Investment Firm Rewarded for Selling in Top Markets – TechCrunch

It used to be that venture capitalists could not sell their stake in a portfolio company before selling it or going public without raising questions about the company’s prospects. As startups started staying private for longer, venture capital and management teams became more comfortable selling some of their holdings to new investors, but now many venture capitalists will likely want to sell more over the past year or so.

One company that is happy to pull the trigger on two of its deals is YL Ventures, a 15-year-old US-Israeli venture firm that specializes in upstream cybersecurity investments that just closed its newest and largest fund to date with $400 million in capital commitments. .

In March 2021, when five-year-old cybersecurity startup Axonius was raising $100 million at a valuation of $1.2 billion, YL Ventures — the group’s lead investor — sold its stake for $270 million to ICONIQ Growth, Alkeon Capital, DTCP and Harmony Partners.

The amount was more than three times the size of YL Ventures’ first fund of $75 million, which backed the outfit and from which YL Ventures ended up investing $15 million in the entire Axonius, including through several special-purpose vehicles.

“Complications were so high a year ago that we felt, under normal circumstances, that we would need [more time] to reach the same result,” says founder of YL Ventures, Yoav Lettersdorf, based in Mill Valley, California. Axonius shares were in great demand and we are looking back today, with this current market. . . traces.

Similarly, YL Ventures sold much of its stake in four-year-old cloud security company Orca Security to new buyers when Orca extended its Series C round last fall, a $550 million tranche that boosted the startup’s valuation 50% in just seven months 1.8 Billion dollar.

“We didn’t sell our full position,” says Lettersdorf, but his company made $250 million from the deal nonetheless.

In fact, 2021 was a good year until it got even better when another portfolio company of YL Ventures – healthcare IoT security startup Medigate – was sold to industrial cybersecurity vendor Claroty back in December as it was closing a 400-worth Series E round. Million dollar co-led by SoftBank. Leitersdorf pulled out of the deal with more than $100 million.

It’s all solid revenue 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 container security company Twistlock, which sold to Palo Alto Networks in 2019 for 410 million. dollar. (YL Ventures was Twistlock’s largest shareholder, investing so early that it invested only $12 million in the company over four years as an independent group to build its position.)

So what is YL Ventures’ secret sauce? He has been from the start – and still is – investing as early as possible in a very specific type of company. As we reported last time covering the company several years ago, nearly all of the founders in the YL Ventures portfolio served not only in the IDF but specifically within its 81 and 8200 units, the elite parts of the organization that became training ground for some The world’s busiest cybersecurity company.

Units are said to accept fewer than 1 in 100 high school graduates, so it’s no wonder that enterprising companies that focus on cybersecurity and then try to choose from among those when their service is complete.

YL Ventures appears to be particularly adept at succeeding in these efforts.

Lettersdorf credits Ofer Schreiber, principal partner and head of the company’s office in Israel, for much of the heavy lifting on the recruiting front, boasting that YL Ventures has “the first achievements in every initial deal coming out of Israel” largely because Schreiber is “so intertwined there” “.

He also says the company’s success to date depends largely on the work of the company’s other senior partner, John Brennan, who oversees a large network of chief information security officers — 120 of them, Lettersdorf says — who collectively receive 5% of the company’s load. Interested in interviewing deal audits and sharing unaddressed weaknesses in their companies.

These CISOs are not limited partners in the fund, says Leitersdorf, but he says the group’s investors include ultra-high net worth individuals from the United States, Europe and Sao Paulo, Brazil, and you can imagine there are at least some crossovers.

Leitersdorf also tells us that YL Ventures promoted two colleagues as part of the new fundraising process. Sharon Seaman, who also served in Unit 8200, was appointed as a partner. Oversees the company’s marketing output. Michael Cortez, who focuses on business development and is “part of the group that writes checks,” says Leitersdorf, has also been hired as a partner.

Meanwhile, Leitersdorf – who remains the company’s sole general partner – says the team’s collective plan is to continue doing what it does, which is specializing in Israeli cybersecurity startups of all kinds, at a much more deliberate pace than many competing companies. .

In fact, the idea is to fund only three new startups each year, or 10 startups entirely from the new car.

Then again, YL Ventures has invested in only 30 companies since its inception. Only one, says Lettersdorf, was a “erase.”

Pictured above: The YL Ventures team, courtesy of the company.

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