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Liron Azrielant is occasionally mistaken for an assistant at Meron Capital, and entrepreneurs showing up at the office ask when the venture capital partner will be available. But she is the cofounder of Meron Capital, along with Daniel Roditi, and they have just announced their second fund, Meron II, with $50 million to invest in Israeli companies.
Azrielant and Roditi talked with me about their fund, which will invest in promising entrepreneurs in Israel. Their aim is to be agile and leverage their contacts to build on the success of their first fund, which they set up in 2017.
They plan to make 18 to 20 pre-seed and seed investments in startups that are building software-based solutions for enterprise, cybersecurity, digital health, fintech, DevOps, and more. They previously invested in 16 startups, and four of those have exited: AIOps startup Loom Systems was acquired by ServiceNow; API integration platform Reshuffle was acquired by Twitter; digital health company Clear Genetics was purchased by Invitae; and IoT startup Axonize was acquired by Planon.
In addition, 10 more have so far raised further financing, with startups Immunai, Solugen, and Armory alone disclosing combined investments in excess of $300 million to date. I talked with Azrielant about her background in the Israeli army, her computer science training, and what she views as her role in inspiring female entrepreneurs. Roditi talked about growing up in Switzerland and then moving to Israel in 2015. The two also talked about the challenge of doing business while Israel was involved in its recent war with Gaza, how they’re inspired by resilient entrepreneurs, and how they expect Israel to continue its reputation as the Startup Nation under the new prime minister, Naftali Bennett.
Here’s an edited transcript of our interview.
VentureBeat: Could you tell me about your backgrounds and how long you’ve been doing this investing?
Liron Azrielant: I’ve known Danny for more than five years now. We were both part of the investment team at Blumberg Capital. We’ve been investing together since 2015. In my personal career, I started as part of a program called Talpiot. It’s a program in the Israeli army. You’ve probably heard of it. Quite a few startups came out of it, like Pagaya. I finished it while serving full time in Israeli intelligence, part of a unit developing new tools to obtain information.
After my release, which was also after I graduated, I joined Agilent Technologies, where I was working on communication protocols. At that point I was still on the engineering side, a hardcore techie, with the intention of becoming more technical. I decided to pursue a master’s in computer science at MIT. I ended up combining that with an MBA, and that drew me more into the business side. After graduating I joined Bain in Atlanta and was part of their private equity group. That drew me into the world of investment, at first in private equity. I was doing pre-deal due diligence for large companies. After a few years I moved to New York and joined PwC’s dedicated M&A group.
After six years in the States I made two decisions. One was that I wanted to move to the buy side, and two, I wanted to come back to Israel. At first I looked at more private equity stuff, but I decided what I was really excited about was early stage. I ended up joining Blumberg Capital, which is when I met Danny and our mutual journey began.
Daniel Roditi: I’m originally from Geneva, Switzerland. I moved to Israel in 2015, which is pretty much when I met Liron. Before that I started my career in Geneva in private banking, the advisory side of the Rothschild Bank, doing mostly bonds, equity structured products. It was nice, but extremely boring. Then I went on to study in the U.S., came back to Europe to go to Greece during the previous crisis, where I was working in commodity trading in Athens, which was an interesting time. There was 65% unemployment in my age group. I was doing back-to-back trading on wheat, corn, barley, soybeans between Greece and other European countries, South America, and Asia.
I decided to join a startup that was solving one of the big pain points I dealt with working in commodity trading, which was business intelligence and transparency over prices. It was a very over-the-counter market. I was employee number one on the business front at AgFlow, a startup in commodity trading back in Geneva. It was still a boring city, but a more exciting challenge. I was there, built the entire business team, built the entire sales pipeline, and then eventually decided to leave to come to Israel. I had a finance background, and I had a software and technology background, deploying software. I decided to combine both of those by coming here.
