EP 162 - Alex Oppenheimer: The Secret Investors Use Before Writing the First Check

Here’s the harsh truth: If your business model can’t survive a spreadsheet, it won’t survive the market.

Every year, ambitious founders pour months into product, pitch, and brand—yet the single biggest reason startups die isn’t funding, it’s flawed modeling.

What are the four variables investors use to spot winners before anyone else?

In this episode, investor and hands-on builder Alex Oppenheimer (Founder & GP at Verissimo Ventures, ex-Facebook IPO, ex-NEA, Monday.com advisor) reveals why most startup advice misses the point—and how the best founders reverse-engineer success long before a single euro is raised.

🎧 Watch now to learn:
1️⃣ The business model simulation Alex uses to kill (or greenlight) a deal in under an hour
2️⃣ The one thing top VCs always ask founders—but almost nobody prepares for
3️⃣ Why a founder’s “calling” is more important than their credentials
4️⃣ How to avoid the European trap of ignoring leverage and failing to scale
5️⃣ The subtle mindset shift that separates bold investors from the herd—and how to apply it to your own company

👤 About Alex Oppenheimer
Stanford-trained engineer, ex-Morgan Stanley tech banker, NEA Series A investor, Monday.com operator, and now founder of Verissimo Ventures—a fund that bets on weird tech and next-gen software models in Israel, the US, and Europe.

💬 Quotes That Might Change How You Think:
(00:59:00) “If I don't build this, nobody else will—that’s the founder’s true calling.”
(01:12:45) “How can you know what data to collect if you don’t know the model?”
(01:22:36) “The real job of an investor is helping great founders not mess it up.”

🧭 Timestamps to Explore:
(00:04:00) Quitting Corporate Venture—The Decision That Changed Everything
(00:11:50) What Business Modeling Is (and Isn’t)
(00:18:30) Trusting the Founder Over the Deck
(00:24:40) Venture Capital and the Power of Naivete
(00:34:03) Inside the Facebook IPO Data Room
(00:44:38) Lessons from Betting on Outliers
(00:49:48) Leaving NEA to Build Israel’s Next Scaleups
(01:02:32) From Frustration to Founding a Venture Fund
(01:10:57) Why Business Modeling Remains a Blind Spot
(01:14:09) Redefining Value Investing in Venture Capital
(01:15:50) Decoding Value with Core Variables
(01:22:36) Helping Founders Avoid Unnecessary Pitfalls Early 

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Subscribe now—your next breakthrough could be one episode away.

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Transcript

Christian Soschner 0:00

What if the greatest mistakes investors make is believing they already know how the game works? In this episode we go deep into the art of valuations, the myth of certainty, and why most venture success comes down to not messing it up. You will hear why elite funds often misread value and why real edge comes from asking better questions, not collecting more data.

SPEAKER_00 0:30

But I think the biggest shift was actually when I quit the corporate venture job with no plan. Um that was the biggest and hardest shift for me for sure.

Christian Soschner 0:40

Alex Oppenheimer, Stanford engineer, turned Morgan Stanley tech banker, new enterprise associates investor. That's the world's largest venture fund, and now general partner at Verissimo Ventures in Israel. He shares the frameworks and failures that shaped his founder first, weird tech-driven strategy. He reveals how Israel's scrappy innovation culture and Silicon Valley scaling DNA meet in his playbook, and why business modeling is the blind spot killing most startups.

SPEAKER_00 1:19

Business modeling is about figuring out who are the stakeholders, how is value delivered, and how is kind of you look at the best investors in history, these are the things that they're able to isolate.

Christian Soschner 1:32

Trust me, you will leave this conversation with one key upgrade. How to spot mispriced opportunities early and help bold founders avoid the mistakes that kill nine out of ten companies. So if you're an investor, operator, or policymaker who cares about building enduring value, this episode is your edge. But before we dive in, if you want more world-class minds on this show, there is one thing that really helps. Every share, every follow, every message you pass along, that's what fuels these conversations. If something in this episode resonates, send it to one person you admire. That's how we keep raising the bar with this show.

SPEAKER_00 2:24

Now let's get to it. Today I, you know, just walking my almost five-year-old son to school uh always makes me smile. So, you know, his uh his school is about two-thirds of the way between where I live and where my office is, and it's in the middle of Jerusalem. And if I just take the second to realize that I get to do that, um makes me smile.

Christian Soschner 2:48

How is your how is your son? How what what is he doing? Sorry? Uh what is your son doing to uh today? Still in school? Yeah. How how long uh is the school in Israel?

SPEAKER_00 3:01

Well, so he's still technically in preschool because he's still four, but uh they go until four o'clock.

Christian Soschner 3:08

Four o'clock, so okay.

SPEAKER_00 3:10

As he gets older, it gets a lot, it gets a lot later.

Christian Soschner 3:12

Yeah, I believe that. I believe that. Uh Alex, let's switch from uh family to professional life. Uh looking back on your career, what's the weirdest career twist that's changed everything for you?

SPEAKER_00 3:27

For sure. So I'll start with the the uh the not so weird career shifts that people might have thought were weird. For example, studying mechanical engineering and then going into investment banking. I actually think that's fairly common. But uh after um going into investment banking and then going into venture out of banking instead of going into private equity, um I then moved to Israel. And that was one big shift and joined a corporate venture here. But I think the biggest shift was actually when I quit the corporate venture job with no plan. Um, that was the biggest and hardest shift for me for sure, was just letting go of this hamster wheel rat race of, you know, move through the ranks, uh, always have a job, and giving myself the space and time to really figure out who I am and what I am and and how I can apply that to the world in the in the most enjoyable and highly levered way.

Christian Soschner 4:25

That's an interesting twist in the career. What motivated you to go into investment banking?

SPEAKER_00 4:32

Um, I knew what investment bankers were when I was like 12, and I was always enamored by it in part because I heard from my dad um like how smart these guys were and how hard they worked and and how impressive what they were doing was in the context of the the deals that he was working on from the operating side. And so I I kind of knew what that was, and I you know, I wasn't always like completely focused on that, but I definitely meandered uh towards it. And um actually, interestingly enough, people asked me what was what were the most important classes I took at uh Stanford uh that prepared me for investment banking. And I explained that it was two classes. One was a graduate level business course on valuation theory and corporate governance, which provided the underpinnings of, you know, rather than just here's the equations and and uh you know, plug the numbers in, but you know, what's the theory behind it? Uh that was really, really helpful because it allowed me to contextualize the kind of sometimes menial work that you do in investment banking. And then the second was actually a class called um advanced thermal systems, where you basically do rocket science. And it's the last class in the thermodynamics track of mechanical engineering. It has like 12 prerequisites. And funny enough, basically we ran an experiment and we took a bunch of measurements and we built models in MATLAB, not in Excel, and we wrote a report on it, and it almost always involved pulling one or two all-nighters to get it all done and make it work. And that working style is actually very, very similar to investment banking, uh, where you, you know, you meet with a company, you get all their financials, you plug it into a model, and then you you know run all the analysis you want to run, and then pop it out in a PowerPoint presentation and pull all nighters along the way. So that one's on the practical side, and you know, the former's on the more theoretical side.

Christian Soschner 6:24

Yeah, they're good all nighters. I remember that also from merchant acquisition. Um, you studied at Stanford and got your degrees there, and you also experienced the ecosystems uh in Europe, in Israel, and probably also in the rest of the world. Um but I would like uh to explore with you a little bit why does Stanford stand out globally as the university producing the most entrepreneurs, the most unicorns, and basically is the most important building block of the Silicon Valley ecosystem today. What why does Stanford stand out in your opinion?

