In the past, venture capitalists could not sell their stake in a portfolio company before it was sold or listed without raising questions about the company’s prospects. As startups have become more private, venture capitalists and management teams have become more satisfied with selling some of their stakes to new investors, but many virtual companies are likely to want to sell even more in the past year.
One company that is pleased to have pulled the trigger on two of its own stores is YL Ventures, now a 15-year-old US-Israeli venture firm specializing in early stage cyber security investments, that has just closed its latest and largest fund to date. with capital commitments of $ 400 million.
In March 2021, as the now five-year-old Axenius cybersecurity startup raised $ 100 million worth $ 1.2 billion, YL Ventures, the company’s first investor, sold its $ 270 million stake to ICONIQ Growth, Alkeon Capital, DTCP and Harmony Partners. .
This was more than three times the size of YL Ventures’ $ 75 million debut fund, which supported the group and through which YL Ventures ended its $ 15 million investment in Axenius in total, including through several special purpose vehicles.
“A year ago, the multiples were so high that we felt we would need it under normal circumstances [more time] to achieve the same result, ”says YL Ventures founder Yoav Leitersdorf, based in Mill Valley, California. “The demand for Axenius shares has been high and today, looking back, with this current market. . . He pauses.
YL Ventures similarly sold much of its stake in four-year-old cloud security company Orca Security to new buyers when Orca extended its C-Series, a $ 550 million tranche last fall, raising the startup’s rating by 50% in just seven months. $ 1.8 billion.
“We didn’t sell our entire position,” says Leitersdorf, but his company still squeezed an incredible $ 250 million out of the deal.
2021 was a really good year, even better when another of YL Ventures’ portfolio companies, IoT Medigate, a health care startup, was sold to industrial cyber security contractor Clarota in December, closing the $ 400 million E-Series, which together led SoftBank. Leitersdorf’s company withdrew from the deal with more than $ 100 million.
These are solid revenues for the company, which now manages $ 800 million in assets and records earlier departures, including the $ 100 million sale of Hexadite to Microsoft in 2017 and the sale of the Twistlock container security startup, which was sold to Palo Alto. Networks in 2019 for $ 410 million. (YL Ventures was Twistlock’s largest shareholder, investing so early that it invested only $ 12 million in the company during its four years as an independent organization to build its position.)
So what’s the secret YL Ventures sauce? From the beginning – and still is – it has invested in a very specific type of company as soon as possible. As we said when we last covered the company a few years ago, almost all of the founders in YL Ventures’ portfolio served not only in the Israeli Defense Forces, but specifically in its 81 and 8,200 units, the elite parts of the organization that became training units. the basis for some of the busiest cybersecurity companies in the world.
The units reportedly accept less than 1 in every 100 high school graduates, so it’s no wonder that cyber security companies are trying to choose from them when their services end.
YL Ventures seems to be particularly adept at this endeavor.
Leitersdorf credits Ofer Schreiber, a senior partner and head of the company’s Israeli office, for much of the hard work on the recruitment front, boasting that YL Ventures has “the first dibs in every trade in seeds coming from Israel”, mainly because Schreiber is “they are so deeply connected there.”
He also says the company’s success to date depends largely on the work of another senior partner, John Brennan, who oversees an extensive network of information security executives – 120 of them, says Leitersdorf – who together receive 5% of the company’s shipping. interested in exchanging for checking deals and sharing what problem points are not addressed in their own companies.
These CISOs are not limited partners in the fund, says Leitersdorf, but says that investors in this outfit include ultra-high net worth individuals, mostly from the US, Europe and Sao Paulo, Brazil, and you can imagine there is at least some crossover.
Leitersdorf also tells us that YL Ventures has promoted two colleagues in this new fundraising process. Sharon Seemann, who also served in the 8200, was named partner. He oversees the company’s marketing outputs. Michael Cortez, who focuses on business development and is “part of a group that writes checks,” has also been named a partner, says Leitersdorf.
Leitersdorf – who remains the company’s only general partner – says the team’s collective plan is to continue what it does, specializing in Israeli cyber security startups of all kinds, at a much more thoughtful pace than many competitors. .
In fact, the idea is to fund only three new startups a year or 10 startups together from a new vehicle.
Since its inception, YL Ventures has invested a total of only 30 companies. Only one, says Leitersdorf, was “erasing.”
Pictured above: YL Ventures team, courtesy of the company.