The Israeli women VCs taking on blockchain

Mor Assia and Shelly Hod Moyal  photo: Ronen Fadida

Mor Assia and Shelly Hod Moyal say theirs is the venture capital fund of the future  - and a 300% return is hard to argue with.

"This technology is no less revolutionary than was the invention of electricity. Our generation grew up with the Internet revolution, but we can already see that the Internet industry is gradually switching to the next revolution: blockchain," says entrepreneur Mor Assia. Together with Shelly Hod Moyal, she founded the iAngels venture capital investment platform, and the two women launched a fund for investments in blockchain two months ago, after realizing that this was a technological revolution likely to change the financial world, and other things as well.

Blockchain is a system for processing digital currency deals, based on a distributed and encrypted database. What is new about this technology is that it facilitates payments without a central entity (such as a bank or credit card company) supervising the transfers and controlling the database. The system is based on a communications network in which each of the parties is both a customer and a server, and there are no intermediaries between them.

The technology, which is based on "blocks" of deals, is designed for use in a range of industries. Last year alone, blockchain startups raised over $2 billion worldwide. This mighty stream naturally also drew in Israeli investors who spotted the opportunity, with Assia and Moyal among the leaders. They are in fact local pioneers in this redhot sector, which is still relatively virgin ground for investors. The new fund that they founded has already invested $15 million in seven startups.

"We started investing in companies operating in the sector because we realized that there are many funds that are afraid of it because of its controversial reputation. Many companies could not even manage to open a bank account in order to pay salaries, because the banks put spokes in the wheels of entrepreneurs in this field. Entrepreneurs founded offshore companies in order to remain beyond the regulators' radar, and tried to build interesting technology with extremely limited resources."

"So far, the fund has a 300% return," says Moyal. "Such opportunities come along once in a lifetime. It's risky, volatile, and can go down. We have already experienced sharp dips. This is a crazy world. My husband (Cyhawk Ventures general partner Kfir Moyal, R.K.) sometimes tells me, 'I can't talk to you; stop talking about blockchain.' My whole day revolves around it; it's addictive."

"We invented a new animal"

Moyal, 34, has a strong financial background. Before founding iAngels, she worked as a financial consultant at the USB investment bank, then as an analyst for the Avenue Capital hedge fund in New York, and later as an investment banker at Goldman Sachs Israel. Assia, 36, served in the IDF's elite intelligence unit 8200 (Israel's NSA), and has a BSc in mathematics and computer science from the Technion Israel Institute of Technology and an MBA from Columbia University. Before founding iAngels, she worked at SAP, IBM, and Amdocs Ltd. (Nasdaq: DOX).

Moyal and Assia met by complete accident a decade ago in New York at a party held by mutual friends. They hit it off immediately, and have not parted since. They returned to Israel at around the same time, gave birth around the same time, and when they were on maternity leave, each of them did her own soul searching, and reassessed her career.

Thus was their venture capital investment platform born four years ago, based on a crowd financing model in which investors from all over the world can take part in a financial opportunity that would ordinarily be closed to them by investing $10,000. "We have raised $100 million at iAngels to date, and have invested in more than 100 startups. We invented a new animal. We're actually creating the venture capital fund of the future," Assia explains. "Entrepreneurs can operate with a single investment concern, instead of being split among various firms, while on the other hand benefiting from a connection to a network of investors from all over the world." iAngel's network of investors includes 1,000 people from 50 different countries.

"Globes": How long did it take you between spotting the potential and founding the blockchain fund?

Moyal: "We started investing in blockchain startups over two years ago, but it took time for things to get going. The feeling was that it was taking more time than people expected. About 10 months ago, I realized that something was going to happen. I felt a very significant change was about to occur with the potential to change the world. It was a moment of inspiration. I knew that this was it, that it was coming now. It was very exciting for me. I haven't experienced such a sense of conviction as I felt at that moment for a long time.

