Jumpspeed Ventures is an early-stage (pre-seed/seed) VC fund that invests exclusively in tech startups originating from the dynamic and resurgent Jerusalem, Israel startup ecosystem. This is a brief memo to our entrepreneurial community, to (hopefully) transparently and clearly state that we are “Open for Business” and what that means.
Under the cloud of the worldwide COVID-19 pandemic many startup founders are confused by VCs claiming to be “open for business” while at the same time VC funding has been plummeting:
Jumpspeed Ventures is very much open for business and I want to clarify for the Jerusalem startup community exactly what I mean by that.
- I am actively and eagerly looking for new investments that meet our criteria.
- Our criteria have not changed as a result of the pandemic. I still believe that if a startup has identified a truly big problem, and a truly game-changing way to solve that problem, and that problem will be as big or bigger in 12–24 months when the initial product is ready, and the right team is in place to execute on that opportunity, then believe it or not, now is as good a time as any to invest.
- According to some surveys I have seen, a strong contributing factor to a VC fund’s willingness to invest in the current COVID-19 environment, is how much of that fund has been deployed. I am investing out of a relatively new Jumpspeed fund, which is less than 33% deployed, so Jumpspeed has plenty of “dry powder.” Our LPs have just made a meaningful capital call so money is actually in the bank. I can’t be clearer than that about standing behind a willingness and ability to invest. (In fact, I am in the process of closing not just another new investment right now, but ironically our largest investment to date.)
- While some VCs have loudly proclaimed they are “open for business,” they have said in undertones “…but we are being much more cautious.” I have always been very cautious, investing in less than 1% of the deals I see given our stringent criteria. (That 1% figure is a common benchmark for professional VCs by the way; I’m not unique in that regard.) I am always looking for that very rare situation (within the Jerusalem ecosystem of course) that meets all of our criteria and for which I develop great conviction. So I don’t feel I can be any more rigorous than I already am.
- Since the pandemic outbreak, valuations have gone down, and terms have shifted to becoming more “VC-Friendly,” which makes sense as competition for deals has fallen and founders’ options and negotiation leverage have evaporated. Because Jerusalem’s ecosystem has generally been under-appreciated and under-exposed, I am accustomed to operating in deal environments with limited competition, but I would like to believe that I don’t take excessive advantage of the leverage mismatch even in “normal” times. I was a founder for many years before becoming a VC, so I have a lot of empathy for a founder’s situation, and I like to do deals that of course meet my fiduciary duty to the LPs who have trusted me with their hard-earned money, but on the other hand don’t over-reach. For example, just to name some specific terms and be transparent about this (, )and at the risk of ticking off my wonderful lawyers for speaking openly about these things), when it’s up to me I generally don’t ask startups to pay Jumpspeed’s legal fees (even though that’s pretty common), I generally don’t ask for participating preferred, and I have a very liberal view towards personal founder reps that is uncommon; I don’t push for these even in these COVID-19 days when I imagine I could “get” them if I insisted. These terms and others are often very contentious but I generally don’t like them and I think they harm the delicate founder/investor dynamic. The one thing that I am seeing, and “benefitting” from (if that is the right way to put it), is slightly lower valuations, again reflecting the heightened risk assessment and supply/demand misalignment. People say that industry-wide valuations have fallen by anywhere from 20–40% depending on stage/sector/location, and I can confirm that is the case in my limited sub-set of exposure over the past few months. So in sum, the one way the heightened risk and uncertainly may manifest itself in an upcoming Jumpspeed investment, is with regard to valuation.
Many VCs have expressed strong views and opinions on how long the pandemic will last, what the impact and effects will be, what the world will be like afterwards etc. I am neither a prophet nor an epidemiologist, and I frankly feel only astonishment, humility and ignorance as I grapple with what has happened to our planet over the past few months. I keep quoting William Goldman: “Nobody Knows Anything.” But to me that uncertainty does not mean that I should stop investing. As a professional early-stage investor, I feel it’s my job in any environment to peer into the unknown future and bet on startups that can potentially best disrupt and benefit from that unknown future. So I feel that now, it is my duty to do the best I can under these new circumstances, to do what I am paid to do, which is to invest — in the best startups I can find that I believe will thrive commercially three/four years from now and afterwards, whatever the future may bring.
So I am still very much Open for Business.
If you have a Jerusalem-originated startup and feel that you meet our criteria, I would really like to hear from you — follow the easy steps at our website. (And even if you don’t meet our criteria, you can drop me a line and I can see if I can help.)
And — stay safe and hang in there.