SPEAKER_00 7:02

Yeah, so it's really uh representative of the entire Silicon Valley. I think Stanford and just also to a large extent, UC Berkeley represent Silicon Valley in part on the technology side, but even more so on the cultural side. And I think that if you look at every ecosystem around the world, their technology industries were bred out of whatever other industries were happening locally. So in Silicon Valley, those industries were technology. It was, it's called Silicon Valley, right? It was developing chips, it was building the first computers. And so that cycles on itself much faster than I'll take, uh, I don't know, Chicago, for example, or Houston, where in Chicago, you know, have you have industrial companies, you have airlines, you have food manufacturers. And so the technology is all kind of bred out of a desire to innovate in that industry. Whereas in Silicon Valley, it is the desire to innovate in the innovation industry. And so you kind of have everything to the second power. So things move much faster, and that becomes, you know, culturally a big part of what it is. And so I think, you know, I graduated in 2011, and I think there's a lot of amazing companies that got started while I was there and before and after. I think though that one of the biggest things that's happened in venture is it's kind of like cycled on itself. Once people started making like, you know, private equity hedge fund levels of money in the venture world, like a lot of dollars and people rushed in. And when anytime you have a lot of money and smart people chasing after, you know, applying all their ambition to a certain industry, but you lack hard data, it creates a lot of space for cults of personality and storytelling and and signal reading and that sort of stuff. And so when I was at Stanford, everyone kind of knew, like, yeah, we're in it, but we didn't really like feel it and we didn't make that much of it. We probably I definitely should have made more of it. Um, but now I feel like to a large extent it's kind of cycled on itself, where you know, that this idea that when where there's smoke, there's fire. So people just like blow a lot of hot smoke. It's like, well, if you're a 21-year-old whatever from Stanford, that means that whatever you're working on is interesting and should be funded and is going to matter. And that's not true. Um, um, and so I think, but a lot of people say, you know, there is this weird nuanced thing in venture where it's like, I can't tell you why it's not gonna work, but I know it's not gonna work. And the inverse is obviously also true. Um, and I so I think now it's like, and the the term for that is just hype, right? A lot of it is is is hype. So um Stanford, I think, and and Silicon Valley continues to be the epicenter just because the quality of experience, the scale people are connected to is like nothing else you find in the world. I think that over the last 30 years, some of the biggest wins in the industry from a consistency standpoint have been in enterprise software, both at the application layer and at the infrastructure layer. And if you look at the companies building those tools internally, they're all there, right? The only, you know, the only ones that are not headquartered there are Microsoft and Amazon, but they have massive presences in Silicon Valley, in addition to Google, Facebook, and and everyone else. And so in those markets and in those positions, the experience that people can get is just like nothing else you can get anywhere in the world. And they really are at the leading edge. And what that means is that people who are not at the leading edge, who are later adopters, who are at smaller scale, are going to be using what these people are inventing right now inside those very unique seats inside those companies. And that kind of just trickles out to the rest of the industry as well.

Christian Soschner 12:34

A lot of great stuff. Do you think the Silicon Valley model is sustainable, or do you believe it's rather a barber that in one point in time will pop and um the other ecosystems can catch up because uh Silicon Valley leaves the space open for them?

SPEAKER_00 12:49

I I think uh I don't think that anyone is gonna catch up to Silicon Valley. I think that the the only thing that could have made that happen is already happened and it and it and it didn't result in that. Meaning we had two major things go on, not disconnected from each other. One was corona and a push towards everything being remote, and all of a sudden it doesn't matter where you are. Well, the smartest and best people are still in San Francisco and and Palo Alto and the areas around that. Um, and the second was just the I don't know, we call it the fall of San Francisco. You know, it used to be that Palo Alto Mountain View was the epicenter, and then kind of everything moved to San Francisco, epitomized by like Salesforce Tower, you know, becoming the tallest building in the city, and then San Francisco became a dump. I mean, not the whole city, but chunks of it, namely where a lot of people work. And that also didn't that didn't kill any of it either. And so if it can survive that, I think it it just keeps going. I was just on the phone with one of my founders right before this, who lives in the woods. Um, but he said he was just in San Francisco for four days, and he was like, Yeah, it's clear to me that if I want to do something important and big, I have to be here working with these people and this quality um and making that happen. So I think Silicon Valley is still the place to be. I'm very grateful that I'm so deeply connected to that ecosystem still, having grown up there in college and worked there. Um, but it it is still the epicenter. Now there's there's more parity globally than there used to be. But with that parity, like Silicon Valley was a 10 before and the next highest was one. Silicon Valley now, I think, is a a hundred, and the next highest is maybe twenty-five or something, you know. Those are very abstract numbers that I'm applying to things, but if that if that makes sense.

Christian Soschner 14:46

Yeah, absolutely. So the call to action is still if a founder wants to build something big and meaningful, uh, the best way to do it is in Silicon Valley. And this is still valid today and probably in the next five to ten years.

SPEAKER_00 14:58

Um, yeah, I think that it's hard to argue with that objectively. I think in certain industries and for certain people, it's not the case, just to be clear. Like again, I'm sitting in Israel investing in a lot of Israeli companies, I've invested in many European companies, um, invest in companies in New York, all over. But I think that again, on the average and for like a kind of unnamed person without a story, uh, then yeah, that probably is the case. But if again, if you want to build stuff for oil and gas, like you should probably be in Houston. Uh, you know, if you want to build things for agriculture, and I think that we've also seen this too, where like people building for verticals, verticals an area that I'm very focused on now, but people building for verticals need to be close to those verticals. Trying to sit in a vacuum and say we're gonna understand this whole industry from our you know, loft studio, you know, half-half thing in Soma, uh still pretty tough. But if you're gonna build core infrastructure, AI infrastructure, like that sort of stuff, like I think there's no question, it doesn't matter where you're from or or who you are.

Christian Soschner 16:04

Yeah, this is uh partly the answer to my next question, which is a little bit off script. Um you are now in Israel running a fund and investing also outside Silicon Valley. With your background in Silicon Valley, what makes you chase targets uh that are not located in Silicon Valley? What's the reason you decided to do that?

SPEAKER_00 16:24

So the truth is that the I'll give you a little bit of a sideways answer, which is that I don't really chase targets. A lot of the companies that I invest in are either founders that I've actually known for many years already, or the kind of N plus one network. So I'm happy to do things in Silicon Valley. Um, I'm also I'm happy to do things wherever. I just invested in a company, and the founder is sitting in Annecy, France. And how did I get to him? Well, I got to him through one of my best friends from Stanford who worked with him at one of the top companies in Silicon Valley. So I don't necessarily go hunting, I don't go fishing. Um, you do have to show up. That is part of the job. You've got to foster and cultivate relationships. But I'm lucky that I've been doing that, you know, since high school. So I have a bit of a luxury that I can, even if it's not right there, you know, on university AV, like I still am connected to those things. Again, I'm not, I'm not there all the time. Um, but I also think there's something maybe a little bit refreshing about that for my own sake and the interactions that I have with people, where I'm not, I don't live in the same world. And so I'm not talking about all the same things with the same people all the time. And by the way, I even get that um in Tel Aviv, right? I live in Jerusalem. I go to Tel Aviv once or twice a week for the day. Tel Aviv is a very concentrated ecosystem. Stepping outside of that occasionally, I think, provides a broader perspective, whereas otherwise it's very easy to get wrapped up in, you know, whatever everyone is talking about right now. And so that's something I try to do, especially as an early stage investor, getting more creative, getting weirder. Um, I, you know, I just saw this today because I've I've been talking about this, and uh Gil Dibner just sent out his newsletter today about they're stopped using deep tech. Now they're using weird tech because became like too played out. Um and and I agree with that wholeheartedly. Like I think that's a great um take on it. And you know, you if you if you're an early stage investor, you gotta do weird stuff. And then when that weird stuff becomes mainstream, A, it's too late to be investing in it as an true early stage investor, and B, if you did invest in it, then it's usually a very good thing because that means you were you were early, you were first, and that's the job.

Christian Soschner 18:42

How much weirdness in founder and technology do you accept? Uh, very steady red line for you.

SPEAKER_00 18:50

It's very subjective. Um, right? It's it's like, what's the kind of weird that just kind of gets me going? I I did a deal not that long ago uh in the protein space. If you had asked me a year ago, would you ever invest in like protein synthesis? I'd be like, no, why would I do that? And then I met a founder through one of my other founders, and I really liked him. And and I told him, I said, there's a big gap here because I don't think I have necessarily the right to do this deal because I just don't know this this market. And then it happens to be that I have a friend locally who's a major player in that market and could validate what they're doing. And sure enough, it came together. And there's you know, a few other kind of players in the space that also validate it as well. And so it's like, okay, let's go. Um, so that was that was a little bit of a a weird one. Um, a lot of what I've done is down the middle, you know, software as well. I, you know, but uh it's really it's really hard. Like I again, I'm not starting companies. I think that's the other thing is if early stage investors speak out and say, hey, I really think that someone needs to build in this space, it's like, okay, well, maybe then you should do it or you should go find the team. Um, I am reacting mostly. That's you know, I don't know what's going to get me most excited until I see it. Um, I do have one rule though, which I learned the hard way, which is if I see something and I don't I just don't get it, unless I hate it, which rarely happens, I'll just ask the person who wants to connect me to the founder. I say, is this an amazing founder? And if the answer is yes, then regardless of what I think about what they're doing, if I just think it's like a little bit interesting, maybe weird, then I'm like, great, yeah, I'll meet them. Um and I know that you know, we'll talk about this more later, but the pitches are not baked, and that's fine. Um, and so you gotta just gotta meet the person. I think reviewing decks, you just lose so much. Um, and I don't want founders to be like excellent at putting together the pitch, like I you know, that's so that's an interesting perspective that you brought in.

