Interview with YL Ventures Yoav Leitersdorf and Robert Goldberg

I recently had a chance to speak with Yoav Andrew Leitersdorf, Managing Partner and Robert Goldberg, Venture Partner, both of YL Ventures. YL Ventures is based in Europe and Israel and I thought it would be valuable to: learn more about what services they provide, get their views on what they look for in an investment, what the Web scene is like in Israel and tips for those looking for investment. Our discussion transcript is below.

Allen: Can we start with a brief bio about yourselves?

Yoav Andrew Leitersdorf has been a successful entrepreneur, investor and advisor in the technology and new media fields for the past 15 years, and is now Managing Partner of YL Ventures. Yoav is the cofounder and was the Managing Director and CEO of Movota Ltd., a mobile software and services company acquired by Bertelsmann AG. He is also the cofounder and was the chief technology officer of ExchangePath Ltd., an online payment company acquired by CMGI. Yoav worked as an associate at Draper Fisher Jurvetson Gotham Ventures, and over the years he has consulted other early stage companies in a broad range of tech-related industries.

Robert Goldberg is a Venture Partner at YL Ventures, having formally joined the firm in March 2008. Robert was the Managing Director at Idealab, an early stage investor and incubator. There he became an acknowledged expert and innovator in the capital efficient strategy of "milestone investing" which ties frequent operating milestones to successive capital investments. Some of Robert's investments include Clickshift, Brightmail, Snap, Insider Pages, X1, New.net/Vendare Media, Personal Bee, Trufina and Energy Innovations. Prior to joining Idealab, Robert spent more than 20 years in senior management and strategy positions at Internet, e-commerce and enterprise software companies, including NBCi, Looksmart, and Thinking Machines.

Allen: Can you give us an overview of YL Ventures?

Yoav: YL Ventures is an early stage venture firm launched by successful serial entrepreneurs with a focus on investing in the emerging markets of Europe and Israel. YL Ventures addresses the opportunity presented by the changing landscape of early stage venture capital. Technology companies require less capital and more innovation in order to succeed. Many venture funds have grown too large to effectively deploy the smaller amounts of capital more appropriately required by early stage companies. This phenomenon has been especially true in Europe and Israel, the markets in which the fund operates.

Robert: YL Ventures calibrates the amount of capital invested in early stage Internet, mobile and digital media companies to both milestones and the likely exits. This preserves the ability to reach a successful investment across a full range of exit scenarios and helps to keep the interests of the investors and entrepreneurs aligned. The fund also assists portfolio companies by maintaining relationships with potential partners and acquirers in Europe and the US.

Allen: What companies are you currently invested in?

Robert: We have formally announced an investment in ClickTale (CN coverage), an Israeli based market and thought leader in in-page analytics. We have made several other investments and anticipate a few more soon, but have not announced those investments yet.

Allen: Can you speak about any past successful exits?

Robert: Most recently I was involved in a successful exit of Clickshift which was sold to Webtrends in about 14 months from the original investment at an IRR which would rival many of the top returns. Prior to that, I was involved in numerous successful exits at Idealab, NBCi and individually.

Yoav: In March 2004 I founded Movota, a London-based mobile software and services company and sold it to Bertelsmann within 18 months. Prior to that, I founded ExchangePath in New York and sold it to CMGI less than three years later for $25MM. Previously, I had founded and profitably exited PcEntertainer, and helped several other companies exit.

Allen: What do you look for in a company that you might be interested in investing in?

Yoav: We invest in companies within the Internet, mobile and digital media sectors that have significant intellectual property in the form of proprietary software. Their products must be ready or almost-ready, and revenues are always a plus though not required. Currently, our investments are in Europe and Israel only.

Robert: A target company should have a unique idea with a passionate founding team that posses significant domain expertise. Ideally the business and the founding team are capable of building the company in a very capital efficient manner to achieve milestones or even an exit on modest investment. The market the company is targeting should be capable of being penetrated using frictionless sales methods and the cost infrastructure of the company should scale in sync with revenue growth or market traction.

Allen: There's been a lot of talk about a recession, where do you believe the Web stands economically?

Robert: As with a number of economic downturns, technology has the opportunity to shine by increasing worker productivity and marketing efficiency. We witnessed this last in the 2001 tech bubble and economic downturn. While it had a material effect on many companies, the medium and long term effect was to focus on technologies and marketing that was cost efficient. This led to the rise of web 2.0 consumer companies that could be built for less and attract customers frictionlessly as well as the rise of Google and other companies that had clear ROI based products. This economic situation is likely to be very similar. Companies that provide products or services that can impact ROI very directly will benefit disproportionately as will media companies that can control costs and grow efficiently. Out first investment, ClickTale, is a perfect example of a company whose product will directly affect ROI.

Allen: Any thoughts on the recent Bebo acquisition by AOL?

Robert: Many people believe that AOL overpaid, but they said that about YouTube and MySpace too. What it does prove is that there is still a robust acquisition environment across many potential companies even in financially challenging times.

Allen: What's the VC scene like in Israel?

Robert: The environment is extremely healthy and lively. We think there are more entrepreneurs in Israel on a per-capita basis than many other places. The infrastructure of technical universities and government services and investments, as well as a culture of risk taking, support this in some ways like nowhere else.

Allen: Do you believe that companies need to be in Silicon Valley to get funding?

Robert: Not necessarily. Certainly not for early stage capital especially now that YL Ventures is on the scene! There are a number of good Israeli VCs, many of which we partner with and a number that are in fact franchises of US venture partnerships. Many venture firms understand that the opportunity is so compelling that it's important to be in Israel rather than forcing the companies to come to them.

Allen: What Israeli services outside of your investments are currently exciting to you and why?

Yoav: In general, and this is true not only to Israel, we are interested in investing in areas that are going to be strategically interesting for many of the large Internet, software and media corporations that we have relationships with. At the moment, we are looking at interesting opportunities (with significant proprietary technology) in mobile applications, interactive online advertising, multiplayer gaming and Internet and mobile search. We believe that web analytics is also an exploding space right now but we already have an excellent investment in that category.

Allen: Can you offer some suggestions/tips for those entrepreneurs who are looking to get funded?

Robert: Find something you love doing, figure out how to build it efficiently, decide if it can scale, and call us!

Yoav: Keep a tight ship and a low burn-rate, actions speak louder than words so get to real product fast rather than write lengthy plans, and don't accept too much funding or else you might not be able to grow your company to a valuation that would make an exit attractive to your investors.

Thanks Yoav and Robert for spending some time with us!