Investor of the day #3. Deso Club “You don’t need to “push” founders. They are hungry and eager for success by default”, — Elli Glaybman, founder and CEO.

— To begin with, tell us how did you get involved in the venture industry?

— I was born in Lviv. In 1990, I emigrated to Israel. Here I entered the army — I got to the technical crew and was repairing aircrafts. I was not accepted to the air forces for reasons of ill health, so after the army service, I entered the business college and got an MBA degree.

After this, I’ve occupied many jobs. I was a marketer in EI AI air company, a maitre d’hotel, an owner and partner of a nightclub. For the last 8 years, me and partners (Nikole Kosheeva and Tim Linkovski) possess a FashionTV franchise. Fashionbar is a nightclub in Tel Aviv, opened in the framework of FashionTV. Developing this project, I got an insight how the fashion industry works and how the designer world goes round. At long last, with a group of like-minded people, we launched COCOS — a b2b-platform for the fashion industry. At one stage, we understood that we need investments, and this moment was the beginning of a new stage of my personal and professional development.

When doing fundraising, I noticed, that many investors from the CIS countries want to appear on the Israeli market. And investors from Israel are interested in the startups from the CIS. But they are afraid of misunderstandings and mental gap.

Once I met Daniel Levin, an entrepreneur and investor of international level, with holdings in Israel and Great Britain. Daniel is a partner of HanacoVentureCapital, which invests in Israeli entrepreneurs, who are aimed at the world markets, also, he is a co-owner of such companies like Solomoto, Group1607, Group IB, Nofim and etc. We became friends and partners in several projects, and, knowing the background of many investments stories, we decided to create Deso Club.

Deso is a business club with closed community of investors and players of the world market, it is founded grounding on the strong networking, absolute trust and personal access to every club member. We decided to assemble our networking and create investment stories. The word “deso” has many meanings: opened to innovations, desirous to expand horizons, in-demand, valuable, significant. All of these concepts can be referred to us at some point.

— What makes Deso Club different from an traditional venture fund?

— The unique peculiarity of Deso Club lays in the direct access to diplomatists, ambassadors, consuls and other officials from more than 100 countries. Our third partner — Izhak Kamilian, is a CEO in The Ambassadors’ Club of Israel, a club of ambassadors and consuls of Israel. Also, he specializes in the strategic media-consulting of Israeli and international brands, embassies, governmental constitutions and IT companies. In such a way, we can contact private investment funds or specific individuals and introduce our portfolio companies to the required markets in the shortest period and on the high-level.

Besides, we help to build a strong board. Among our partners are Tel Aviv University, Technion, TAU Ventures fund and others. You have to think about fundraising right on the next day after a startup closes a round. That is why the forcible board is important to any startup.

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— Who are the club members and how to join it?

— The first rule of the private club — you cannot get in! Joking. Now seriously, you can become a member but only through our local partners — people, who know the local market, understand the founders’ mentality and can form up a pipeline of startups upon our request. Now, we are creating a pool of such partners and defining cooperation business models. What is more, local partners can invest in startups.

Now, the club includes 47 investors from different countries. In the nearest future, some of them will be presented on the website.

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— What do companies of your portfolio do and how did you help them already?

— Global Commerсial Real Estate startup is tracking interesting investments in the real estate industry, it automatically executes Due Diligence and offers to book and invest in the object. Gabriel company works in the cybersecurity industry. Inteligenta is a startup from the industry that deals with medical cannabis. It creates an application that, using a finger scan, analyzes the patient’s body condition after smoking cannabis. A Bites startup offers a tool for inter-company communication between the employees of big enterprises (starting from 500 people). HYPR Brands analyzes user profiles in social networks. For example, if you have 10 thousand followers on Instagram, this service will tell you the information about each of them — age, activity, social status and etc. It is useful for big brands, that cooperate with bloggers and influencers. Such giants like Coca-cola and Revlon also use this service. Founders attracted about 10 million dollars, in the nearest time they are planning to attract 5 millions more. Last investment story is a Growor company. It produces specialized lamps for growing cannabis for medical issues. The startup received 3 thousand dollars from us.

As of help: we have an individual approach to every specific case. For example, if the goal of the Gabriel startup is large companies in the CIS and Australia markets, we will address our local partners in the respective countries, find the best consulting and HR companies, carry out scouting — we will help resolve all issues so that the startup quickly starts generating revenue. We really believe in this model of work.

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— What is your average paycheck for investments and how fast do you close the deals, taking into account the fact that investments are in a syndicate? How many investors does the startup have on average?