"It usually takes 12-18 months to found a fund by the time you do all the auditing, especially when you're dealing with a new asset. We did it in seven months, and we were among the first to establish such a fund, which shows something. This doesn't mean that we now understand exactly what's happening in this industry. Everyone is as a point at which they're preparing themselves for every possibility."

This is the place to mention the close connection between blockchain and the digital currency stirring up the market - bitcoin. This currency, which has been soaring in recent months, with the price reaching a record $20,000 for a single bitcoin during December, exposed blockchain technology to the world. Even Prime Minister Benjamin Netanyahu recently referred to bitcoin, saying, "Will the banks disappear in the future? The answer is yes. Will it happen tomorrow? Will it happen because of bitcoin? That is the question."

"I agree with a lot of what Netanyahu said. The banking world will undergo a transformation, and the role of the bank will change," Moyal says. "Bitcoin was created in response to the 2008 financial crisis as an expression of rebellion against the authorities printing money and diluting its value for us, the average citizens, in order to save huge irresponsible companies.

"If bitcoin becomes a substitute for gold, as many speculators are hypothesizing, the value of bitcoin currency could reach $300,000 much more quickly than people think.

"There is a libertarian and anti-establishment kernel in the community that uses the currency, similar to the free-of-charge software culture in the 1990s. This community has strong anti-commercial and anti-establishment values. Despite the dominant commercial aspect, there's something deeply ideological here."

Is blockchain an expression of a world in which consumers try to break free of the corporations' chains?

Assia: "The center of power is passing to the consumers, and they want to be the ones who decide. Consumers are demanding transparency, immediacy, added value, and autonomy in relation to their money. A consumer who has already been exposed to cryptographic (digital) currencies usually wants to increase exposure to these financial assets, and is not inclined to convert them back to ordinary currencies. A new market has been created here of consumers who do not consume services from the conventional banking system."

How will it change the financial world?

Moyal: "Blockchain infrastructure enables people to cooperate, conduct deals, and trade directly, almost free of charge, and without any prior knowledge. This infrastructure is already partially available to us through the banking systems, some of which will become superfluous when blockchain penetrates the market in depth. This doesn't mean that the banks will disappear, but it certainly means that their role, as we know it today, is going to change. Blockchain will do to the financial and regulatory system what the Internet did to the media and advertising companies."

Everyone wants bitcoin

Moyal has a simple clear answer to the question of why companies are issuing new digital currencies: "The capital market is broken. Companies don't want to offer shares on the stock exchange now; they prefer to remain private companies. The offering process is lengthy, expensive, bureaucratic, and involves a lot of exposure. Trading volumes on stock exchanges are falling, while a multi-billion dollar trade is now taking place in digital currencies. For example, if a company wants to raise capital from investors all over the world, each of whom will invest $50,000, it can't do it through an offering on the stock exchange. Blockchain is giving companies options for a global offering."

What is the average profile of a blockchain investor?

Assia: "Most of the money in the industry today comes from a few dozen billionaires who made a great deal of money from bitcoin, and are seeking to enrich their portfolio with other types of currencies. At the same time, new investors are entering the market every day."

Moyal: "It's terrible difficult to characterize the new investors, because they are people from all walks of life - even my babysitter asked me how to buy bitcoin - which adds another layer of risk. I get calls from a lot of people who want to take part in what's happening. Almost everyone I know bought bitcoins in the past month.

"This market has passed the $500 billion mark, and we're seeing a major rise in prices at a time when the technology is not yet being used in our daily lives. Its value has risen far more than the value it delivers right now, so you have to be cautious. Everyone has to sit and think about what is appropriate for him or her, because the market can go down the same way it's going up now. We have already invested in currencies that have fallen 80%, then went back up even more.

"On the other hand, there's something exciting about this, like the first Internet technology revolution. There are things here that have always have always attracted the most brilliant minds, talented entrepreneurs, and big investors. We're investing in infrastructure technologies that we believe can survive a crash."

Can we already speak of a bubble in the digital currencies market?