Christian Soschner 20:58

You said uh 12 months ago when someone had asked you um, do you invest in the protein space? Your answer was no. And then within one year, uh, if I understood you right, you changed your mindset completely. And not in one year, in one meeting. In one meeting, in one meeting. Oh, I thought it was one, yeah. But it's one meeting, but it's but it's even better. And uh connecting to what you said before that um if the opportunity is so obvious that everybody invests in it, it's probably too late for an early stage investor, uh, because the opportunity is gone and the evaluation is chiroted rocketing already. But what I would like to understand better is your um decision-making process. What must happen that you change your mindset and your decision from no-go? I never will ever invest in that space because I don't understand it to yes, let's do it. What happens in you?

SPEAKER_00 21:48

So I the only spaces that I won't invest in are things either that I do understand and I don't like, um things that I think are bad for the world, frankly, um, which I don't want to spend too much time think talking about. But you know, there are things that I just I ask myself, if this company is successful, is the world a better place or a worse place? And so if it's a worse place, then I just that I just won't get involved in. If there are things that I don't I'm not an expert in, but I also don't think that there's lots of other people who are experts in it and it's a new weird thing, then I'm like, great, let's dive in and let's just see if we can get the right people who we and how can we, you know, kind of use what we have at our, you know, what resources we're connected to to validate if those are the right people or not. There's another category, which is things that we're not an expert in, but other people are an expert in. So, like, kind of the the main thing there, especially sitting in Israel, is cybersecurity. Like, I am not a cybersecurity expert. Cybersecurity investing is a full-time job. It's very different business, but sort of like crypto. Like if you're not in it 24-7 and you haven't been in it for years, like the chance that you kind of like pop in and get something right is is very low. Not because you might not get lucky, but because someone else will is more likely to get lucky, right? Like it things are just more likely to show up to them that matter versus I'm just like, you know, I'm just some guy like you have to always humble yourself and say, like, why would this come to me? Now, again, if it's if it's an area that like nobody's an expert in, then yeah, it's just as likely to come to me as it is to come to anyone else. And in fact, based on the relationship with the founder, then it might be more likely to come to me. But if someone's already the person who's an expert in this and they're not doing it, you kind of gotta like look in the mirror and be Like maybe there's a reason for that. Maybe not. Right. Maybe the you know, I think that one of the biggest mistakes that that VCs make in their careers, and I've been in venture now since 2013. So I've experienced this, I've also seen it, and people will invest in an area that is what I call part of like a mega market. So the mega markets would be things like food and agriculture, transportation, energy, real estate, like you know, financial infrastructure, like these things that are massive global problems. And people will invest in some part of that. Let's say 10 years ago, they lose all their money, nobody wins, there's a bunch of failures, and then they're like, I was burned, I'm not touching it again. And I think that's a huge mistake because things change. Underlying technologies change, market opportunities change, regulation changes, and and the whole thing can be, you know, can work itself out. You just have to, you know, move very, very cautiously and but make sure that that scar tissue doesn't impede you from leveraging the often painful experiences of losing 10 years ago to see if they're okay, now maybe there is something that's fundamentally different here. So I, you know, one example for me is like I did an ed tech deal a year ago, and ed tech has been tough. There have been successes, but it's it's been really, really tough. Now, I think it's kind of fairly obvious that when you're generating educational content, generative AI changes the whole game in a like it that's one of the most obvious ones, right? Like it's it's like, okay, yeah, we have this underlying technology shift, and yeah, it is a different ballgame than it was 10 years ago or even five years ago. And so now, can you create a really massive thing here? Like, yeah, I think there's a decent chance, you know, much more than there was five years ago. Um, and probably more than people thought there was 10 years ago.

Christian Soschner 25:37

It's an interesting perspective. Um, how do you really fight this group thing? Um, I mean, you resemble perfectly what Alex Dang describes in in the venture mindset that venture capitalists usually invest in areas that not be not many people look at. You mentioned before this car t issue. I mean, it's always a human uh problem that when you have one bad experience, you get a slight nudge to a to creating a pattern, but then you have the next one, the next one, the next one, the next one, and you have five bad experiences in one area. And as you said, it could be just the the wrong timing of the entire sector, and five years later it looks completely different. What do you do to to fight off these patterns that uh just humanly builds up in a person?

SPEAKER_00 26:18

So I think that being a venture investor requires an intelligent, healthy naivete. I that's kind of the short of it. And I think that this is also the reason why I think most investors, you know, you they look at a company where it's two founders and a PowerPoint doing something they think they're really excited about, priced at, let's say, a$20 million cap or something. And then there's another company that's been slogging it out for three years. They had a pivot, they went up and down, but now they're like, we feel like this is working. They have$2 million of revenue and they're also raising a 20 million. Look at the number of meetings that those founders are each able to get with early stage investors. People will take the clean slate because it's just easier to see a bright future versus having to dig in and figure out what really works. And so anytime you have experience in an industry where you've seen the pain points, you've seen the customer behavior, that's usually the the toughest one. It's like the customer behavior. Certain areas also I think that people are guilty of. If you're an expert in an area and you're like a like a leader in that space and you really know it, there's a couple of mistakes that investors can make. One is they meet a founder, founder listens to everything they say, and it's like, well, wait a second, I know this market way better than the founder. And that's not a definite reason to nix an investment, but you have to make sure that you didn't just feel really good after a meeting because they validated everything you said and they're like, wow, you can help us so much. And it's like, well, should I need to help you that much? Now the answer is the answer may be yes. You may just have an incredible operational founder that can execute on really any idea and vision. I wrote about this in my Substack like uh probably a year and a half ago. Um, but there's a healthy amount of expertise that you want people to bring. And then going back to the investor perspective, and you say, ah, well, there's gonna be a pitfall here, there's gonna be a challenge there, this is gonna be really difficult. So then the conversation changes and it's you push the founders on, like, this is probably what's gonna happen. How are you gonna react to that? How are you gonna feel about that? What makes you think that the buyer persona has changed? What makes you think you can engage with this product, despite the fact that people always have, should want, you know, should have wanted to engage with this product, but then they just haven't because, you know, sadly, again, this is the more cynical side, but I always say there's one thing that you can rely on in users is that they're not going to do what they're supposed to do. And so you I always say you have to trick people into doing the right thing. So there's all these different levels. And one of the things that I try to do with my team is really like talk through a lot of this stuff. Because once you're kind of the way I say it is once you're in the ring with a founder, kind of like the gloves come off, all the frameworks, everything goes out the window. You just hope that your instincts and your frameworks are good enough that you can make the right decision in that moment. Because a lot of what it relies on is excitement, right? The the best, it's the nature of the business, the best early stage investors are not young. Now, wait, what do you mean? Like it's a they say it's a young, a young person's game. Like, but if you look at the people who've been recognized as the best early stage investors, which creates positively biased deal flow, positively biased follow-ons for their portfolio, they're all people in their 50s right now, maybe 40s, right? And part of the reason is that it just takes a long time, like it to know if they're really good or not. Like you just have to see these companies play out over 10 plus years sometimes to know if they're really good. But the other answer is that it's it's an instincts game. Like, I don't think it's an access game, I think it's an instincts game. And you you can earn the right to talk to the right people if you've demonstrated the right instincts, but instincts are built over a long period of time.

Christian Soschner 30:18

Yeah, that's true. That's true. Um, you grew up in the Bay Area, close to San Francisco, in San Francisco in Silicon Valley. Um, and you describe perfectly the venture mindset that you apply in your fund. How much did growing up in the Bay Area contribute to how you view the world?

