Venture Capitalism in Israel: an in Depth Interview With One of the Best
By: Nathan Berzack
Last week I had the pleasure of sitting down with Scott Gross to learn about his background and role at Cornerstone Venture Partners.
Q: Could you please introduce yourself?
A: Sure. My name is Scott Gross, I’m 29 years old and I grew up in Baltimore, Maryland. I attended school at the University of Maryland and after that went on to live in New York for 6 years where I worked in finance, before making my way to Israel.
Q: Could you tell me more about Cornerstone and its specifics?
A: Cornerstone is an early stage business to business software-focused fund based out of the States. We invest in most B2B software verticals besides health-tech.
We are a 25 million dollar fund, generally investing a half million to one million dollars in initial startup investments. We don’t restrict ourselves to investing in any geographical area but the vast majority of our deal flow comes from Israel where we find the best opportunities.
Q: What do you spend most of your time on?
A: There are three main aspects I spend most of my time on — dealflow being the main one. This is comprised of finding new opportunities to potentially invest in, which includes really digging into the company’s history and setting up meetings to truly ensure that the company is at the point where it lines up with our investment thesis and is worth a deeper look by our team.
Besides dealflow, I also represent Cornerstone at events, where a lot of the networking and learning about the ecosystem takes place.
The last aspect I work on is the due diligence phase, which consists of me finding out the logistics of the companies we are heavily considering. This consists of market research, a look at the competition, background of the team, and so on.
Q: What’s the method you use for discovering companies?
A: Startups reach out to us. And the events that I previously mentioned are very rewarding as well. And if I’m discovering these startups personally, I will use online databases like IVC or Startup Nation Central. Another great way to discover companies is through our relationships with other venture capital funds. Other venture capital firms will let us know about companies that don’t interest them but may be interested us, and we’ll find companies that way. It’s also worth mentioning the fact that we live in Tel Aviv is also a huge bonus — there’s just so much going on in such a compact area and there’s opportunity everywhere.
Q: What do you love most about what you do?
A: I’d have to say seeing the progression of the startups that we invest in this ecosystem. Seeing a company start from the bottom and grow into a flourishing business, especially in Israel, is incredible.
It’s also really nice to have flexibility with this job. I obviously work hard but the flexibility is great. Sometimes I’ll go to these networking events and it doesn’t even really feel like real work when you’re wined and dined and mingling with other people. It’s pretty nice.
Q: What is the most challenging aspect of your work?
A: The amount of companies we invest in is small compared to all the companies that I’m meeting, but that’s just the life of venture capitalism. Lots of meetings, lots of research, and lots of scanning. This creates a very tedious and lengthy process when making an investment in a company. To put it into perspective, out of over one hundred companies, we only invest in one. So, there’s also a lot of repetition in this line of work as you can imagine. But although this procedure is one of the most challenging aspects of my work, I’m always thinking of how we can speed it up.
Q: How does being in Israel boost the company, its culture, and openness to innovation?
A: We all know that Israel is known for innovation and the opportunities here are unmatchable. So, we hold a great reputation for investing successfully in the startup nation. Even big companies like Microsoft, Google, and Facebook are coming to Israel because they know just how respected the innovative culture is here.
The culture is definitely an aspect that makes this country so successful. Israel is a small country so people know each other. You’ll be able to get meetings easier and network easier compared to American society.
Q: What is the most incredible startup that you have met here?
A: There’s this really interesting company we actually recently invested in called Youtiligent. What they essentially do is make dumb machines smart. They’ll first understand the exact machines technology along with the electrical patterns.
Take a coffee machine for example. By dissecting the machine, they can find out some really interesting logistics like just how many people are drinking black coffee versus cappuccinos. And this is all in real time, with the data saved to the cloud. With the information, coffee providers can then understand their customers better, which will lead to more efficiency when ordering supplies. It takes out the guesswork that suppliers face which makes it so interesting and innovative.
Q: What’s your favorite Hebrew expressions that you’ve learned so far?
A: My Hebrew is still improving but two that come to mind are hakol besseder (everything is ok) and yihye besseder (everything will be ok). It just seems like that’s the mentality here in Israel.
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