Assia: "Like the Internet revolution and the dot.com bubble that burst in the late 1990s, there are also signs of a bubble now in blockchain. There's hype, there's fear of missing the boat, and there's a gold rush. People hear success stories about those who invested in bitcoin six or seven years ago, when it was worth less than a dollar, and the currency has since increased its value thousands of times over, and they think that if they invest in a new digital currency, maybe it will succeed like bitcoin. Even when the bubble deflates, a lot of good successful companies stay successful, and there are important companies that will probably remain stable."

How is an investment in a blockchain company different from an investment in an Internet startup?

Moyal: "Here, you don't invest in a company; you invest in a network, and you buy a token, not a share. In a company, a shareholder has rights, such as voting rights and profit rights. You don't have those rights in blockchain; you're in the same boat as the entrepreneurs, the users, and the other investors. It's like investing in a cooperative economy, and this technology has enormous potential."

The level of information security of the blockchain platform also carries risks. For example, due to the anonymity of the platform, it is also useful for criminals, who use it as a convenient refuge for realizing dubious businesses. "There were recent cases of a digital currency offering in which money was stolen during the offering," Assia says. "It happened because a hacker planted a wrong digital address on the website of the company making the offering, and participants in the offering unknowingly transferred their participation money to that address. This is another good reason for investors who are not well acquainted with this market to avoid taking part in offerings that have not been checked out, and where steps have not been taken to prevent any possibility of such a situation occurring."

Is there way of making sure that the companies offering a digital currency fulfill their obligations to the buyers?

Assia: "You can ask exactly the same question about an investment in a startup that has only a prototype product, and wants to raise $1 million. How do we know that the entrepreneurs won’t take the money and go to the beach? That's why we conduct due diligence before any investment, assess the entrepreneurial team, and also test the sentiment in the blockchain community towards that startup. Where companies that already have a beta product are concerned, we meet with the teams and see how the product works and who's working there. If we believe in the product, we expect its value to rise after the ICO."

"I got my life back"

"When we founded the fund, we came into it with a lot of naivte," Moyal says. "We thought that we’d set up a website, do marketing on Facebook, and people would come and invest $1,000, but it doesn't work like that. Building a business is a challenge. You have to build networks of relationships and trust with people. We began everything from the cellar of my home. Every morning, we thought, 'What will we do today?', and set targets for ourselves."

You left a comfortable job with a safe income for your business.

Moyal: "Before I became self-employed, I worked around the clock. It was normal to go home at midnight. When I gave birth, I got my life back. I gained perspective; it opened me to the world. I realized that this was an opportunity to take my life to the next stage. I took time out to ask myself what I wanted to leave behind me as a legacy. These are acute points in life at which you can do soul searching."

Entrepreneurship is a gamble that takes courage. Weren't you afraid?

"At the beginning, we worked without any capital. We slowly began to build a product. It was difficult to raise the first investment capital. We did a pitch and went all around the industry. We met with Gigi Levy-Weiss. He didn't know us, and it took a long time for him to free up time for us. I remember that at the end of the meeting, after we spoke of the vision and the dream, he said, 'Good, I'll invest.' We were in shock. We asked how much, and he said, '$50,000.' We were so excited that someone believed in us and wanted to invest in us. We raised $300,000 more immediately afterwards, and got going. As we see it, above all we're entrepreneurs."

Are you entrepreneurs or investors?

"Both. When we're taking to entrepreneurs, we can connect with them on a different level, because we know what they're going through. They appreciate us being on the same level as they are, and see in us the hunger and the ability to take on board and understand situations."

Over the past four years, the two women have managed to expand their families as well as their business. Assia has four children (the youngest is five weeks old), and Moyal has three. "There's a division of labor between us in births," Assia laughs. "When one of us is on maternity leave, the other works like crazy."

"I met my spouse when we were 20. I saw a lot of women in New York who said, 'We're spending 10 years on a career now, and then we'll invest 10 years in a family." From my point of view, it can't work like that. That's even truer in high tech, where you can't even take six months off. So there's no choice; you have to do things simultaneously. There's private life and there's work, and we run 200 kilometers on two tracks simultaneously. We're deeply into this. We live, dream, and even think all day how to make the business grow.

