Erel Margalit founded Jerusalem Venture Partners (JVP) over 24 years ago, and is one of the chief architects of the startup nation, bringing innovation and entrepreneurial leadership to Israel’s most pressing political, economic, and social challenges. Chosen for the Forbes Midas list as the lead VC outside the US and by Israel’s prestigious business paper The Marker as the first venture capitalist with the golden touch, Erel Margalit has led numerous global exits as managing partner of JVP.
What is JVP today?
JVP is a venture capital Fund that I founded, with two centers of excellence, one in Jerusalem and one in Be’er-sheva that includes Israel’s leading Cyber Security Incubator. Over the years JVP was instrumental in helping create over 120 companies and, as the largest shareholder in these companies, has pushed them to become global market leaders. Together with additional partners we lead the creation of the a cybersecurity national initiative in the Southern city Be’er Sheva, which over the last four years has been the spearhead of cyber technologies out of Israel. We have a strong emphasis on technologies that can disrupt global markets in the spaces of Data Analytics, deep learning, cyber security, software and storage. We partner with major tech companies to bring the digital revolution to all sectors such as banking, automotive, security, insurance, retail and media.
How do you work?
We see more than a thousand companies a year that are presented to us by groups of young people with ideas. These ideas can be sourced from the Israeli armed forces and their strong technology units, they can be found in the renowned Israeli academic institutions, and at times we see opportunities that are spun out of large corporations. The founders are usually very bright people that need to receive guidance in order to succeed. We believe in brainstorming with entrepreneurs in order to help them to develop.
“We start early, work closely with our companies, and give additional investments if we believe they can become market leaders.”
Erel Margalit with President Macron of France, visiting the JVP Media Quarter in Jerusalem
How many companies do you invest in?
JVP will invest in around eight to ten companies a year and start working closely with the founding team as they develop their product and market outreach. Apart from the financial investment we also support the companies here in the JVP Media Quarter in Jerusalem or in Be’er Sheva, or in Tel Aviv and sometimes overseas in Europe or in New York. We have strong ties with global leaders and multinational companies. We host them many times in order to gain their market experience and see what pains and solutions they are seeing in the world. Just as an example, the relationship we have with French companies, investors and strategic partners was augmented during the recent election and following the visit of President Macron to JVP. We are now defining the bilateral initiatives around a variety of fields. We have hosted many French, American, Chinese, British and Italian groups and entrepreneurs, such as Alibaba, who is a strategic partner of the fund, who work with us to learn more on the innovation landscape and what we can do together.
Do many of the startups succeed?
Many succeed, but only a few become large companies. One example is a company in cyber security that we invested in in 2001 called CyberArk. We had smart founders, most of them coming from underprivileged families, who managed to get a decent education, acceptance to top army units and academic achievements. They were able to present an outstanding idea to JVP. This took years to develop in Israel, the US, Europe and around the world, and in 2011 we received an offer to buy the company for $150 million. We said no to this offer because we thought it was premature. Other investors in the company wanted to sell, and there was a big debate in the Board room. We approached the other investors and said, “We will buy you out,” and that way we were able to take a bigger piece of the company and continue to help them grow. We took the company public three years later with great success and it is now valued at close to $2billion. This is just an example, of how we start early, work closely with our companies, and give additional investments if we believe they can become market leaders. In total JVP has had 32 very successful exits.
“The digital revolution is changing businesses, category after category.”
What is JVP doing now?
We are now at the point of starting our eighth early stage fund with investors from France, China, the UK and the US. Our investors include some large strategic global groups. The world is changing and most of the brands we currently know will change or will not exist in ten or fifteen years’ time. The digital revolution is changing businesses, category after category. One of many examples is that we were with a retail company recently and they said that if they just continued to sell clothes there are so many competitors that they would go out of business. So they approached us to get a better understanding of young people that they touch through their clothes and fashion, what are the trends and preferences of these individuals and understanding that they, as a company, touch many aspects of their lives. Fashion is just one of the cultural phenomenon we are seeing today. Understanding what clothes mean is understanding music and which are the cultural preferences. Through clothes you can understand a lot more things. By understanding this the company will be able to find in their data what will allow them to know how to address the younger generation.
Erel Margalit with the Egyptian and Jordanian Ambassadors to Israel, discussing joint initiatives for the region.
Erel Margalit at the BPI Innovation conference in Paris, October 2017
“If innovation can transform a country, maybe innovation can build the first bridges in the entire region.”
What about your own political ambition in Israel?
I spent five years in the Israeli parliament promoting Economic development in Israel and in the whole region. Over these years we were able to launch many initiatives that are actually bringing change, through technology, through partnerships and through identifying the strength of the area, brining quality jobs and pushing it forward. What we are doing here in JVP isn’t just a business phenomenon. When we started, we had a vision, to give a city with a long historical heritage and burden, like Jerusalem has, a big new narrative around innovation and coexistence. There were many security issues in the city, and many people were afraid to go into a restaurant, or to send their children to school. Jerusalem was the poorest city in Israel, and many young people were emigrating out of the city What we did here, by combining business and culture, changed the way young Jerusalemites thought about themselves and the city, and they realized that they could succeed in Jerusalem. We gave Jerusalem a new story by creating a place where history and the future work together.
Today with so much tension around Jerusalem, we want to remind politicians that innovators, creators, community leaders and the young generation want a city where co-existence is not just a phrase, but a way of life. Where politicians see despair, entrepreneurs find a way and bring hope.
What about the Bakehila community project?
The project was founded by my wife Debbie and me and is now the biggest social education project in the city which gives children from underprivileged neighborhoods a chance to succeed. When you have business innovation, performing arts and a social outreach you are creating a transformation. Taking this message forward, if we can transform a city maybe we can transform a country. I presented a plan to transform seven regions in this country by bringing social and economic development to those regions and we are now active all over the country. Another thing I am doing is bringing innovation to connect Israel with other moderate countries in our region. We want to be part of the bigger story for the entire region. If innovation can transform a country, maybe innovation can build the first bridges in the entire region. Entrepreneurs will create the first breakthroughs because most politicians are still entrapped in old concepts and old ideas.
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