SPEAKER_00 30:40

A lot. Um, the short answer is a lot. Something really interesting, though. I'll kind of start with the end of the story, which is that I don't feel like I really understood what was going on and why it mattered and how to look at it in the right way until after I had moved to Israel, which was in 2016. And even though I was right around all that stuff, like I one kind of example I give is like everybody I knew was in tech. My my dad is a now retired technology CFO. The people I knew were either investing in tech, like people I knew from high school, their parents, everyone, you know, like they were investing in tech, they were lawyers for tech, they were running tech companies, they were high-level operators. Like, that's what everyone did. I didn't know people like in real estate. Like that wasn't something in my world. And so it always was tech. I remember when I was interviewing for investment banking jobs, they were like, why do you want to work in tech banking as opposed to you know, industrials or oil and gas or you know, real estate or whatever? And I was like, I'm not doing this if it's not for tech. And that's also one of the main reasons that I studied engineering, is like you always have the finance of something, and understand understanding that underlying something improves your ability to finance it by like an order of magnitude. You know, yes, there are some great healthcare bankers that they're, you know, they don't have obviously medical degrees, but over time they gain like a real understanding of that industry, of the science, of what makes it work. And the same applies to technology. So I grew up in and around it. Um, and then I stayed in it, you know, through college and for two years in investment banking, but I didn't really understand what it meant on a global level. And maybe that's because, like, yeah, Google was huge, but you know, I worked on the Facebook IPO when I was at Morgan Stanley. Like it wasn't huge yet when I was when I was growing up. These were kind of niche things. As I say, uh when I was growing up, technology was a sector, and now it's a layer of the whole economy, similar to like finance. So I do, I honestly didn't have that much of a perspective, but one thing I've spent a tremendous amount of time doing is looking back and revisualizing those conversations, those scenarios, those people, all of those things that went on, and re-kind of contextualizing it with a much more entrepreneurial, like wider global mindset and being able to take those experiences firsthand and kind of apply them. You know, one example is the year after I graduated from college, I moved into an apartment with Pal in Palo Alto with a roommate. Roommate was someone I had lived in the same dorm as freshman year and and uh junior year as well. And he was working at Palantir. And at the time, Palantir had like maybe a couple hundred employees. He and his team were like the elite there. I didn't see him at one point for like four months because I was in the office 20 hours a day and he was on the road like all the time. So I literally went like months without seeing him at a certain point. He and his team all decided to quit and start a company. Now, like now that's obvious. And there were people then who who also thought it was obvious, like Peter Thiel and Mark Andreas. And like, that's who invested in him and and his team. I didn't really put that together at the time that, like, wow, you've got all these elite people leaving this elite company. And now it's now it's like, oh, yeah, you just throw money at them. And like, well, maybe, right? Are they really entrepreneurial? Do they really have a great idea? The original idea that they had was nothing like what the company ended up becoming. Um, only one founder of that group remains at the company. Everyone else started other companies or became investors, or you know, they've all been massively successful, but I was right in front of them. Like they were, they they they quit Palantir and started the company in our living room uh in Palo Alto. And so I was, you know, right there, but I didn't quite understand the gravity because I think part of it is you just don't when you're like when you're just in it, you kind of don't appreciate that level. Um, if I'm being honest, you know, like I could say, yeah, I knew they were amazing. Well, you know what? I didn't I didn't have the wherewithal to say, well, can I just give you some money? Yeah, like you gotta let me invest. I didn't, you know, I should have. Which company is it? Um the company that they started is called Blend Labs.

Christian Soschner 35:17

What is it? What is the company doing?

SPEAKER_00 35:19

It's uh in the mortgage space, it's a public company now.

Christian Soschner 35:22

Yeah, yeah, that's cool. That's good. I have to look it up. You mentioned also before that you were part of the Facebook IPO, and back then when Facebook did the IPO, it was just tech was just a sector and not uh um a crucial part for the entire global economy. Um, how was it working at the Facebook APO at this time?

SPEAKER_00 35:41

So when I started investment banking in kind of Q3 2011, um, I got put on like a semiconductor account right when I started. And the associate happened to also be the associate covering Facebook, and then the staffer was like, hey, they need another analyst on Facebook. And I was like, you know, that's that's what I came here for. Like, I'm gonna slave away, but you you slave away on stuff that matters, and that makes it a little bit easier to do that work. A lot of the work that we did was super menial, manual, rigorous, painful stuff, which now we would just use AI. But back then we didn't, you know, we had like an outsourced team in like Chennai, India, but it was like you're not allowed to use them for, you know. At one point, I sat at my desk for like 40 hours straight, and I read every 10K, 10Q earnings presentation, earnings transcript for like 16 different companies just to identify every non-gap metric that they were disclosing so we could figure out and benchmark what we should be talking about in the Facebook S1. That's a ridiculously painful exercise, which now like nobody would even think about doing that manually. So, but at the same time, I also helped run the model, which was like how we valued Facebook. Now, in investment banking, a lot of valuation is like you stick a number and then you do the work to justify that number. So when you know, when Facebook went public, that that number was a hundred billion dollar market cap, and Facebook happened to have exactly one billion dollars of LTM net income, but that's not how you value a high growth internet company. And the way that we valued it, and I give it a lot of credit to the the you know, the head of the group, Michael Grimes, who's just got a brain for this stuff of thinking creatively how to value companies. And I still rely on this heavily. And the way we valued it was the only comp was Google, and we split Google into three different kind of eras of how Google was valued and ran a correlation between 1.5 and 2.5 year forward growth and the associated PE multiples. And that's like who thinks of that? That's not that's not something they teach you in business school. That's not in a textbook anywhere. And so I did get to be a part of some of those more creative, thoughtful things that we did, a lot of the analyses, um, but a lot of also like very, very menial work. And then, you know, part of something that's big and that that matters and understanding the mechanics of that stuff is that's what that's what you know, that's what venture is all about.

Christian Soschner 38:28

What was the initial valuation of Facebook uh back then? That um the IPO valuation? 100 billion dollars. 100 billion dollars. Um, I mean, it's basically what people want to see also in the venture about 100 billion. I think Facebook is now around 1.5 trillion or something, uh, if I remember it right. Uh it's uh a little bit more, uh, it fluctuates constantly. But let's say 2 trillion for the exercise, it's a 20x, it's a 20x, isn't it? Uh basically on a hundred billion valuation when you went in on the IPO. Uh, I mean, the ideal model would be you go in at 1 billion or below, and uh then you find out 20 years later or 10 years later that you end up at two to three billion or four or four trillion, not two billion trillion. Uh it's ideal, it's the ideal world. But back then, when you were working on the Facebook IPO, uh, was it that obvious for you that this will be a company uh 10, 15, 20 years down the road that cracks the trillion dollar mark, the two trillion dollar mark, and keeps soaring?

SPEAKER_00 39:26

Well, back then there was no such thing as a trillion dollar company. Um, you know, everything was billion, right? Like the only other deals that were even close to this big were like GM and Visa, and they were like way smaller. And even Google, when it went public, was you know, that was seven years prior, but it was also way smaller. And so obviously, you know, Microsoft and things like that were were much bigger, but you know, for it to for it to do another 10x, I think it's hard for people to like I definitely didn't think that. I'm sure there's people who who did. The other thing so much has changed in the background of of the environment that Facebook was operating in. And so I'll give kind of a few examples. One is that while we were executing on the IPO, Facebook bought Instagram for a billion dollars, which I think is one of the two greatest acquisitions in history, the other one being YouTube and by by Google. And it wasn't even material because Instagram had no revenue and it was only a billion dollars, and Facebook had so much money and so much revenue and net income, like it wasn't even deemed material to the to the IPO. Um and so, and so that was a game changer. Um, and then the the other one was a couple years later was WhatsApp, you know, for 22 billion. And a big part of that was that I don't know if people remember it at the time, but people were really Facebook had not figured out mobile. No one had figured out mobile. Mobile was a big question. I mean, we were still on like iPhone 3G, maybe iPhone 4 at the time, and no one had figured out mobile. Mobile apps were not good, mobile web was unbearable, and there was no 4G. I don't even I think I have to look at the exact dates, but can they figure out mobile engagement? Can that be a thing? And and so much has changed on that front. Obviously, they made two incredible massive acquisitions that have driven things forward, but yeah, did we think there was another 10 to 20x in it? I don't know. I mean, these things are all the whole idea is that they're valued on a on a forward basis. So, how much more forward can it go? You know, there was already billion people using uh, you know, it's my you know, I always joke around that like my charts are world famous because the actual charts in the S1 were charts that I made in PowerPoint um you know in Excel, like in PowerPoint, like aligning the number, but you know, one pixel at a time. So um, yeah, I don't think anyone really thought that. Interestingly enough, I worked on another IPO in 2012 in the fall, and Facebook was priced in May. And then in the fall, I worked on another one called Amborella, which was the smallest IPO that Morgan Stanley did that year. Semiconductors, genius chip design that power GoPros and other like uh sports cameras, really enable them by being low power, super well-designed processing capabilities, HD, that whole thing. Like there's no GoPro without these chips. I think the deal priced at like a 240 million dollar market cap, which is now like that's like a series B now, right? Um and then it it went up 10x within a year, within one year, it traded up 10x. So, you know, they've definitely had some ups and downs with like the ins and outs of GoPro and everything. I haven't tracked the company, you know, over the last 13 years, but um it was that one did go 10x 10x in a year. So could that one I I saw that happening with, right? I saw like the whole you know, small form factor video becoming really, really big. Obviously, I couldn't invest in any of these things because I was an insider, but um, that one was actually easier to see than you know, Facebook going from 100 billion to a trillion. It's it's very easy to say, like, yeah, this could be a 100 billion dollar company, this could be a trillion dollar company. I don't find that it's like so relevant often. I think it's more like, okay, can this can this do like can it become like a reasonable thing? And then okay, now let's have this upside, like that it can be a massive thing. And like, okay, let's have that be our upside case, not our like double case. Like when I was at NEA, we had like, you know, we had uh like a a write-off, then we had like single, double, triple home run, and those were like cases in our exit analyses, and like you want to have like that grand slam case where it's like, well, if if these three things happen and they navigated properly, then we're looking at like a hundred billion dollar situation, and then we all become like massively wealthy versus I think what's gone on a lot more recently is if this doesn't become a hundred billion dollar company, then it's not so good. Maybe it's good, but it's not great. I'm like, that's tough. You know, this company Cursor is the fastest growing company like ever. Um, and I think that people are using the same rubrics that they used 10 years ago to analyze SaaS companies, maybe, and that's this company just raises like a$10 billion valuation. So, like, can it be a hundred billion dollar company? Like, I don't know.