I came to do an MBA at Tel Aviv University in 2015. That’s when I met Liron and joined Blumberg as part of the investment team. Together we left in December of 2016 to found Meron Capital.
VentureBeat: It seems like this whole “startup nation” image around Israel has accelerated. Does that give you the confidence that focusing on Israel is the important thing to do?
Azrielant: We’re deep tech investors, and we believe there’s no better place than Israel to invest in deep tech. The stuff that I personally was studying and implementing in the army, it was far more advanced than anything I studied in any corporation or at the university. Israel is a place where, at 18, a large percentage of the population picks up training that’s relevant for a wide array of technologies. If you think about intelligence, it’s cyber. It’s about stealing information and preventing it from being stolen. Once you have the information, it’s about understanding what to do with it. NLP, deep learning, pattern analysis, everything that narrows down information that’s too big to listen or read through and understanding the key parts. Image recognition.
This is relevant for so many industries. Anything that has to do with infrastructure, databases, these are all things that we learn and employ in the army. It just gives Israel such a huge edge. I’m not even talking about getting a lot of responsibility at a young age, getting this can-do attitude. People at 18 don’t pick that up so often in other places.
Also, there’s this sort of self-fulfilling prophecy we’ve seen. Israel has been identified as a hotbed for startups, which in turn causes companies to open more development centers here, strengthening the talent. Corporations look at Israeli companies as targets for acquisition. That in turn creates more successful entrepreneurs, investors, and mentors for the new generation. It only strengthens and increases the potential of these companies to succeed.
Roditi: It’s accelerating, as you said. This is also due to recent trends we’ve seen and what’s happened in the past few years. First of all, what happened with corona. We realized that Israel was pandemic-proof in its DNA. Most of our companies are not exposed to consumers. They’re targeting other businesses or infrastructure. That made them flourish in that period of time. Two, what we saw with Softbank and WeWork and these types of movements in the ecosystem, we’re also quite proof against that. Most of the companies we invest in, most of the biggest successes in Israel, are capital-efficient with high profit margins. There’s no WeWork effect.
There’s also a maturity in the ecosystem today. That comes with what Liron mentioned, and also comes with more big companies coming out of Israel. Startup nation, scale-up nation, these are things we hear, but actually today it’s becoming quite apparent that more and more companies here are multi-billion-dollar companies. They’re strengthening the ecosystem from the ground up.
VentureBeat: I see some of the success stories you had from the previous fund. Can you talk about some of those and why they were significant?
Azrielant: Our first investment and second exit was Loom Systems. They sold to ServiceNow. The biggest story there — and this is also something we use as a north star when we look at a company to invest in — is resilience. Loom is a great company, but I don’t think that’s the reason they succeeded. It’s that the entire founding team, and especially the CEO — when it was hard, when it wasn’t looking like it was going anywhere, they got through the tough times and brought the company to such a successful state that it had multiple offers. It taught us a lot about what to look for in a founder and what really leads to success.
Roditi: Just in terms of baselines, we have four exits out of a portfolio of 16 companies in four years. Twenty-five percent of the portfolio has been acquired, which is completely crazy when you look at the global statistics.
VentureBeat: Does the word “Meron” mean something, by the way?
Azrielant: There’s a mountain called Meron in Israel. I wish we had a more meaningful story, but honestly we were just going back and forth on names we liked and domains that were available. Because we were such a new, up-and-coming fund, and we were trying to gain authority, we chose a name that sounds like something that was there before. Canaan is a fund. There used to be a fund called Carmel. Meron is a very known mountain in Israel, so we thought it conveyed a sense of stability.
Roditi: I’m Swiss, so I have mountains deep in my heart. I’m happy to connect that to my DNA.
VentureBeat: $50 million seems like a good amount. What are you targeting as far as the usual size of the investments?
