EdTech during Lockdowns and Startups in Israel: Q&A with Benson Oak’s Robert Cohen
Managing Partner ,
Benson Oak Ventures
In this interview with MarketCurrents WealthNet, Cohen describes his team’s investment framework and the promising future for Isreali startups and online education.
Vishesh Raisinghani of MarketCurrents led an interview with Robert Cohen of Benson Oak Ventures. The recorded version is also available below.
Could you give us some insight into the investment philosophy that guides your team at Benson Oaks?
Absolutely. So we steer clear of the typical venture capital strategy – what I like to call the “spray and pray” method. Instead, we use the so-called conviction model. So we’re very focused on areas that we understand and that’s where we invest. The more we understand the business the more we can add value. And once we know we can add value we double or triple down on the opportunity. That’s the model for the new fund and all our previous funds.
A recent company we exited in the Czech Republic is a great example of this. Klik is a startup that started innovating in the online insurance market. That was a miniscule market in the region back in 2012 when the company was launched. But we got in early and funded it pre-product at the seed stage before doing a follow-on round a few years later. A new CFO drove the company to profitability and it’s been cash flow positive since 2015. So we recently sold the firm to a Hungarian firm called TA Associates. We knew TA Associates through our co-investment in AVG, which is now a well-known cybersecurity firm. So this gives you a sense of our model at work and the outcomes it can produce.
This exit you’ve mentioned was the only holding in the Benson Oaks portfolio based in Czech Republic. Is there a reason the team currently has no capital deployed in this part of the world?
I think part of the reason is personal. I moved from the Czech Republic to Israel for what was supposed to be a two-year stint. That was eight years ago now. Another reason is that there seems to be too much capital chasing too few deals in the Czech Republic. That being said, it’s an amazing and innovative place. For companies focused on SMB tech or building global consumer brands, it’s always an incredible place. But there’s a lot more deals in Israel.
I understand most of your team’s investments are based in New York and Israel, both of which are thriving startup hubs. Has the ongoing crisis accelerated this pace of startup innovation and expanded the number of opportunities you’re seeing here?
Yes, so most of our investments are in Israel and two in New York. And Israel has always been dynamic and creative. It’s got the second most startups in the world – not per capita but overall. Even in the current environment, the number of deals and investments emerging here has stunned me. There’s more money to work with and it seems like there’s a new major exit or new deal emerging every day now. The focus here is on cybersecurity, telehealth, medicine, biotech and education, which are all going to be highly relevant in this new world we’re about to experience.
How do the valuations for startups in Israel compared to the ones in Silicon Valley or the U.S.?
Well, the valuations are certainly better than Silicon Valley, for sure. Recently we’ve seen startups being funded despite losing money all the way to going public. Whereas in Israel, certain pockets may seem overvalued, but others offer better opportunities. So cybersecurity seems to capture a lot of attention and the valuations in that sector are certainly eye-watering. But we like to be contrarian and focus on underrated sectors such as consumer brands and SMB tech. EdTech, in particular, is a focus of ours that not many investors like but we see incredible companies with valuations that are reflective of that. Since we’re one of the few companies investing in EdTech, we can get in early or at excellent valuations
I’m glad you mentioned Education Technology or EdTech. I understand some of your biggest and most recent investments are in EdTech startups. This is a sector that’s been around for years. But now, with institutions shut and families confined to their homes, is the industry finally ready to go mainstream?
I certainly hope so, because our investments are based on these platforms gaining traction. EdTech is a broad term. One of our investments in Tailor-Ed is what I would call classic EdTech. It’s better technology that has gained a lot of traction with teachers since it allows them to cluster students and monitor progress and personalize the content on offer. Their platform uses machine learning and design to connect traditional schooling with remote classrooms. That’s the sort of tool that bridges the two worlds. I believe or hope that we still have traditional schools going forward. But platforms like these combine that with digital tools that drive better results.
Another company we invested in, Spitball, empowers entrepreneurs to create digital courses and generate revenue from online education. That’s another major trend we see accelerating. For most startups, the intention is to disrupt the market many years in the future. But for our two EdTech investments, I think the current environment has brought the market to them much sooner. They’re at the perfect inflection point.