— I should repeat one more time — we are not a traditional venture fund. We are searching for new approaches to startups and investors’ funds.

When an interesting company appears, we analyze how we can help. If we see that we can help with business development, building a strong board or with exit, that we have profile investors for the project— we start the work. Our goal is to pick the “right” investors to the company, those who are interested in the startup’s success.

Talking about hard numbers: during the previous year and a half we invested in 6 startups. The paycheck varies from 300 thousand to 10 million dollars.

The number of participants in a group investment may vary depending on the startup. On average, from two to three investors. The fastest case of closing a transaction is 3–4 months. But the company was well prepared (including the documentation level — Due Diligence, Know Your Customers, etc.) and, most importantly, the chemistry between people has happened.

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— How active are you in the life of the company? What are the best and the worst Israeli practices?

— Often, founders are very creative people. If a founder experiences a down, you have to help him to get back to an up: through communication, motivational tours, etc. In general, it seems to me, that founders should not be actively “pushed”. They are hungry by default and starve for the fame and success for their brainchild.

We do not believe in the approach when the investor is too much involved. He has to be involved in taking strategic decisions, in order to avoid making holistic mistakes, nothing more. The founder has to realize his own ideas, as nobody knows the product better than him.

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— One of the favorite questions from investors is about an exit strategy and the number of x’s. How should founders answer it?

— Just tell the truth. Every founder has his own truth. Often, such questions are dumb and unnecessary. But every startup has to have a vision, a strategy. And nobody can guarantee that they are wrong. There are many examples when investors set aside and laughed founders in the face, but at the end startup was successful.

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— How to understand that it is time to sell the company? How people in Israel decide that, YEAH, let’s sell it!

— Quite often, a decision about fundraising or company sale is a result of integration between people, putting that in the context, a team. For example, if you see, that the investor is useful but there is a feeling that you can lose a company or a product (it will develop in a different scenario), listen to your heart. And talk to your team. The whole team creates a startup, not just a founder.

When I met Yurii Holovach, my COCOS partner, I can say that “I fell in love from the first sight”. He knows nothing in fashion but he invested in me and my vision. We have never had disagreements, we perfectly complement one another.

— How to learn to attract money? Sometimes, it seems that it is a natural talent, it either exists or does not exist.

— There is no one single road. From the one side, it is an art, from another — hard work. For example, every month I work with a teacher on my pitch of the COCOS platform. I believe that the pitch must change constantly.

The correct pitch — it is not about selling an idea, it is about explaining to the investor, why he needs this company. All startups tell about how cool they are and what they are selling. But at first, you have to explain, how the investor will increase his capital with the help of startup’s project. Then, he will understand that the founder is also a businessman, not just a creative person.In Israel, all startups are changing their investor communication strategy now. Investors look at 500–600 startups a year and invest in one or two. The amount of information that falls on one person is enormous! The founders should pay attention to this. Founders mainly think about how to raise money because they believe in their brainchild. And they completely forget about VC, which need to report to their VP, LP.

 

— What exactly are you talking about when you pitch your startup?

— At first, I talk about myself for1–2 minutes out three: about my 15 years of experience in business, money flows of my businesses, for what me and my team are ready and how we will increase the investor’s capital.

Only after this, we start a product pitch. At first, I tell about the situation on the market and the segment specificity — fashion, which is the second-largest in the world. Then I show the opportunities that our startup opens up. And only after that, I tell about what we are doing now, what we have achieved and, of course, about our team.

The idea of a startup can be truly ingenious but if the founder doesn’t know how to manage money, he will fail. But this is exactly what is important for the investor!

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— What to do, if a startup does not have revenue and is just at the beginning of the road? What to talk about?

— It depends on the business model and the overall startup strategy. If there are clients but there are no financial flows yet, this is one story. If there is revenue, the model of cooperation will be qualitatively different and, of course, more promising. Since there are real metrics by which it can be analyzed and evaluated. At the same time, there are always companies interested even in the startup at the level of an idea.

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— How to melt a heart of an Israeli investor?

— First of all, get prepared thoroughly. Ideally, if you find somebody from a fund and receive some pieces of advice from a manager or assistant. Israeli startup nation is both large and small: everybody knows each other, and if not, they know those, who can give information to to help you get prepared.

Secondly, be open-minded, even if you hear negative feedback. Do not push away, accept instead, this also appeals.

Thirdly, do not exaggerate and be yourself. The last important thing is the mentality of the Israelites. Israeli investors are smart people. They immediately see the falsity. If you do not know how to answer the question, do not come up with. Be honest, day that you do not know, but you will return with the answer.