Azrielant: Between half a million and $2.5 million. We’re focusing specifically on the pre-seed and seed companies. We want to be the first institutional money in. As for the size of the fund, despite the trend that you’re seeing now with valuations going higher and exit sizes growing bigger, it was important for us to have a fund where the dynamics make sense even if that reality changes.
When we went through the numbers in Israel, we saw that there’s this layer of unicorns that you now see, which is fairly new, but in the past 10 years, Israel has been extremely overindexed in exits between $100 million and $500 million. In some years, the chances of a company getting any funding at all to being acquired at above $100 million were 1 in 25. In bad years it was 1 in 40. These are odds you really want to play, and having a $50 million fund allows us to return the entire fund with even just one exit like that. This is also something that we baked into our strategy.
Roditi: It’s also core to our culture that we want to be aligned with our funders. When you have a fund that’s $200 million, you have 10% of a company, and they get an offer of $500 million, you’d return 50 out of 200. That would be great for you as a fund, still. Often partners tend to push entrepreneurs to not take offers, and instead take more financing and grow the company bigger to make their returns more worthwhile. We don’t want to be in that position. We want to optimize our alignment of interests with our founders to the best of our ability. Having a fund size that’s limited in capacity is the best way to do that.
VentureBeat: When were you raising the fund and closing the money?
Azrielant: We made our last investment out of Meron 1 in Q1, or maybe just the beginning of Q2 in 2020. We started fundraising for Meron 2 around August, but we were lucky enough to do some investments in a warehousing structure, so our first investment out of Meron 2 was in September 2020. The period between August and June was what I refer to with Danny’s resilience. He kept us pushing and working and hustling. It wasn’t an easy period for us. But we were lucky to be able to make investments in that period.
VentureBeat: I’m guessing it was not easy to raise money during the pandemic.
Roditi: We raised all the money without face-to-face meetings, almost. Which was interesting. How do we build trust, especially for that? We strongly believe that trust is the most important element, trust and respect. How do we build those over Zoom? That’s something we had to work around and still create meaningful relationships with our investors and bring them in. It was challenging, but honestly it was super cool. I enjoyed the process.
Azrielant: We had one very significant investor that never invests without meeting face to face. We were at the brink of applying for a special visa to travel into Germany just to meet him. But eventually we were able to generate enough trust without having to travel.
VentureBeat: Have you noticed anything different about the startups you see now coming out of the pandemic?
Azrielant: The seed rounds have continued to increase. We’ve seen $5 million, $6 million, $7 million — there was one $26 million seed by a repeat founder. We’re seeing that more and more. There’s also a bit of a dichotomy where startups that start out with a certain — either they’re repeat founders, or they have an easier time starting, and then there’s a bit of a gap in the early stage, the pre-seed and seed. To us, it’s great, because we feel like we’re playing right before where all of the craziness begins. We’re able to identify just the sheer raw talent of the founders and teams before they become super-hyped companies. It’s hard, because the scene keeps changing, but we feel like our window of opportunity, that gap in the market, is significant right now.
VentureBeat: I know you had the recent trouble in Gaza. Has that had any sort of impact on being able to do business?
Roditi: We had a very significant commitment come in on the Tuesday everything started. We received that commitment from European investors for whom-it would be their first investment in Israel. They didn’t have a special affiliation to Israel and were doing it for purely financial reasons. They gave us the commitment on Tuesday, early in the afternoon, and then Tuesday night we started being bombarded out of Gaza. I was afraid that would jeopardize the commitment, but they signed and moved forward with the investment with no issue.
In the end, in Israel, people know that it happens like this. It’s cyclical. It’s not going to impact the industry at large. For the rest of the world, I think there’s — it changes, a bit, their approach to Israel, although not significantly enough for it to impact us.
Azrielant: We had alarms going off during Zoom meetings. It’s weird to say that we’re used to it, because something like this happens every few years, but we are. The toughest part was trying to communicate to our partners that for us, it’s just business as usual. We’re going to keep focusing on the business. It’s not as severe as it sounds, even if we have to hang up and run for shelter in the middle of a meeting.
