Venture capital firm is rewarded for selling at the top of the market – TechCrunch


Previously, venture capitalists could not sell their stake in a holding company before it was sold or made public without raising questions about the company’s prospects. As startups have started to stay private longer, VCs and management teams have become more comfortable with selling some of their stakes to new investors, but many VCs probably want to. this time having sold even more over the past year.

One company that is happy to have pulled the trigger on two of its own deals is YL Ventures, a 14-year-old US-Israeli venture capital firm specializing in early-stage cybersecurity investments. to close its newest and largest fund to date. with $400 million in capital commitments.

Just over a year ago, when five-year-old cybersecurity asset management startup Axonius raised a $100 million seed round at a $1.2 billion valuation, YL Ventures – the company’s first investor – sold its stake for $270 million to ICONIQ Growth, Alkeon Capital, DTCP and Harmony Partners.

The amount was three times larger than YL Ventures’ initial $75 million fund, which had backed the company and through which YL Ventures ended up investing $15 million in Axonius.

“The multiples were so high a year ago that we felt that under normal conditions we would need [more time] to achieve the same result,” says YL Ventures founder Yoav Leitersdorf, based in Mill Valley, Calif. “There was a lot of demand for Axonius stock and looking back today, with this current market. . . he breaks off laughing.

YL Ventures also sold a large chunk of its stake in four-year-old cloud security firm Orca Security to new buyers when Orca extended its Series C round last fall, a $550 million tranche. which increased the startup’s valuation by 50% in just seven months to $1.8 billion.

“We didn’t sell our entire position,” says Leitersdorf, but his company nonetheless snatched a whopping $250 million.

Indeed, 2021 was an even better year when another of YL Ventures’ portfolio companies – healthcare IoT security startup Mediagate – was sold to industrial cybersecurity provider Claroty in December as it was closing a $400 million Series E round co-led by SoftBank. Leitersdorf’s company walked away from the deal with $100 million.

These are all solid returns for a company that now has $800 million in assets under management and has seen previous exits, including the $100 million sale of Hexadite to Microsoft in 2017 and the sale of the startup. container security company Twistlock, which sold to Palo Alto Networks in 2019 for $410 million. (YL Ventures was Twistlock’s largest shareholder, investing so early that it only invested $12 million in the company during its four years as an independent company to bolster its position.)

So what is YL Ventures’ secret sauce? It invested early on — and continues to invest — as early as possible in a specific type of business. As we reported the last time we covered the company several years ago, nearly every founder of YL Ventures’ portfolio not only served in the Israel Defense Forces, but specifically in its unit. 8200, an elite part of the organization that became the training ground. for some of the hottest cybersecurity companies in the world.

The unit is said to accept less than 1 in 100 high school graduates, so it’s no wonder cybersecurity-focused venture capitalists then try to pick and choose from these once their service is over. YL Ventures seems to be uniquely suited to succeed in these efforts.

Leitersdorf credits Ofer Schreiber, a senior partner and head of the firm’s Israel office, with much of the heavy lifting on the recruiting front, boasting that YL Ventures has “the first dibs on every seed deal coming out of business.” Israel” in large part because Schreiber is “so deeply networked there.

He also says the company’s success to date is heavily dependent on the work of the firm’s other senior partner, John Brennan, who oversees a vast network of information security managers – 120 of them. them, says Leitersdorf – who collectively receive 5% of the company’s capital. interest in exchange for verifying agreements and sharing unresolved issues in their own businesses.

These CISOs aren’t sponsors of the fund, Leitersdorf says, but he says the company’s investors include high-net-worth individuals primarily from the United States, Europe and São Paulo, Brazil, and you can imagine that. there is at least some crossover.

Leitersdorf also informs us that YL Ventures has promoted two colleagues as part of this new fundraising process. Sharon Seemann – who also served in Unit 8200 – was made a partner. She oversees the company’s marketing production. Michael Cortese, who focuses on business development and is “part of the group that writes checks,” Leitersdorf says, was also named a partner.

Leitersdorf – who remains the firm’s only general partner – says the team’s collective plan is to continue doing what it does, which is to specialize in startups. Israeli cybersecurity companies of all kinds, at a much more deliberate pace than many of its rival firms.

Almost surprisingly, the idea is to fund only three new startups per year, or 10 startups in total.

Again, YL Ventures has invested in only 30 companies in total since its inception. Only one, says Leitersdorf, was an “erasure.”

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