Christian Soschner 44:42

Yeah, it's it's interesting. I mean, with this uh post IPO, when we look at the market, it's observably easily. Um, the tech companies don't scale linear. So when I look at Nvidia, for example, or you mentioned Palantir, um, the uptake in valuation is suddenly it happened suddenly. Nvidia, I didn't expect that NVIDIA in uh from 2022 after 2022, the huge crash that they go up exponentially again. They had already a good run from 2013 upwards. Palantir, the same. I mean, Palantir, I think five years ago, the feedback that I got was not the best on Palantir. Uh, and then suddenly the ecosystem, the global system shifted a little bit, and Palantir just soared in the last year and just took off a minute. It's really great to see the stock price go up. The question I have to you, when we stay a little bit with the Facebook IPO for a minute longer, um, thinking back to Facebook from 2004, 5 and 6, Facebook was not the first one, Facebook was not the only one, and the market was already crowded back then. And what still exists today is Facebook. I think all the other competitors from 2004, 5, 6, especially the European ones, they don't exist anymore. But Facebook is still alive. When you think back on your time at the Facebook IPO and the experience that you gained afterward in venture capital, is there something at Facebook or something that people can learn from the Facebook story to um have it a little bit easier to spot these founder personalities or this company structure or whatever it is in these companies that makes them so special that the probability of a home run 20 years later is just higher when you put money on that. Did you find some metrics there?

SPEAKER_00 46:25

Um there's so many things to to say on this. Um I mean, one one thing that I used I used to say is that like, you know, what do you learn from the Facebook Series A? And it's like I say, like nothing. Like it was an aberration, right? Like, you know, when I when I joined NEA in 2013, the main guy that I end up working for was like, what do you want to work on? And I said, early stage enterprise software. And he was like, Why? You're you're 24, it's 2013. And um, I said, Well, there's there's what to learn, right? There's a certain pattern, there's like a there's this things that are learnable and there's who to learn it from. And yeah, he has an intra incredible track record of enterprise software investing. Um, you know, in terms of Facebook, again, you could argue like, well, if you just do one of those, then nothing else matters, right? If you look at the partners at Excel who did that deal and you look at Peter Teal, like Peter Teal's gone on to do like incredible stuff, um, you know, that's the career deal. I'm not, I don't want to take anything away from other things that those people have done since, but like there's a strong argument that they wouldn't have been able to do those things had they not done the Facebook.

Christian Soschner 47:31

Yeah, yeah.

SPEAKER_00 47:32

Um, you know, I also have a framework which is that for most companies, there's really only like one way to be right and to really achieve that maximum outcome. Maybe there's a couple versions of it, but there's really only one way to be right. And then there's so many ways to fail, so many mistakes, some in your control. Sometimes it's just things change, rug gets pulled out from under you, not in your control. Um, and that is all meant to be kind of priced in um in terms of how both founders and investors are rewarded. But there's yeah, there's usually only one way to be right, and that what I always say is that, or not what I always say, what I just kind of articulated yesterday for the first time, is that the reason that there's it's so much easier to talk about the ways to be wrong, or that they're often the same for every company. Like the mistakes that people make, the the ways market change and things that happen to them, they're kind of similar for like large groups of companies. I'm talking about good companies, not like things that never really had a chance. But if you look at like what went right for Facebook, right? Like a lot of things had to go right. You know, I also like I, you know, I worked at Monday.com 2017-18, and like what's gone right there? And it's like so many things have gone right. Which one is like the main thing? Yes, it goes back to the founders, but it's really the decisions that they made. Can you pick someone who's always gonna make the right decisions? I no, right? Like, um, you know, in theory, that's the same thing as like, you know, trying to get married, right? It's like, you know, like, is it always gonna be perfect and right? Like, no, like there will be mistakes. You don't know ahead of time which ones will be more consequential and less consequential. Um, but it's usually just there was that one lane and they hit it and they did it at the right time and they avoided making those critical errors, and and that's how it became so successful. Whereas the companies that mess up, it's just like things change. I've also written about this as well, is like the ways to be wrong. And you know, there's a really good way to be wrong in venture, which is that you invest in an amazing team in a growing, awesome market where they have clear advantages and lots of momentum and things are working, and like sometimes just things just take like a hard left, and like the whole industry just moves from like one style of infrastructure to like something else, and then you're just left with this like little thing. And like when you invest in all really all those things do line up. That's why you see you see these announcements of companies getting acquired for 200, 300, 400 million dollars. You see who their backers are and they're leading venture capital funds because that's who they had the opportunity to invest in. It's those teams in those moments, in those opportunities. And so, yeah, it didn't end up being like the maybe the Databricks size, like what I think they just raised at like 60 billion or something. You know, it didn't end up being that big, but it can still be like a 500 or 400 or 300 million dollar outcome, um, even though the market shifted. So, yeah, there's so many different ways to kind of answer that, but those are a few a few different frameworks.

Christian Soschner 50:39

That's great. Thank you. Um, you had a great career in the United States, investment banking, Facebook IPO, worked for great companies, and then you decided to move to Israel. What motivated you to leave the United States? Uh, was it some evangelizing uh the Stanford and uh Silicon Valley uh mindsets to Europe so that you uh teach people here how to do it? What motivated you to come to Europe?

SPEAKER_00 51:03

So the the short answer is I I moved here for personal reasons. I I just the first time I visited Israel in 2009, I just felt the immediate connection and I kind of always saw myself moving here. And then um there's someone that I'm you know fortunate to be close with here in Jerusalem, Michael Eisenberg, who's one of the top you know VCs for the last 25 years in maybe 30 years now in Israel. And um he was like, dude, you want to live here? I was like, Yeah. He's like, Well, you're 27, you're single, you have five years of experience, you work in venture capital. If you want to live here, get on an airplane. And and I heard it. Um, and I realized too that like I do have a niche, right? Like I worked at NEA at a really unique, awesome time. Like my first year there, I did like 10 investments in one year. Team was small, we were doing a lot, moving fast, things were changing. SaaS was taking over. I became like the business model SaaS metrics expert inside NEA. And I had those things to take with me, which I knew would provide me an advantage. And being the finance guy, right? Everyone talks about Israel being startup nation, and then over the last few years, it's been way. Well, we really want to be a scale-up nation. And with this Waze exit and some of these other companies, like they're scaling up. And it goes back to what I was talking about with Silicon Valley here in Israel, that like it's not about those companies just scaling up and like, that's great. Now there's money in the ecosystem, is that the people who are along for the ride get to see that greatness. They get to see what's worked, they get to see the mistakes that were avoided and the mistakes that were made. And then they get to take that and start their own companies. And so the alumni of those companies, that's like that's who I'm focused on now as an early stage investor. But I also knew that, you know, to go from startup to scale up, what's that difference? It's the numbers. And I credit my good friend Mike Stoppelman with figuring this out on my behalf back in 2018. He had been doing a lot of seed investing as an angel. And he said, You did like a bunch of series A's at NEA, right? I was like, Yeah, I did like 20-something investments, but I sat in the room for like 250 partner meetings and saw all these companies pitch and get discussed by legends in the industry with very super smart, insightful, deep things going on. He's like, So you know what it takes to get to that series A? I was like, Yeah, I think so. And what I realized was it's really the it's the numbers, right? It's validating whatever you said at seed, it's the founders, it's the market, the product to some extent. It's the business model and the traction that takes you into that series A where things need to be clarified. And in business, the way we clarify the future is through numbers. That's the that's the language, it's dollars and cents, it's how we quantify what's going on. I actually, the term finance gets so like overused and misused that I started just saying quantitative resource allocation. That's what it is. And that's my skill set. And I've had the opportunity to do that with late stage companies in IPO and MA scenarios, but also with early stage companies, you know, right at the kind of early curves, but also with like weird new innovative business models. And so to me, it's like that's the more fun challenge. And so I knew I was bringing that to Israel. And then the other thing I was bringing to Israel is just kind of my network. I I talk, I remember I've, you know, I had a great conversation when I was deciding to move here with one of my friends who's originally from New York and has been in Silicon Valley since like 2009. And he was like, You should go. And at the time I was living in Washington, D.C., working at NEA. And he was like, You have you have this here in San Francisco, and you're never gonna not have this. And you've built already something great in you know, DC, New York, Boston, where I was splitting my time. And he's like, He's like, and you're gonna be able to do the same thing in Israel and and build that there. And and the synergies across all of that are gonna be really, really valuable. And he was totally right. Um, and so those are the two main things. That was my kind of thesis, and figuring out how to kind of actualize that and make the most of it has been the journey of my last nine years here in Israel.