VentureBeat: It feels like a lot of investment is built on that trust and comfort level. When you have a war going on, it has an impact. Somehow Israel has done this through its whole history.
Roditi: You’re right. Anybody who invests in an environment is going to look at it from a risk-reward perspective. War increases the risk aspect, both because it increases the geopolitical risk, and because people, especially those who don’t have an affiliation to Israel, feel like there’s some layer of political gesture to investing in Israel when it’s at war. Perfectly aligning with this — I think it’s our job to manage this correctly.
VentureBeat: This also seems to come at a time when there’s political or governmental instability. It’s interesting that life still carries on.
Roditi: Yes, absolutely.
Azrielant: The potential, if all things go well — I’m assuming you know the background of Naftali Bennett, the new prime minister. He’s the founder of a very large high-tech company [Cyota, sold to RSA for $145 million in 2005]. We’re pretty excited about — despite each of us having our own opinions on his political standings, the entire industry is very excited to have a high-tech startup veteran as prime minister. We believe that he’ll understand the complexity and the needs of the industry.
VentureBeat: Did any of that make you consider whether you wanted to expand the region in which you invest and mitigate risk that way?
Roditi: No, or at least not me. It’s about maintaining and being aware of our competitive advantage. That competitive advantage is to be part of this ecosystem, to be entrenched in this ecosystem, to be able to scan all of it and do due diligence on founders here. If we were to expand and start investing in Europe or the U.S., we’d let go of that competitive advantage, which I think is key to being successful.
Azrielant: I think I’d rather invest in founders that have managed the uncertainty of having to run to shelter, or not knowing if they can make a business meeting because of political unrest. They’ll be so much more prepared when exit discussions go south, or when they’re trying to win their best clients and manage negotiations.
Roditi: For these guys, entrepreneurs, when they decide to create a company, they also go through that process of assessing risk and reward. If they see increased risk and still go for the reward, these are typically the type of guys that we want to finance.
VentureBeat: Do you place your own importance on being able to meet face to face with startups that you invest with?
Azrielant: During the corona crisis, we had to have a lot of the meetings in Zoom. Still, we found ways to meet the founders we chose to invest in at least once. Whether it was meeting outdoors at a coffee shop, or whatever was allowed — I think we got better at creating the initial relationship remotely, but we’re trying not to cut out the face to face element completely. The same with the war. We found places that have shelters or secure spaces, and if the alarm goes off, we’re already there.
Roditi: With regards to face-to-face meetings, as opposed to larger funds or growth stage funds — they have a lot of data to rely on when they do due diligence on companies. They have a lot of quantitative information and visibility into a company’s products and so on. We’re really investing in the entrepreneurs. We take that leap of faith on entrepreneurs before they have a product, and sometimes before they even have an idea. We work with them on that. Our job is much more qualitative than quantitative. It’s very personal. We need to make sure we can sit on the same side of the table with this entrepreneur for the next 10 years. In our case, I don’t think we — I wouldn’t say never would we invest without meeting face to face. I think we would have. We may very well do it in the future. But this element and this chemistry is very important to us.
VentureBeat: What sort of predictions might you make about what you expect to see unfold in technology, especially in Israel?
Azrielant: I do think that inherently capital-efficient companies will continue to overperform. We’ve seen quite a few physical startups growing, like Uber, like WeWork, but I do think software technology startups are going to be the main drivers of value, especially now that we’ve seen what happens when the physical aspect of the world drops completely.
Roditi: A few things are happening in the world where Israel is positioning itself very well. Israel’s real DNA in terms of how entrepreneurs work is that they’re very strong technically. Until now, it made a lot of sense to go for very technical places, like deep learning and AI and cybersecurity, which is mostly what Israel is known for. Today we see a lot more technology in all sorts of businesses. We see that talent being attracted to this. One of the big ones that has yet to be disrupted by technology is health care. There’s a huge opportunity there with computational biology, which is based on software. Software in health care is going to boom, and we’ll see that more in Israel.
