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Yoav Leitersdorf on why focusing 'just' on quick exits can become too restrictive
I recently caught up with Yoav Leitersdorf, a partner at YL Ventures, to get an update on his venture firm and its progress. Turns out, YL Ventures has made a bit of a pivot, but only because it's managed to pick some winners in its portfolio.
About a year ago, Leitersdorf described YL Ventures' strategy as seeking startups that a big strategic company would like to own, and pay up for in a few years, when the risk of building such a platform would be mitigated. As I had said in that earlier interview, you might think of YL's approach as being the R&D for big corporations. And for LPs (limited partners) who invest in YL Ventures, the idea would be getting liquidity faster because the startups in YL Ventures' portfolio were expected to have quick exits (after three years).
Things have changed. Some of the companies in YL's portfolio were thought to initially have "relatively quick exits," said Leitersdor. "But they ended up being leading figures in their field," making it hard for YL to push for an exit. A couple companies that are doing extremely well include ClickTale, which has received $800,000 in funding, but has been profitable since 2009 and generated $10 million in revenue last year. It has over 100 employees and over 80,000 customers. Another company is Seculert, a cloud-based malware detection startup, which went on to raise a Seris A round from NVP for a total of $7 million invested.
"We already have several outliers in our first fund from our initial strategy," said Leitersdorf, leading him to believe that YL needed to "think more broadly about our strategy with regards to our portfolio companies."
The big change is flexibility, he said. "What's important is that we don't take an extreme view," he said. "We provide that first initial capital and based on how the company does with that, we determine (along with the team) the best course for them."
YL has also raised its initial investment size to $1 million to $1.5 million. Once the company has burned through about 50% to 60% of the capital, YL determines with the company the next step - whether it's taking additional investment, considering aquisition opportunities or scaling. YL also focuses on startups that are B2B focused with SaaS models. The firm also invests mainly in non-US companies. It currently is working on a $30 million fund.
Here are a few other companies in its portfolio:
BlazeMeter (self-service load testing cloud) - $1.6MM raised to date solely from YL Ventures, 10,000 registered users, 500 paying users, 40,000 tests ran on the system, millions of concurrent users supported, over 400% year-over-year user growth, many Fortune 500 customers including Citi, Toyota and the BBC. (see Vator story)
Upstream Commerce (online retail intelligence) - $5MM raised to date from YL Ventures and Bright Capital, billions of product prices collected and analyzed per day, many Fortune 500 customers in including Staples and Toys ‘R’ Us, over 300% year-over-year revenue growth. (see Vator story)
6Scan (website security suite) – Over 1MM website vulnerability scans performed to date, 40,000 customers (both free and paid total) – almost all SMBs. Pursues a channel strategy of partnering with hosting providers and others – recently added several new partners include Arvixe, IDA Group and Certified Hosting.
AcceloWeb - acquired by Limelight Networks in May 2011 (see Vator story).
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Upstream Commerce is the leading solution for pricing intelligence and product intelligence for online retailers. It helps you proactively adjust your pricing to the most appropriate levels for market conditions. By running 24-7, collecting, normalizing, analyzing, and reporting on product pricing and related factors you receive information when you want it, where you want it, and in the formats you need, eliminating all the tedious work normally required to arrive at useful market intelligence.