Christian Soschner 55:17

That's amazing. Uh, when I look at Israel today, in my opinion, the best startup ecosystem and scale-up ecosystem is actually in Israel, in Europe. And all other ecosystems, I mean, they are nice, uh, but I think the greatest is in Israel. In your opinion, what are the three main characteristics that make Israel better than other ecosystems? And what can the other ecosystems learn from Israel?

SPEAKER_00 55:42

Yeah, so uh the things that come to mind are like innovate to survive, right? The second thing is very similar to Silicon Valley. It's like what are the underlying industries? And um the third thing, I guess, is trying to like what's the third thing? Um it's really like the culture of the people who are here, um, which I is distinct from the first thing. I'll explain why. So the the the first is you know the innovate to survive. So um, you know, this place kind of you know has developed. I don't want to get into any of the like political things, that's why I'm like uh stuttering, but um you know, the defense industry was the first one here, right? You know, forced to innovate, surrounded on all sides by enemies, you know, everyone kind of knows that that startup nation story. The the kind of unification of the network through the military is a big part of it. It would be like if you only had Stanford, right? Which by the way, like 50 years ago, that's all you had, right? Everything came through Stanford. Like if you were a VC 50 years ago, like and you weren't on University Avenue, it was like, what are you doing? Like you're you know, um, and so that's you have a similar dynamic of kind of like a very cohesive um singular network here that's driven by that survival. The second thing is because it's always been tech, right? For whatever reason, like you know, Intel, Cisco, like all these companies, Microsoft like set up shop here years and years and years ago. And so one of the things that I've found that's interesting is like, you know, Haifa used to be the tech center, right? That's where Intel and Cisco were. And so if you go back to 25, 30 years ago, the people who are working at those companies, these is the Israelis, their kids are now like my age and they're starting companies. And so they actually grew up similar to how I grew up, where like their parents worked in technology, that's what they knew. Um, and so that's what that's been their ethos and the world that they lived in. And so you have that kind of tech for tech uh doubling over and cycling on itself, which is really, really good. And then the third thing is just the culture of the place. I, you know, anyone who's been to Israel knows that you know, the the service here is terrible, right? Um, and you you kind of don't get both, you don't get a bunch of people who have the confidence and the gall to be entrepreneurs who also can like do a really good job of like being service people in restaurants and hotels. It's just those two things are are not the same. And so I there's so many, you know, there's a lot of thoughts and literature on this subject, but um at this point, practically speaking, to me it's about like, hey, now we've got these massive companies, you know, like and people have seen it get really, really big. Because for a long time it was it was small ball in Israel. That's why every major VC who's coming back to Israel now left Israel in the last 15 years, or they spun out their fun to a local thing or whatever. Maybe now everyone's coming back. Oh, right. Um, the people who stayed have had insane benefits, but uh it's it's kind of growing into itself now.

Christian Soschner 59:14

This was a nice twist. Um, you can't party in Israel uh good enough because the service is not good in restaurants and parcel, you have to work your way out, basically.

SPEAKER_00 59:23

Everyone's a leader, everyone's an innovator, everyone has something to say, and I think that that's a necessary characteristic. You know, it's necessary but not sufficient for being a great entrepreneur. You know, no one's no one's just okay doing whatever they do all day, every day, and then all of a sudden they become an incredible entrepreneur. Like I just don't think that happens. I I always tell people who want to start companies, I say the only reason to start a company, like starting a company is definitely not like a thing you check off, like on your resume, like on your career path, like being an entrepreneur. That's something you either have or you don't have. And it's not like if you don't have it when you're 20 years old, you're never gonna have it, but it's something that that really grows and develops inside a person. Um and so I always ask people, I say, the only reason to start a company is if you wake up in the morning and you're frustrated and angry that something doesn't exist, like this needs to happen. And then you look left, you looked right, and I don't know if that's inverted in the video, but um, and uh and you say damn, like if I don't do this, nobody else will. I have to do this. And and again, that goes back to that like survival mentality. So there's a lot of that is I have to do this now. Again, this whole like being a founder for the sake of being a founder and starting something and saying, Oh, yeah, there's 25 people doing this, but we think we're better. That doesn't work. There needs to be a level of kind of aggression and creativity that's driving people versus you know, one of the red flags that when I talk to founders is like, I'm like, okay, what do you want to accomplish? They're like, Well, we really want to raise our series A in 18 months. That's not a goal. Like, I want to hear again that I mentioned this earlier, like, if and when you're successful, how is the world gonna be different? Maybe not for every human on earth, but for whoever you're working, like, how is their day-to-day gonna be different if you're really successful where you're just doing something for fun, like because it's a nice challenge.

Christian Soschner 1:01:28

Yeah, that's true. And I think the the true entrepreneur has a calling. It's not that they have any other choice than just doing what they want to do, because when they want when they try to evade, their calling pushes them back, and it's not so much a passion, it's rather they have to do it, they can't get out of it. So it's just it's like a revelation, basically.

SPEAKER_00 1:01:48

Yeah, uh it's the same thing that we get. So you hear about a founder and they're like, Well, you know, they have an offer to join Facebook and get paid$500,000 a year, or they might start this company, yeah. Or join this company as a founder, let's say. And I'm like, no, they won't. Like no founder actually has to, like, again, okay, outside maybe specific personal financial situational stuff, that's just not that's not an option. Like sitting at a desk as part of a 50,000 person company versus grinding day and night to build something, again, either you gotta do it right now or like it's just not that no. I'm not saying never, but not right now. Yeah, yeah, and so I think that you know, kind of just to piggyback on that a little bit, of a little bit of a different angle on that same thing, which is that, like I mentioned earlier, a lot of the technology infrastructure that's been built has come out of, you know, Google and Facebook and Microsoft. And um those infrastructure engineers are have exposure to things like Amazon that no one else can touch in the world. And the problem is if you say, oh, well, they worked at Amazon or they worked at Microsoft, whatever, and so now they're starting a company and like that's really amazing. Well, yeah, if they're building infrastructure software and they're an infrastructure software engineer, then yeah, probably. But more and more I hear, oh, this person was a operations person or a salesperson or a product leader or whatever, and like now they're starting something. And like, that's not the same.

unknown 1:03:22

Right?

SPEAKER_00 1:03:23

Like that, those are very, I'm not saying it's it's a no, right? It may work out that it's the right thing, but it's definitely not as like obvious as it is in these core infrastructure tools where there's literally no one else in the world who got the exposure that this five-person team at Google got versus this person was a project manager on X, like that day-to-day and the things they're doing might not actually be the most relevant, you know, to being in that day zero startup thing. Again, they might find that it is and they figure out the way, and they do get inspired by something they had in that seat for sure. That can definitely happen, but it's not obvious like it is with some of these infrastructure plays.

Christian Soschner 1:04:00

Yeah, it's true. When we speak about calling, what was your calling um to found your fund? What drove you to this decision?