Fintech is also becoming more technical, more deeply integrated, and I think we see that with embedded fintech. We see that with tech for finance companies. We’re also going to see a lot of developments in the fintech space. Cyber, of course, is seeing a big resurgence right now. We’re also very well-positioned for frontier technologies like quantum computing.
VentureBeat: Are there things you might stay away from? I don’t know if games or cryptocurrency are interesting to you.
Roditi: I would rather not say we’d stay away. One of our competitive advantages, one of the things that defines us specifically, is that we’re young and agile. I’m always going to be open to investing in new places, depending on what the industry is coming up with, and responding to the market very quickly. We won’t invest in arms, tobacco, gambling, or things where we don’t feel a strong ethical parallel with our own standards.
Azrielant: In the broader sense I think I wouldn’t invest in anything that I think has a negative impact on the world. Those are just some obvious ones. But a good example is we saw companies that we really liked, that had great numbers, in the area of medication adherence. But as we dug down into it, we felt like it might have an element of reinforcing drug dependency. The overall impact of what that company does might not be for the best. We didn’t feel like that was a product the world should have. We always prefer technologies that make the world better, and we’ll avoid completely technologies that we feel are reinforcing problems or promoting problematic things.
VentureBeat: Related to that question, where do you expect to invest a lot? Are there sectors that are clearly where more money might go?
Azrielant: Personally I’m the most excited about fintech, from multiple angles. B2B payments is a huge area that both Danny and I are excited about, but also tools, selling to CFOs, to the controllers. We feel that unlike, say, cybersecurity — while there’s still a huge need for it, CSOs are being marketed to nonstop. There’s still a big gap in offering tools to the CFO in an organization. In addition, similar to what Danny said about trends, anything that has to do with health care, precision medicine, matching the right treatment to the right person, trying to use software and algorithms to treat people better.
VentureBeat: Are there a lot of other woman-run companies in Israel, in the venture industry there?
Azrielant: Not at all. It has its ups and downs. In a lot of ways I feel fortunate. I feel like standing out helps. But it also means that I had to work harder to get to where I was. It doesn’t happen anymore, but when I was just starting out — Liron, my name, it’s a unisex name. I’ve had founders walking into the office and asking, “Oh, when will Liron arrive?” Honestly, for both of us, not just being a woman but also being young and appearing young — we’ve had people asking, “Is a decision-maker here? Who else is on your investment committee?”
It’s this rapport you need to build from scratch over and over again. But I do feel that after all the hard work of making a name for ourselves and standing out, it’s starting to no longer be a disadvantage. We’re starting to reap the fruits of that work. People do tend to remember us more and recognize us more. That’s a tool that’s been great for us, especially when we’re trying to show our work and our value to our founders.
Roditi: Liron is being quite humble, but she’s actually a great figure in the Israeli ecosystem, especially for being a woman founding partner of a fund. What we see here, and I guess it’s something that you also realize in your day to day, there’s a lot of funds that have multiple partners. Recently, because there’s been a lot of light shed on women partnerships in funds being so low in terms of percentage, they’re promoting female partners, often in operation roles rather than investment roles. Sometimes they’ll bring them in in investment roles, but as a fifth partner, sixth partner. Liron built the fund from the ground up herself, which is something that’s not — it’s more than rare.
VentureBeat: When you have some of those awkward situations happening, how do you respond?
Azrielant: I didn’t do it, but one thing I really wanted to do is serve that person coffee and tell him, “Liron will be right in. Here’s a good tip about Liron. He really likes when you read about him before a meeting. Please use this time to do some research.” But no, honestly, I just smile and correct and try to focus on not taking it personally, staying professional. Danny has the same thing because of his age. A lot of professionals have these things you have to overcome. This is mine, and I try to smile through it.
