Start-up tips, by Facebook’s backer

By Candice Krieger, October 30, 2008
Venture capitalist Moshe Mor of Greylock says clean technology is now a major growth area

Venture capitalist Moshe Mor of Greylock says clean technology is now a major growth area

Moshe Mor is the man for aspiring entrepreneurs to impress. A partner at private venture capitalists Greylock - the backers of Facebook - his job is to invest in technology start-ups in Israel and Europe.
Founded in the US in 1965, Greylock has more than $2 billion-worth of committed capital under management and has provided equity capital and support to over 300 growth companies. Mr Mor, 46, heads up Greylock Israel - a $200m investment fund to focus on local investment opportunities, plus those in Europe, particularly the UK. The Israel fund has invested around $100m in more than 20 companies and hopes to close its first UK investment in the next few weeks.

What does Mr Mor look for? He says there are three fundamentals: the technology; the market; and, most importantly, the people.

"We try to ensure that every investment will have at least some record on all three of these. Firstly, there is the technology product. We are looking for things that are not going to make just an incremental improvement but have a fundamental innovation and deep intellectual properties.

"Secondly, we look at the potential of becoming a large market. If the market is growing but you are not the greatest on other fronts, you can still become successful. But you can have the best company in a niche that's not necessarily going to get you too far." But the most important factor by far, he says, is the entrepreneurs and the team. "We are looking for people who ideally have had entrepreneurial experience before, but not always. They need to have staying-power and innovation. So, we are first and foremost investing in people who will make it happen."

Mr Mor says that Greylock receives approaches from up to 200 companies a month. Only one-fifth are taken further. His portfolio includes Farecast, an airfare-prediction website, which was sold to Microsoft in February; software company ClearForest, acquired by Reuters; and Siliquent, a developer of ethernet hardware which has been acquired by Broadcom.

Investment in start-ups constitutes around 75 per cent of Greylock's activities. "This could be $200,000 for a professor and his idea to get going. That's our bread and butter and Greylock's focus."

The remainder is ploughed into mature companies, where there is an opportunity to add value. The main area of outlay is in IT: software, mobile technology and the web economy.

Over the past two years, the firm has started venturing into clean technologies: solar, wind and energy substitutes. "We think that over the next five to ten years, that will become a major investment area and we will continue to invest heavily in that space." Greylock does not invest in life sciences or biotechnology.

What have been the most successful investments? "Obviously there is Facebook. I think it would be a lie for anybody to say, including the founder, that they expected it to be such a huge success, but that's the beauty of the web. If you are successful, it can be very quick and very significant."

He cites business-oriented social-networking sites LinkedIn and Data Domain, a data-backup specialist that had been trading at more than $1 billion, as other examples.

A former captain of the military intelligence branch of the Israel Defence Forces, where he served for six years, Mr Mor completed an MBA at Harvard Business School in 1992. Two years later, he co-launched software company SPL WorldGroup. He led it through rapid expansion to reach around 900 employees and $150m in revenues worldwide.

He joined US-based Greylock in 2000, to front its Israeli investment activities - the company's first major overseas operation outside of the US. "Greylock had predominantly invested in North America. It was an opportunity for me to get closer to Israel and the entrepreneurial scene here.

"We felt that Israel was the closest to Silicon Valley and very compact. You could fly to Israel for three days and cover all the centres of technology. It was an efficient way for us to start investing overseas." Mr Mor relocated to Israel in 2005 when the Israel fund was launched.

He acknowledges that times are tough in the current economic climate. "The situation obviously has an impact. First and foremost, it impacts upon the companies we invest in. They are facing a tougher environment out there. Our advice to them is to be proactive and be cautious. We are trying to raise more capital for our companies so they will be well-stocked for rainy days. We advise them to be conservative in terms of expenses, and we are trying to drive the more mature companies to profitability - often at the expense of growth. We want them to be profitable rather than fast-growing at this time."

He adds: "The environment is definitely going to make it hard to raise capital for venture funds and create a natural process of fight for flight, where the strong funds will get stronger and the weaker funds will find it hard to raise money."

Earlier this year, Greylock recruited a London-based partner to help its European business development and form closer ties with local venture communities in the UK.

"It never ceases to amaze me how much innovation is out there," he says.

But he admits there are drawbacks. "It's tough to sift through all that and decide on a few. You say ‘no way' a lot more times that you say ‘yes'.

"It's hard to say no, because almost all entrepreneurs are enthusiastic about their ideas. It's a tough call, and any venture capital company who tells you they have never missed anything would be lying. We all make mistakes and miss good opportunities, but this isn't about the companies you miss but the companies you do invest in. Just make sure that they are successful."

Mr Mor divides time between his home in Herzliyah and Silicon Valley, where Greylock's head offices are located.

Last updated: 2:16pm, November 4 2008