SPEAKER_00 1:04:10

So, truthfully, I you know, I I left NEA in 2016 when I moved to Israel. I joined a corporate VC here. Um, I'm not a corporate guy, that I knew. Even when I was at NEA and when I was at Morgan Stanley, like dealing with like office politics and firm politics, I was just like, I had no patience for it. I wasn't good at it. Uh, it was very frustrating for me. Um, and so I was like, I and then on top of that, starting like 10 years ago, the venture, the mid-stage venture world, which is where I had spent all my time, for better or for worse, like kind of the series A B C world, um, had changed fundamentally in the approach, which was basically again, everyone rushed in. There people realized like there's a lot of money to be made here. And so you have like Insight who hires like 50 people just to call every company on planet Earth and just gather information and figure out who they want to invest in. And that's not how they do all their deals, but like it just becomes about this concept of like winning deals, of like hunting and winning. And like, I didn't grow up with that. That's not why I enjoyed my experience at NEA. That's not what I felt like I learned. I felt like I learned instincts around what really makes a great company and a great founder and a great opportunity, and and then how to work with those founders and take what I have skill-wise, what resources I have, what network I have, and do what I can to help those founders. I always say help them not fail. I'm not gonna help, I'm not gonna make a company successful, but help them, help them not fail. And so I I kind of didn't really have interest after I left corporate VC job. I didn't really have so much interest in like jumping back into another venture seat because I was like, that's not my skill set of like chasing and hunting. I have friends who are some of the best in the world at doing that, and they've done very, very well, and they're very good what they do, and they deliver returns for LPs and founders love them, and it's just it's just not my style. And I think there's kind of more than one way to do it. Um, and so basically, what happened was when I was at NEA, I was super hands-on with my portfolio companies. To me, that felt obvious. Like, this is how I'm gonna learn how to how companies work so I can diligence them better and figure out what works. This is how I'm gonna help other companies, and this is how I'm gonna build relationships with founders, which is that's the most valuable currency in the business. And so I was just doing that. People, I kind of out of the blue, people just started calling me companies, companies I worked with at NEA, friends companies, friends portfolio companies. They were like, hey, we want your help with our business model, financial model, metrics, rev ops, whatever. And I just got deeper and deeper into the operational side of it. And I was like, I really like this. I also really liked working with like five companies at the same time. Um, I found that the rapid switching was very well suited to my personality, was actually similar to like, you know, again, similar to what any VC does, but also similar to what I did in banking, working with a bunch of companies at the same time, similar to what I did in college, taking three or four classes at the same time in different, you know, areas that are all kind of loosely related. And I enjoyed that. I learned a ton. I continued to build out my network, got more operational. And then frankly, like after I got married, I was like, okay, where does this go to? Because at the time I was like 28, 29, no gray hair. I'm an advisor, I'm a consultant. What am I? People the you know, the people who needed me most didn't want to hire me. And or they wanted me to kind of frankly like help them kind of commit lightweight fraud. Like, make our numbers look good. I'm like, yeah, but your numbers aren't good. Like I can't do that. I won't do that. You know? Um, you know, there I always say, I wouldn't put lipstick on a pig, but I would put lipstick on a supermodel. So it's like the best example of that, you know, is Monday.com. I got pulled in to work with them, and that company is an incredible company with incredible founders and an incredible drive in terms of everything they do. So I was like, I can help you in that like last little one percent. And the founders saw that. They said, you have something, some skill sets, you know, that we've never seen before, but we know we need it. Um, and so I had I got that great opportunity, and and I just love doing that. But I started thinking, you know, I'm very big on business model and stuff. I basically started eating my own dog food. I said, okay, like one of the key things in business models is leverage, and where can I find more leverage versus just kind of, yeah, I'm getting equity in companies as an advisor or whatever, and I'm making small angel investments, but you know, and I'm getting paid, you know, uh retainers or whatever. But like it's not a lot of leverage in that. So I I was talking to a friend and I told him I'd figured out like basically there's four different types of leverage. You have like people leverage, technology leverage, capital leverage, and network leverage. And then you can combine those in different ways to create things like brand leverage. And he was like, if you don't write that blog post, I'm gonna write it. And that was one of the first blog posts that I wrote, um, going back to like early 2020, I think. And so I kind of again, I dog fooded my own stuff and said, okay, what's the best business model for me? And so if you look at each of those layers, I was like, okay, I have now more deal flow than I can afford to invest in because I was getting good early stage deal flow. I had also realized that there was a great opportunity at early stage to bring business model and finance into the forefront, both as a value add, but also as a perspective. There are so many companies that I've seen raise seed money that frankly never had a chance. Like nobody sat down and built a really basic model to figure out can this even work? Or what do we need to believe for this to work economically? Like people just they they raise money. I have a friend who spent years at McKinsey, and he was like, Wait, people quit their jobs, incorporate companies, and raise money, and they haven't done that exercise. I was like, all the time. Like that's my arbitrage, right? Like you could just if I have a good network, which thank God I have a good network and people doing interesting stuff at a high level, and I could just weed out the ones that had no shot, then like surely something will work out. So, you know, that was part of it. And I figured out, you know, again, technology leverage. Okay, I'm investing in technology leverage, like people leverage. Frankly, don't have a lot of people leverage. Now I do, now I have a team, but at the time I didn't, right? Um, network leverage, like, well, I've got this network, you know, and then capital leverage. That was the other missing piece. Like, I'm just investing my own, like I was getting paid retainers and writing like$10,000 to$25,000 angel checks, but I had more allocation than I could afford. People started asking me, hey, can I get in on your deals? And I'm like, I think there's a financial instrument for that. And so even though I came from the VC, I look like a VC, like I really came back to the idea of being like an early stage investor pretty organically, of seeing the supply and demand and the leverage in that. And so I basically kind of bit the bullet on the entrepreneurial side and realized that I need to step outside my comfort zone and go, you know, ask people to invest in me, uh, which is not something I had ever done with anyone besides, you know, my parents. Um said, hey, you know, I'm I'm gonna scale up my angel investing to the next level. And here's what I want to do. And I, you know, in hindsight, I'm like, I can't. I look at my first deck that I ever put together for the, you know, my fund one, which I really kind of call it like my fund zero, like proof of concept fund, um, you know, five plus years ago. And I'm like, I can't believe anyone gave me money. Like I was all over the place. Like, I, you know, but people were like, hey, I they saw something in me. They I think this guy's gonna figure it out. And I, you know, I'm still figuring it out, but I I'm definitely way ahead of where I was five years ago. And that's that's what people bet on, and that's what that's what I bet on. And and so that I kind of bit the bullet. And you know, I really do think that I needed to move to Israel, quit a good job, and have the space to like figure out really what do I bring to the market to take that really entrepreneurial step and start my own business and kind of, you know, as they say, hang out my own shingle, um, put myself out there.

Christian Soschner 1:12:14

Yeah, great story. Great success story. You mentioned while you were speaking um a couple of times, business model inc. And when I look at the corporate world or MA world or investment banking, I think it's quite uh natural that people question the business model, uh, want to have a clear explanation what drives cash to the company, how do they reinvest it, how can they grow it, how sustainable is this? And you mentioned also where's the leverage in the model? Uh, why can it scale faster than any other company? When I look now at the European startup landscape and I bring up the term business model, I get constantly pushbacks. My question to you is uh why is business modeling such an underrated skill in the startup landscape?