Roditi: It happens less and less now, because of years of work and presence in the ecosystem.
Azrielant: Now most founders that come to us know who we are beforehand, which is something we’re extremely proud of. It was hard to come up with — Meron Capital, which was nothing a second ago, is now on the list of funds you want to approach.
VentureBeat: Are you noticing more women entrepreneurs in Israel?
Azrielant: Yes, definitely. Danny and I just had a long discussion about this yesterday. I’ll tell you a story about my grandfather. When I was five or six years old, every time I visited my grandfather he’d say, “When are you bringing the Mercedes home?” That was the prize for being a beauty queen in Israel, so that was his way of complimenting me. When my brother, who was six years younger, grew up, I noticed my grandfather would say, “Are you going to be a lawyer or an engineer?” In my generation, there was a difference in expectations. It’s being corrected more and more.
What I’ve seen coming in the last few years, and I’m super excited about it, is we’ve had that awareness about the difference in expectations between the genders for long enough that it’s suddenly kicking on. Suddenly women founders have had this new expectation of them for long enough to go study, take great steps, and start their own companies. Compared to five years ago when we started investing, we’ve seen so many more top women founders that we’re excited to invest in. Our latest investment, Sorbet, is woman-led. Also, our fourth investment and first exit was woman-led. They’re both awesome.
Roditi: We have a statistically woman-heavy portfolio, although that’s really not by design. I also think that from the entrepreneur’s side, seeing that we’re a fund that has a woman in leadership makes women more comfortable working with us. I can’t say for sure if that’s true, but I’ve heard — Sorbet, when I was doing the deal, it’s something the entrepreneur mentioned. I’m guessing, but I think it’s important that we show we have that culture in-house.
Azrielant: We always invest in the best person, the best company that we meet. We have a fiduciary duty to our investors. But we’re so excited that so often that person happens to be a woman. We hope that this trend grows stronger.
VentureBeat: As a society, do you feel like Israel is any more likely to produce women entrepreneurs than elsewhere?
Azrielant: Absolutely, for two reasons. One is the military. Men and women, every person at the age of 18 goes into the military. The way that people are sorted into units, guys tend to take combat roles a little more often than women, even though a lot of the combat roles are also open to women. What’s left, the technological roles, are open enough — not enough of them are 50-50, but a lot of them are. There’s this crazy tech training that women receive.
Second, I think it’s changing a bit now, but Israel is so deep into — the culture is very much a meritocracy. In the U.S., when they look at your resume, they may care more about whether you worked at a top company, the logos you can put there. In Israel it’s more about what languages you can code, what you can technically do. Those things tend to have a lot less of a gender flag. Do you know Python? Are you good at Python? That drives respect and promotion.
Roditi: It’s funny, because my brother, the other day we were talking about gender in Israel. He said, “Israel, to me, is the most feminist country on the planet. Look, already, just the first names, in Hebrew so many names are both for men and women, like Liron.” When you think about this, it’s a little crazy, the number of names in Israeli society that are used for both men and women. You really only see that here. It’s funny coming from — my brother is Swiss and he still works there, so he has limited visibility into Israel. But that was something that impacted his vision of it. If you say a name in Israel, it could be for both genders. There’s no differentiation.
VentureBeat: Is there anything else you’d like to mention?
Azrielant: We like to work with founders for a long time. More often than not, the founders we end up investing in, we met them long before the investment. I know you keep hearing this, but we like lines, not dots. Almost all of our deals, we’ve had very significant discussions with founders. Some of them were actually around, “I don’t think that idea is good enough. I’d like to help you validate something different.” This is because we go early stage. We invest in people. For us to make an investment, we don’t necessarily have to be in love with the idea or the specific solution that the founder is pursuing. We just need a strong enough founder approaching an interesting enough problem. That’s helped us identify a lot of strong founders when there’s crazy competition.