You probably have not heard of Oren Zeev, and he would prefer it that way.
There’s a small breed of early investors in Silicon Valley who primarily invest their own money, but who want to have an active role in building a company. This model isn’t for everyone. It’s a hybrid of a traditional VC with a dash of the early-stage angel investor, and it requires getting your hands dirty. They aren’t writing checks in the six figures. They’re putting in seven figures, and, in turn, own more of a startup than the average angel investor. This isn’t about scaling. It’s about building. And this is what Oren Zeev excels at.
The results speak for themselves. Zeev, the early investor behind Chegg, Houzz, Audible, Tipalti and others, has quietly seen a 100 percent IRR each year on his collective investments.
Institutional To Angel
Zeev’s career in investing began at Apax Partners in Israel. As he recalls, he was fresh out of business school and he saw the industry as nascent. There were only a handful of funds, each of which only had around $20 million in capital. While at Apax, Zeev focused on creating a private-equity business for the firm in Israel. In 2002, Zeev had an opportunity to move to the U.S. to work on Apax’s VC business in Silicon Valley. While moving away from his family across the world with his wife and two young kids was a risk, Zeev had always dreamed of “coming to the mecca of technology and venture.”
But Silicon Valley was still reeling from the bubble bursting. Zeev was focused on Internet investing, and people thought he was crazy for even making the move. Most VCs weren’t in the mood to do new deals because they had portfolios full of problems. But Zeev took a wait and see approach, and stumbled upon Audible, an online audio technology company that had gone public in 1999 but hadn’t seen any traction on the public markets.
“It was a total penny stock and the entire company was worth $30 million. People did not think it would make it but I thought the company may have gone public too early and I saw value,” he says. Apax’s $11 million investment bought 40 percent of the company. And a month after investment, Audible signed an exclusive deal with Apple to provide books on iTunes. In 2008, Amazon bought Audible for $300 million.
“There was an advantage of being an outsider and looking in to Silicon Valley,” he adds.
Don Katz, the CEO of Audible, explains to me that many of the VCs at that time came out of the MBA mold more so than the operator mold. “Their core competency was founder removal. Whenever things got tough that was their first instinct,” Katz says. “Oren was so different. He was a partner and was supportive of the founder as well as the company. He could have judged us through the eyes of a financial investor, a number cruncher, but that wasn’t helpful at the time. And he knew that.”
Zeev continued to work for Apax until 2006, but when the firm moved away from investing to concentrate on mega buyouts, Zeev knew he needed to move on. He was burnt out and, while his time at Apax had been lucrative, he needed a change. He started to teach middle school math at a school in Los Altos and took a few graduate courses at Stanford.
On the side, he started investing his own money. “Back then angel investing was less common. Most angel investors would write small checks but people weren’t really doing it for the money. These investors actually liked the company-building part of it,” says Zeev.
He also started to pool his money with three other investors in a consortium of sorts called Primera Capital. There were four equal partners, but Zeev was the only one sourcing deals full-time.
In 2008, Zeev was introduced to the co-founders of then textbook rentals startup Chegg. At the time, the company was looking for a Series B investment, and Zeev, along with his consortium, invested $3.5 million into the company (a quarter of which was Zeev’s own money), and Zeev joined the board. The entity put another $4.5 million in the Series C round when Kleiner Perkins came in. And Zeev helped recruit Dan Rosensweig to join the company as CEO.
Rosensweig cites Zeev’s network as being one of the defining factors that differentiates him as an investor. As Rosensweig recalls, when he joined, the company was at a turning point when it was trying to figure out its business model. “It was a tense, difficult situation and Oren was calm, and positive throughout the experience.”
While Rosensweig and the company were focused on making the transition from print to digital, Zeev was helping him source talent to help develop for mobile platforms and made the introduction to the 3D3R team in Israel, which, via an acquisition, became Chegg’s R&D and mobile team.
Along the way Zeev also invested in Cramster, a community to help students do their homework. When Chegg was looking to acquire compatible technologies and talent, Zeev made the intro to Cramster but recused himself from any discussions, and told Rosensweig that there was no pressure from his end on making the acquisition. Chegg ended up acquiring the company, which became the foundation for Chegg Study.
While there are a sea of angel investors, there aren’t many individuals who can grow with a startup that it matures into a late-stage company, and then a public company. Zeev is one of these unicorns, Rosensweig says. “It’s rare to have an investor and board member that can be useful at multiple stages of a company.”
“Oren is not the guy who will pound his fist on the table and demand answers. He’s thoughtful and asks the right questions,” Rosensweig explains. While Zeev is no longer on the board, Rosensweig still asks him to be in board meetings because his enthusiasm continues to help the company as it encounters new goals and challenges. “He’s really a jack of all trades and works tirelessly on behalf of his companies” Rosensweig says of Zeev.
Even when it came down to the money, Zeev didn’t sell much of the stock before Chegg’s IPO last fall. He sold 20 percent after the company’s Series E round and still owns 8 percent. The fact that he still holds stock (which is a rarity for early investors, and even some VCs) is a testament to his long-term vision for Chegg.
Oren 2.0
In Zeev’s subsequent deals after Chegg, he started to pull in different people in his network to participate in certain deals. As Katz tells me, he became “Oren 2.0.”
