in Israel is very pro-technology, pro-startups, so it’s the highest per-capita in the world for the numbers of startups and the numbers of people.
“So this is Israel, and I think today, if you compare it to the U.S. or to Europe, compared to the U.S., kind of valuation-wise, Israel is still on the lower side. So it is very attractive for investors to invest in an Israeli company because they can buy more shares when it’s a lower valuation for the same amount of money. And also, Israeli companies are always looking at the U.S. market as the potential market for the growth and for the sales. So the technology is developed in Israel, but when an Israeli entrepreneur wants to grow, they will look at the U.S. market, they want to go to the U.S market, they want to get American investors and they want to sell to Americans. Where, in the American markets, I don’t think this is the case; they’re not looking to sell to Israelis. It’s a very small country. So these are the main differentiators [in the U.S.]. In Europe, listen, it’s still behind. Not all of Europe, there are places that have great startups, but the culture is a little bit different. Of the support, the environment, the business environment, the government incentives. They’re trying, and some places are growing tremendously of course, like London for example, Munich is strong, other places in Eastern Europe, but it’s still not yet where the U.S. or Israel or China [are].”
Chinese investment in Israel: “If you look at the Chinese investments in Israel, comparing 2015 to now, I think it’s dropped by 90% on the tech side… Maybe there are deals that I’m not aware of, but you had a lot of Chinese groups that were acquiring and were investing in tech — and I’m talking about the tech sector. Also there were bigger, or big private equity deals that happened. I think it’s a combination geopolitically of the relationship with Israel and the U.S., but I also think it’s what happened in COVID, China closed, right. So something happened there, and I think we will probably see more and more…Chinese-related businesses in Israel happening now when China opens up. So I don’t know if it was because of the U.S.-Israel relationship, or U.S.-China relationship, or because it was COVID that really decelerated the involvement of China in Israel. And also, if you look at, you know, China has a big government contract in Israel still, building the port [in Haifa], building the [light rail] train in Tel Aviv, I think there are a few more in the pipeline, so it’s not totally cut off, but significantly declined.”
Israel’s awareness and concern about the BDS movement: “I think Israelis are aware of BDS [Boycott, Divestment and Sanctions] and aware of the movement against BDS…I think there are businesses that are affected, but in the VC world, we’re always optimistic, right? We’re investing in an idea, in technology, in a person, and we believe it’s going to be a $1 billion company.
“The numbers or the facts in the technology sector shows that the Israeli, you know, the foreign investments are growing and growing from year to year, and also the exits and the returns to the investors, and it’s hard to fight that. And as long as we continue to develop this ecosystem and to grow it and to support it and to nourish it, it will be hard to detract investors from investing in what’s happening in Israel. [On the] other side, like more traditional industries, I think were affected more by BDS — not think, know that they were affected more by BDS. If you weren’t going to fight for it and be outspoken for it, and against it — because by the way, BDS is not only hurting Israelis, it’s hurting Palestinians in the same way, because they’re working in Israel. So I think we should be very outspoken against BDS, and we should be the educators. ‘We,’ I’m saying [are] VCs and investors and financial managers and business communities, besides the policy and the political communities or the universities, we should be more out there, and I think we’re not doing a good job of doing that. [We] should be outspoken and educating people against BDS and why it’s important.”
What working for an Israeli ambassador to the U.S. is like: “If you compare it to different TV shows, it’s a combination between ‘Veep’ and ‘House of Cards,’ right? There are scary moments and there are really, really funny moments — I think Jarrod and I shared a few, very funny ones — and also very serious ones. It’s basically dealing with everything, from the media, especially if there is a conflict, it’s working 24/7, [working on] prime minister and president and defense minister visits, policy-making behind the scenes.”
Bonus lightning round: Favorite Yiddish word or phrase? “Schluff” Favorite Israeli wine? “I really like Tzora wine, I think it’s one of the best.” Favorite Jewish food? “I love cholent, chamin, but the Moroccan one. First of all, it’s separate, like the rice and the potatoes and the meat. It’s all separate, where like with the Polish one, the cholent is all together like a bubbly soup.” Favorite place that you would go in Washington, D.C.? “There was a bar that had like a Latin festival every Monday, I forgot the name. I don’t know if it exists anymore…Cafe Citron, yes. I love this place.”