Early-stage investors YL Ventures have raised a $75 million fund, their third, to back Israeli software startups seeking to enter the U.S. market. The firm maintains offices in Tel Aviv and Mill Valley, Calif. It is best-known for its use of predictive analytics to find promising entrepreneurial teams before they have officially launched a business.
YLV founder and Managing Partner Yoav Andrew Leitersdorf said his firm’s proprietary software generates several hundred alerts each month about companies being formed. Partners reach out to about 30 to 40 of these teams to learn what they are doing. “Some are gems, many are not relevant,” the investor said. “Using this lead-nurturing platform, we work on our relationships until an investment becomes appropriate. Some founders are shocked we found them so early.”
The firm only invests in about three seed-stage companies a year, generally promising them more capital and hands-on help than other very early stage funds. YLV intends to use its new, $75 million fund to back fewer than 10 startups, Leitersdorf said. It will focus on companies building enterprise and cybersecurity software and software for self-driving vehicles, drones, virtual- and augmented-reality.
Leitersdorf said despite advances in manufacturing that reduce the cost of building hardware or robotics, the fund remains completely software-focused. “With software every new unit you sell has virtually zero incremental costs. It’s just a software copy. Hardware economics are more challenging for venture,” he explained.
With this focus on Israeli tech talent, and strictly software, YL Ventures has racked up three exits in just the past year, with the acquisitions of: Seculert, FireLayers and Blazemeter by Radware, CA Technologies and Proofpoint, respectively.