In perhaps the earliest, offline version of AngelList Syndicates, Zeev chooses these syndications very carefully, and says generally there is more demand than supply. And he never charges people to be part of the syndicate. While Zeev is responsible for the investment and the company-building aspect of things with the founder, members of the syndicate can get involved, as well.
Some are CEOs he has backed in the past like Rosensweig and Katz, and others are key individuals in his network who could be of help to startups, including Richard Sarnoff, an adviser to private-equity giant KKR and a former chairman of Bertelsmann, or former News Corp. exec Gary Ginsberg.
For the past few years, Zeev has been averaging around one to two deals per year. He’s also been investing primarily with Israeli entrepreneur Oren Dobronsky, the owner of Palo Alto restaurant Oren’s Hummus. Dobronsky and Zeev share an office in Palo Alto and Zeev has also backed Dobronsky’s current startup Mallpad. In total, Zeev has pulled in 40 to 50 different partners for his investments.
In 2009, Zeev backed social browser toolbar startup Wibiya with $2.5 million, which was eventually sold to Conduit for $45 million. In 2010, he backed DudaMobile, a mobile website maker, which has seen success after partnerships with Google and others. Other investments include Crossrider (acquired by Market.com for 19X the total money raised), Tipalti, Gogobot, Infolinks, Webflakes, Bonobos, Streamonce (acquired by Jive), and Preen.Me.
In late 2010, Zeev was introduced to Adi Tatarko and eBay engineer Alon Cohen, a married couple who had created a network around sharing photos and information around home remodeling and building. There was something about the startup, called Houzz, that struck Zeev as being a massive opportunity. As Tatarko recalls, Zeev went to her and Cohen’s home and saw what they were working on. Within days, the money was wired. Zeev invested the first million in Houzz for a sizeable portion of the company.
As Zeev promised Tatarko and Cohen, “I’m not going to make your life harder, I’m going to make it easier.” And Zeev stayed true to his word. He’s been a constant protector, she explains. “He’s never asked us to do anything, and he’s always there to help us, and we have leaned on him more than any other investor.” Zeev has been so involved with the development of Houzz that Tatarko compares him more to a co-founder than an investor. Zeev has taken on the task of recruiting many of the company’s strategic hires, as well as helping form deals and partnerships, and his track record helps him make inroads with investors.
When Tatarko and Cohen considered taking another round of funding in 2011, Zeev knew that he wanted to connect Houzz with Sequoia’s Michael Moritz. Tatarko and Cohen maintained that they didn’t want to visit VC offices and go through the traditional pitch process. Zeev didn’t know Moritz himself but his old friend Katz did (who Zeev had brought in on the seed round a year earlier), and he asked for an intro. Zeev pitched Houzz to Moritz over email at 9 p.m. on a Sunday night, and by Monday morning Moritz was visiting the Houzz office. Along with the Moritz email, Zeev also pitched four or five other Sand Hill VCs.
Moritz, fellow Sequoia partner Alfred Lin, Zeev, Tatarko and Cohen met and within two hours. Moritz told them that as long as terms could be agreed on, Sequoia would back the company. By the time other VCs had their assistants schedule meetings for Tatarko and Cohen, the ink had already dried on Sequoia’s first funding round in Houzz.
In the case of one of Zeev’s more recent investments, gifting service Loop Commerce, he helped bring in PayPal as an investor, one of the few startup investments the payments giant has made. Zeev had seen PayPal CEO David Marcus at an event and was telling him about Loop — the company actually wasn’t raising more money, but Marcus, and PayPal as an investor, is a key partnership and hard to turn down for a startup in the gifting space.
While Zeev’s network is vast, he’s also not afraid to put some old-fashioned hustle into his company building. “Everyone in the Valley is reachable within one degree of separation, thanks to LinkedIn. Recently, a portfolio company wanted to speak to someone at NetSuite and Zeev was able to connect with someone via LinkedIn.
Another element of Zeev’s network worth calling attention to is the Israeli connection — many of the entrepreneurs he backs are from Israel. Zeev acknowledges that a disproportionate part of his portfolio are startups from Israeli entrepreneurs, but he says part of his network involves founders and investors from his home country.
As I mentioned above, looking at the numbers, Zeev’s track record speaks for itself. He’s invested $20 million personally since 2008, and is responsible for around $60 million invested with other partners included. Zeev has seen his money return 100 percent annually since 2008. Good VC funds return around 20 to 30 percent per year, on average. The current value of Zeev’s portfolio is several hundred million (much of which is attributed to his 10 percent ownership in Houzz).
What is clear about Zeev is that he can’t scale, and he’s never going to be able to compete with some of the established seed and early-stage funds with larger funds. And it’s worth noting he doesn’t have a WhatsApp in his portfolio. Yet.
“What drives me is I really feel that my job is to work for founders and serve them. I like that I don’t have any other constituencies, like LPs or partners,” he says. That comes with some sacrifices as well, he adds. Zeev says he has no interest in building a firm, and acknowledges that what he does is not scalable.
But in a sea of early-stage capital and investors, Zeev offers a commitment and thoughtfulness that typically doesn’t come with scale.