“The pandemic created an abnormal situation in the industry and led to the acceleration of many activities and areas and the value of companies rose to unreasonable heights. There was an excess of heat that suddenly stopped and led to a you rethink. However, I love a good crisis because the best companies are built in the past and it’s a good way to see that you’re focused on the right things. I’ve built part of my career through of crises and I am very excited about this time,” said Mäelle Gavet, who since the beginning of 2021 manages Techstars, the largest accelerator in the world, in an interview with Calcalist. Techstars invests every year in about 500 companies at the start-up stages before the Seed and Gavet thinks that the coming years will be very difficult for the high-tech industry.
“In 2021, we see companies rising to unimaginable amounts with a very small base of activity and we see Seed companies worth tens of millions of dollars without any financial consideration. We, the big seed investors, should be happy when the value goes up, but it’s not like that. There are companies that are not doing well. We don’t know when the crisis will end, whether it’s this summer or five years. A lot of uncertainty. We have thousands of companies in our portfolio and a lot of investors in our companies and institutional investors with us, and I’ve heard all kinds of opinions from them about when the end of crisis. teach our companies to be flexible and ready for anything.”
What do you think will happen?
“Unfortunately, what I think will happen is that 2023 and 2024 will be a graveyard for startup companies. The companies have a lot of money and there are more rounds. Some of the companies that received money in very early stage and done Not building themselves is not ready for the crisis. Those companies that do not have time to raise enough are expected to encounter many difficulties.”
Gavet has been in the high-tech industry for several years. In his last position he held a senior role at Ori Allon’s company, Compass. From his perspective, he sees a tough future for the industry in the near term. “Besides the aforementioned grave for many startups, I think we will also see an army of zombies among venture capital funds, which will not raise a new fund. They will work and invest, but will -first deal with money that is already there. There are many funds that will not survive in the future. There are over 2,000 active funds in North America, Europe and Israel, and in my estimation, the world does not need more this.”
Does the impact of the crisis differ between companies?
Gavet thinks that the main problem is for companies in advanced stages. “We have seen difficult times for companies there, with a decrease in value of 70% and a lot of difficulty in raising money in general. These are companies that were built for a quick IPO, even through a SPAC or outright IPO, and all will cease to exist.
“Also companies issuing through SPAC and generally creating a negative impact on the industry will affect the future. Companies in less advanced stages will be able to raise, especially through their investors , although it is accompanied by a decrease in value .In the very early stages I believe that raising is possible, but I no longer see scenarios of useless values in the stages of the Seed and before the Seed. See We also do due diligence reviews that require more time at each stage of the investment.”
We have seen many layoffs in the Israeli industry. Where does it go from here?
“Unfortunately, I feel that we are just beginning the wave of layoffs and we will see more in the coming years. I don’t think that the companies have internalized the crisis and some of them are still living on the funds they have funded. has been resurrected before and hasn’t hit a wall yet.”
Gavet does not like the industry’s use of the term “unicorn” (a start-up that has raised a value of more than a billion dollars), which has become synonymous with success, and he admits that he has never heard of the term. that “centaur” , referring to startups that have passed the $100 million mark in annual revenue, which he titled dragons. “The industry is focused on flashy companies, like Airbnb and Uber, while we see more positive sides in less flashy companies. Unicorns and dragons are mythological creatures. Dragons want to interact -fight and win, so we should focus on them and not on unicorns,” he said. “The focus only on unicorns creates most of the problems in 2021, growth at any cost, very little financial capacity, and we prefer dragons who have the financial capacity to face any crisis that comes their way.”
You work at Compass, with an Israeli background. How do you feel about this time?
“Compass has changed the residential real estate market in the United States. In 10 years they have become the largest real estate broker and have invested in technology more than any other broker to help their agents be more productive.”
Gavet recently decided to put his familiarity in the field of writing and published a book titled: “Trampled by the Unicorn: Big Tech’s Empathy Problem and How to Fix It”, whose main focus is lack of empathy among industrial managers. “Big tech companies create a sense of lack of empathy and don’t think about the impact they have on people,” he said. “Being a good leader is measured by the way you influence others but you have to be thoughtful. My book tries to answer the question of how we became an empathetic industry and how to manage it. But there is hope. Most companies are not empathetic because they are run by engineers and people are part of the formula and they try to take people out of the equation and that makes them not empathetic.
“The book was written after I worked in the industry for 15 years and after I did not understand why good people make terrible decisions from a human perspective. I tried to understand why companies suffer from lack of empathy and then I also look for the solution.”
Techstars is one of the leading programs today for developing companies in the early stages of construction. Hila Ovil-Brenner recently retired from managing Techstars Israel, leading Gavet to go to Israel to try to find a new manager. “We have nine programs here in six successful years, but we can do more. We are looking for a new manager here and see the great importance of Israel. I hope we have two program next year and we have an obligation to do so next year as well. We will continue to invest in 50- 70 companies in Israel and this is a small amount of what can be invested here.
“We are like an index in the early stages and operate around the world in different industries, such as agritech, edtech and foodtech. We even invest in music and have successes and partnerships there. There is a lot of excitement -as in the world and I am very strong in the Europe, Middle East and Africa region. Israel is an important center of innovation, also beyond cyber and AI. There is also a lot of potential in Africa and we are opening offices in Lagos.”
What are you looking for?
“One area that has really interested us in recent years is foodtech and agrotech. Food insecurity is something that has not existed for many years. My grandmother must have felt it when she was in war, but it is an event that the thought of not related until the climate crisis and the war of Russia in Ukraine. This event requires technological solutions from the world of entrepreneurship.”