I am currently traveling in New York, and everywhere I go people ask me whether we at Aleph have been investing during the war. The answer is an emphatic yes. We have completed 5 new investments since October 7th. But that is not all. In the last four months, we have raised over $150M into our portfolio companies from leading foreign venture capitalists.
On Day 30 of the war, we signed our investment in Dream. Led by Shalev Hulio and Sebastian Kurz, Dream provides national-level AI-based solutions for cyber protection against state level threats and has been delivering to customers in both Europe and Israel since October 7th. As I said then to The Wall Street Journal, “Even during wartime disruptions, many Israeli startups continue to deliver products and services, and hit their numbers. Israeli high tech is not only here to stay, but will grow better out of this.”
Of the four other investments, only one was announced. It’s a consumer fintech company called Sequence that’s building a financial routing product and growing extremely quickly. We believe, as we always do when we invest, that the other three are just as magical.
Since the beginning of the war, and even over the past year, we have repeatedly said that any delta in total dollar amounts invested in Israel versus the USA has a lot more to do with mega investment rounds in AI-base models in Silicon Valley than it does with any political or geopolitical events. Israel does not yet have a group of “base model” companies and I am not sure it ever will. Unfortunately, the government’s lack of focus over the last few years on AI and insufficient investment in quantum computing is cause for concern, and a likely cause for the lower dollar investment.
However, we are seeing Israeli entrepreneurs tackling different parts of the AI stack, automating many big, long, paper or form-based processes with AI. The sort that often involves significant labor resources and, in some cases, adherence to regulatory guidelines. We believe Israel can lead here, and we are excited to tell you about some of those investments soon. Moreover, we believe there are real opportunities in the defense area. Israel is due to rebuild its defense tech industry in the area of AI and synthetic biology, and Israel-based companies could grow into global leaders in these fields.
I cannot speak for our colleagues at other venture funds. Future statistics will show whether other investors were on their back heels while the war was ongoing. The gloom and doom narrative does not match our lived experience. At Aleph we saw the resilience of Israeli entrepreneurs, the will to deliver and win that caused many companies to beat their numbers in Q4. We think this will turn out to have been one of the best periods to invest in Israeli innovation. We also see many soldiers coming back from the front with a burning desire to build something big and build a better country.
As suggested above, we were not alone. You will need to wait patiently, but meaningful follow-on rounds were completed between November and January into our portfolio companies, all involving foreign investors. You will recall that a couple of cyber companies were acquired in Q4, another one was announced this week and rumors suggest that a few more acquisitions are coming.
What is the elevator pitch for investing in Israel for the next decade? Israelis are the most resilient, optimistic, responsible, battle-tested and innovative civilian population in the world. In an era where political leadership is waning, invest where creativity is already tested against the challenges of the future. Invest where multidisciplinary innovation will lead to exponential breakthroughs and profits. The horrific tragedy of October 7th created the greatest real-time hackathon in history, bringing together the best and brightest of many generations of Israeli innovators
Be prepared to see science fiction come to life.