SPEAKER_00 1:12:58

Yeah, so I think it's because business modeling is misunderstood. People talk about business plans, they talk about financial models, and that's not really what business modeling is about. Business modeling is about figuring out who are the stakeholders, how is value delivered, and how is compensation driven for that value. It's a very fundamental but abstract idea. And if you look at the best investors in history, these are the things that they're able to isolate. They're able to abstract these like very complicated, you know, number-filled things into like the right abstraction layer of like, okay, are we delivering value in an advantageous way? And do we have an effective way to scale that up? Like, though that is business modeling. It's really like, oh, of course I thought about that. I'm like, I could say, okay, you thought about it, but like, did you, you know, kind of benchmark it? Did you figure out what are the key drivers and assumptions, right? Business modeling, the act of modeling. I always say it's like, you know, when I was in mechanical engineering, we build CAD models. It's like, what's the point of building a CAD model? It's really to run simulations on something, see what it's going to look like, and then run, well, fine if it's FEA or whatever, but like run a simulation on that thing in a digital way before you create it in real life. And so the exercise, again, you can do it in an hour and in Excel. It's not so easy to do it elegantly and simply. But when you're working with a company, people always ask me, like, well, how can you build a business model when you don't have any data? To which I respond, how can you know what data to collect if you don't have know what business model it's going to go into? It goes back to that idea of quantitative resource allocation. Like that's really what you're trying to do. And you've got to know what mechanical model, you know, what are the inputs, what are the outputs, what is the right mechanical model for that? Again, you might not be right. Things change. Like sometimes you have to adjust the model. But a lot of times people, against the person who figures out the model usually makes the most money, and then people go, Oh, that's a good model. And then they all copy it. And that's what happened with, you know, SaaS over the last 25 years, right? Like Mark Benioff figured it out, you know, their original logo, like a line through the word software, right? And this whole cloud thing and like multi-tenant software. It's become obvious. I've spent a lot of time thinking about like what are the fundamental drivers? And it goes back to, you know, the stuff that I read. I'm not reading like, you know, I there's great stuff in there, but like, you know, zero to one and all these other startup books, like they're fantastic from an operational perspective, but I'm not operating a you know startup. It's not necessarily my job. My job is to figure out like, is there outsized value here? Is there a mispricing in the market? Right. Um, ultimately, that all comes down to like what is value. So I look at Charlie Munger and Warren Buffett and and you know, um, Howard Marks and like these types of like what is value? Oh, but that's value investing. I said, no, no, no. There's only one type of investing, and it's trying to buy something for less money than you actually think it's worth, and that the rest of the world will then figure out what it's actually worth. Like now, if you look at it from a startup journey perspective, you have like one person with an idea that is worth something, not in and of itself, right? It's only worth something relative to what it will be worth in the future. You know, a company raises money, let's say again, at a$20 million valuation. Like, is the company worth$20 million? No. And I always use the example from years ago when the big PE funds came into venture, they'd write a$100 million check and they'd own 10% of a company. And I'd say, okay, what's the company worth? People would be like, Well, a billion dollars. I'd say, no, 10% of it is worth$100 million. The other 90%, we have no idea what it's worth. Also with Capstack and everything, like you have no idea what it's worth. Now, and my proof to that is if KKR, TPG, or Warbert Pinkus is coming in and buying 10% of a company when their core business is to buy whole companies, there's a reason they're not buying that whole company. And oh, you could say, well, it's because the founders don't want to sell it. Yeah. I think that if they got, you know, they own 40% of the company and they someone offered them a billion dollars, they'd most people would take it, right? The vast majority of the people. Not about to take it. The only people who wouldn't take it are people who already have$400 million. Um, so, or maybe a hundred million or whatever. But uh so it to me then goes back to like what is value, right? You know, what's price, what's value? And the defin my my working definition of value is again, how do we measure it? And that's what finance is, it's how we measure things. Money is just is is the units of business, just like kilograms and degrees Celsius, it's the unit of business, it's how we measure if things are working. And so what it comes back to is a a business is worth the the future value of its cash flows. So that gets us to the discounted cash flow analysis. And people say, well, you can't run a DCF on a company that has no, like uh, you know, has no revenue even. Forget cash flow doesn't have revenue. And that's true, you can't. And I think it's a waste of time to actually start building these models. But if you isolate the core variables that drive that, again, this is just a modeling exercise. What are the inputs? What are the outputs? Right? The output is enterprise value. The inputs into a DCF analysis are growth. I call it big G. It's like the growth period, the little g, which is after the growth period, which is like the sustained growth relative to GDP. You have R, which is the discount rate, which is the associated risk and cost of capital. And then you have the free cash flow margin. And those are really just four variables. And let me tell you, you know a lot about those four variables before the company even gets incorporated. And again, this goes back to enterprise software. I think this has changed, but enterprise software in the mid-2000s, people were like, again, I don't know if they were thinking about it like this, but if you run it through that analysis, you go, okay, well, gross margins on multi-tenant enterprise software are like 80 to 90 percent consistently, even with services. Maybe they go down to like 70, but okay, fine. Then you have like sales and marketing, SGNA, whatever, like and then you have RD, which again, this is not we're not building rockets like SpaceX here, right? We're shipping application layer software, like continued RD does not need to be a massive part of what we're doing. Say, okay, the free cash flow margins can be amazing. And then you look at older software companies, you look at Microsoft, you'll get Adobe. These things have 50% EBIT DOM margins, Oracle, SAP. It's like, whoa, at massive scale. And anyone who's worked at those companies knows how insanely inefficient they are, right? So you're like, okay, that's nuts. Like the free cash flow margins here can be insanely good. Okay, so then go, let's go back to like the multi-tenant cloud hosted thing. So, like, all right, that's big G. Let's look at big G. That when we talked about the margins, these things can grow as fast as you can sell it. That's something we all take for granted now. But the ability to spin up an AWS instance instantly and serve more customers, that's pretty novel. And so Big G is basically as fat as big as you want it to be. It can grow just insanely fast, as we're seeing like with this company cursor, it's just growing insanely fast. And then you look at R, which is the discount rate. Now, people talk about like repeat founders. Well, that goes into R. So if you look at like one of the greatest enterprise software companies of all time, Workday or ServiceNow, two of the greatest, right? The R associated with the operating team and the market they were selling into was like it was like zero. It's like these guys know exactly what they're doing and how to do it. They're doing the same thing again, definitely workday, maybe a little bit less so in ServiceNow's case. But then you look at the business model and you say, okay, yeah, there's high free cash flow margins by nature, but they're also locking people into single and multi-year contracts with the cash paid up front. This is where when founders tell me, oh, we have a annual contracts paid monthly, I'm like, my friend, that is a monthly contract. Like you're not going to sue them if they quit after six months, unless the money's in the bank, right? And that creates again, that decreases the cost of capital and it it it creates an ability to like raise debt. You're saying we have we now have basically the inverse of accounts receivable, right? We have deferred revenue, which is a liability, it's free loans from our customers. If you want to talk about the discount rates, like say, oh, well, you know, what if you know your customers are all startups and they might go out of business? I'm like, I don't care. They paid us a year up front and the the unit economics, like cac math, right? Like we got paid back in nine months. Like, I don't really care, right? Like it that's and then anything you retain beyond that becomes a bonus. So you could run that through. Now, the problem is with the enterprise software model applied to that is that like everyone rushed into the space, raised tons of money, and the SGNA part of that equation has just shot up massively. So the yes, the gross margins may still be really good, but the free cash flow margins have taken a massive hit. And that's a big part of the reason that, you know, for me and my fund, I'm focused on like weirder stuff where I think that there's again, if you focus on those fundamental levels, like what really are those drivers? Again, a competitive edge that decreases R, right? Like all these sort of things. Um, where can we find that in other markets besides enterprise software? Because a lot of areas in enterprise software have just become like a knife fight. This company raised 100 million, this company raised 200 million, and they're just they have to blow it on like everything from like hiring ridiculously overpaid engineers to like blowing out Facebook and you know uh Google ads. And it's like, yeah, it's like a tough business. It used to be easy and now it's not.

Christian Soschner 1:22:53

So anyway, life life changes changes. It's a really great conversation, Alex. I just check the clock and see that we are two minutes away from your 90 minutes uh time window. Do you want to uh continue or should we cut it off here and uh wrap it up?

SPEAKER_00 1:23:11

Um I'm trying to think if there's any let me just look at my notes quickly to see if there's anything else I wanted to mention. Um yeah, I would I would say that you know, my the the main things that I'm focused on now, um just to like wrap up, are being clear on like you know, kind of what my job is. Like I would say to a large extent I am a network-based investor, and my job is to find the teams in the markets that I think have a very, very high chance of being successful. If everything goes their way, the world's a better place, they're massively successful, identifying those people in my network and and picking them. And that is a core part of this business. But then the second part kicks in, which is helping them not mess it up. And I think that's the a core competency for every investor is saying, you know, I fine, I maybe I've done this, maybe I haven't done this. It doesn't really matter, but I've seen it and been part of these stories over and over and over again. And like developing and earning the trust of founders to say, hey, I really think you should focus on this right now, or I really think you should talk to this person, and and avoiding, you know, massive challenges down the road. Some of that is on business model, so many different, again, so many different ways for a company to fail and just avoid those unnecessary pitfalls. So that's a big part of what we do. We actually just rolled out a new program for our portfolio called It's All About Everything, which focuses on why it's just so difficult to be a founder, that you've got to do everything. I also believe that every company, whether it's a pre-seed stage startup or a Fortune 500 company, needs to have the same functions. The difference is that everything is on the CEO's plate or the andor the CTO, the founding team at day one. Everything's on their plate. And so they've got to figure out what makes them special, what gives them the edge, as my friend David Russ calls it, their zone of genius. Spend as much time there as possible and really outsource and delegate the rest. Know just enough about it that you can successfully and effectively delegate it. So that's you know, that's my approach. That's what we're trying to do and work with amazing, you know, early teams that are trying to figure it out.

Christian Soschner 1:25:16

Alex, that's that's amazing to hear. Um, what's the best way to reach out to you when someone listens to the episode and thinks you might be the perfect um person for the cap table?

SPEAKER_00 1:25:30

So the best the best way to reach out is through a warm introduction. Anyone who says otherwise is uh is lying. Um that's that's the single best way to to reach out. Um the other ways are you know, our website, we have a submission piece, um, you know, LinkedIn, Twitter. These are all um these are all relevant um and can work.

Christian Soschner 1:25:51

Alex, thank you very much for this amazing conversation. It was fantastic, fantastic insights. I love your drive. I love the experience that you bring to the European ecosystems. And I wish you and your team and your family um success, health, and luck for the coming years. Thank you. Same to you, and thanks so much for having me. I really enjoyed it. I really enjoyed it too. Alex, have a great time and let's stay connected. Absolutely. Talk to you. See you soon. Bye-bye. That's it for today's conversation with Alex Oppenheimer. If there is one idea to walk away with, it's this. Business models aren't a box to check, they are the lens that shapes everything. From his time inside the Facebook IPO to helping Monday.com fine-tune their strategy. Alex showed us that venture capital isn't about betting, it's about building smarter. We talked leverage, we talked trust, and we talked what it takes to be the kind of founder investors fight for. Now, if this episode made you think differently about your company, your career, or your next move to one thing, share it with someone who's building something important. That's how the show grows. And it's not with ads, not gimmicks, just people like you passing it along. And if you want more conversations with venture capitalists, operators, and thinkers at the frontier, follow the show, hit like, and come back for the next one. The best ideas are still to come. And thanks for listening. See you next time.