"This juggling act of doing it all - both raising three or four children and putting all of ourselves into entrepreneurship - is non-stop insanity and adrenalin. In one week, I experience several super-amazing and super challenging things all at the same time, and it makes me mentally tough. We've learned to cope and acquire talents that help us deal with the life of an entrepreneur."

What, for example?

"Staying cool. If you were to take me back four years and tell me to deal with the situations I face today, I wouldn't be ready for it. We've learned to keep on top of the things that happen to us. Even if there's a very difficult day at work, we're able to put it aside and be with our families, and even to sleep at night."

The average exit

Assia's father, Amdocs cofounder Dr. Daniel Keret, and Moyal's husband, Kfir Moyal, cofounder of the Matomy media company, are on the board of directors. Assia's husband, Yoni Assia, son of Magic Software founder David Assia and cofounder of the eToro investment platform, is also closely accompanying iAngel's growth.

How is your activity today different from the way you started?

Assia: "Over the past year, we have become a leading investor in the early rounds of startups, and the volume of our activity has grown. While we formerly invested up to $500,000 in a company, today we are already investing $2-3 million. Since we started by working on a joint investment model, many entrepreneurs in the industry are still unaware that we can invest $2 million in a startup. The investments we led over the past year, however, have had an impact around us, and the industry is starting to realize that we can lead financing rounds."

Moyal: "95% of the companies that iAngels have invested in to date are still active. Five companies in which we invested have already had an exit, and 30 more have had a round-up - another financing round at a value higher than the one at which we invested. In addition to that, we have enabled our investors to sell their investments in four portfolio companies between the first and second financing rounds at returns of 2.5-5 times in a year. We have other companies in advanced stages of being sold."

Move, and quickly

iAngel's profit model is based on a 2% annual management fee for four years from the entire investment portfolio - a total of 8%. "In addition, we receive 20% of the profits from each investment, but that's only after an exit or IPO," Assia says. "When we make an investment in the early financing stages of a startup (seed or A round), our expectation is an investment horizon of at least five years. This is a long-term strategic investment."

How is the experience of working with Israeli entrepreneurs different in comparison with US entrepreneurs?

Assia: "Israeli entrepreneurs have flexibility in thinking and business. If an Israeli entrepreneur runs into a wall, he turns right and bypasses it. Our need for constant renewal and movement is inherent. Many investors prefer an entrepreneur who makes a decision and moves quickly, even if the decision isn't always right, to an entrepreneur who doesn't make decisions."

What have you learned in the past year that has changed how you do things?

Moyal: We learned a lot about management the hard way. We learned that when you provide employees with a pleasant and liberating environment and let them create, they are more effective, loyal, and happy than employees whom you constantly supervise, and whose mistakes you correct all the time."

Only three of your 20 employees are men. That is quite rare on the capital market scene.

Assia: Since we're more open to accepting women, more successful women tend to be attracted to us. The women working at iAngels are all 'sharks'. Everyone who comes to the company feels the energy of the office immediately. We're looking for superstars.

"We're the firm that has invested in the most women's startups to date. Still, women are a minority among entrepreneurs. Only 10% of the startups we have invested in have women among their founders."

Many in Israel have been bitten by the startup bug, and jump into the deep end.

"Israel has the most engineers and managers per capita. When you look at LinkedIn, everyone has startups. Women are less inclined to take risks, but I tell them to challenge themselves. I work many more hours today than I worked as an employee, but now I'm the one who sets the rules of the game and my priorities, and that puts a lot of power in my hands."

The full Hebrew version of this article appeared in "Lady Globes" magazine. 

Published by Globes [online], Israel Business News - www.globes-online.com - on January 18, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Mor Assia and Shelly Hod Moyal  photo: Ronen Fadida
Mor Assia and Shelly Hod Moyal photo: Ronen Fadida
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