Moving to the dark side (and succeeding at it)

— an interview with Kobi Samboursky from Glilot Capital

Kobi Samboursky is a serial entrepreneur at heart with twenty years of experience in the tech sector. Despite initial misgivings about venture capital, he co-founded his VC firm Glilot Capital with a founder’s mindset. He identified a problem and set out to offer a solution, quality, and real value.

Kobi’s approach was to give personalized attention to each of his portfolio companies. His goal: to be on the founders’ side, especially when times are tough. Glilot decided to create their Value Creation Team around the same time as Andreesen Horowitz, the firm best known for introducing this approach.

The results speak for themselves: Glilot Capital has been ranked by Preqin among the top five best performing VC funds in the world for several consecutive years. With five funds closed, Glilot’s Seed and post-Series A assets amount to more than USD 500 million.

Paweł Michalski (PM): You are an ex-entrepreneur, who happens to work in venture capital. How do you see your role as an investor? What is the most challenging part of your job?

Kobi Samboursky (KS): I think that the biggest challenge is to keep a hedge between your experience and the ability to do things that go against it. In every profession, you want to learn from the past. That’s the idea of gaining experience. For example, if you are an engineer who built several buildings already, it should be easier when you work on your next building because you’ve done it before.

In contrast, in venture capital, you always have to figure out where to apply your historical perspective and where to think ahead, see the future. For example, you might have seen a company five years ago, and it failed. You see a very similar company now and you like it very much. Though it didn’t make sense in the past, maybe now is the time? An automatic reaction would be not to do it since it reminds you of the failure you’ve seen in the past. If you’re in this industry long enough, it might occur to you that you’re seeing the same things over and over again. Yet, you have to develop an ability to decide if now is the right time, even if it wasn’t the last time around.

This goes for many things in this industry: ideas, valuations, types of partners, etc. The additional challenge is that everything is changing so dramatically these days.

PM: Venture capital isn’t your first career choice. How did this journey start for you?

KS: I was in the Israeli army in my twenties, serving in an elite tech unit. I started as a young engineer and gradually moved up the ranks to become a manager of a group of six to eight people.

On many levels, the army works like a startup — you get a lot of responsibility for important matters, but you are young, inexperienced, and have limited resources. What I learned from that experience is how to manage people, give them the flexibility to do what they want to do but in a way that helps them accomplish a common goal. It all serves as the basis for what I do today.

PM: Do you think being part of the technological unit in the army made a difference for your VC career?

KS: In general, I think what mattered was the army culture. Of course, the tech unit had a weird mix of army and startup culture. It valued hierarchy and procedures, but the true ranks came from how much people could contribute to our goals.

PM: Outside of your army days, what other experience prepared you the most for becoming a VC?

KS: I started my VC career about ten years ago, after being an entrepreneur for nearly 20 years. I had both the good days and the bad days as a founder that I could draw inspiration from. When you advise entrepreneurs, there’s a massive difference between those who have made mistakes themselves and those who have only read or heard about them. It’s not about trivial mistakes but about the moments when you really struggle to make a decision. I believe that advice is better served if it’s coming from someone who’s done dumb things and knows why he had done them.

On the flip side, the startup ecosystem is changing dramatically. We all saw that with COVID-19. The challenge is to draw lessons and conclusions from your own experience, but at the same time to be aware and keep adapting. If you are doing things that were right five years ago, you will probably make a lot of mistakes.

PM: Are there any things you wish you knew before becoming a VC?

KS: Not really. Yes, it was a big move for me, and I even joked about moving to the dark side. I’m still being reminded that I was discouraging people from working with VCs for a good part of my entrepreneurial career, claiming that venture capitalists don’t offer any real value. I can honestly say that the downsides of being a VC that I identified before becoming one are not as negative as I thought.

I was prepared for the transition to venture capital. Before I made my move, I had talked to people who made similar decisions. I heard about both the good and the bad things. The reality has been much better than I thought, not only because our firm became successful but also because the market has been growing like crazy in the last few years.

PM: Let’s look at the last ten years a bit closer. You entered the VC scene at a fascinating point in its history. In hindsight, was this the right timing?

KS: We developed our strategy for the fund in 2010 and started investing in early 2011. It all happened after an entire decade that was not easy for VCs. The big bubble burst of 2000/2001 and then the financial crisis of 2008/2009, with only a short period of recovery in between. The market didn’t have the time to take off. As a result, people in the VC industry were struggling. In many cases investing in startups didn’t create great results.

Then, in the last decade, our ecosystem became very strong, and people started doing much better. Part of the reason lies in how the VC model has evolved. When we started our first fund, we decided to offer a very different value proposition.

We have always followed a hands-on approach, always focused on doing concrete things and investing in particular areas. It was not just us. If you look at what happened in the last decade, you will notice that firms like Andreessen Horowitz followed the same model and have proven that it works very well.

On a personal level, our decision felt right. We were able to beat the market, even though it is growing. However, I still think that because much of the upside in venture capital goes to Limited Partners, it’s still much more lucrative to be an entrepreneur these days.

PM: Aren’t you worried that the VC industry is moving towards a dead end? With the abundance of money in the market, it’s getting harder to succeed without running ever bigger funds and hope to find even more unicorns. Is this trend sustainable?

KS: I never liked the classical model of this industry. It says: let’s have one unicorn, and then we don’t care about the others. It simply works against the entrepreneurs. If I’m a founder of your portfolio company and you already have your darling unicorn or two, you barely have any incentive to help me.

You’ve done your share in this portfolio, and you will most probably focus on your next fund. The other reason I dislike is the lack of work optimization. You might ask yourself whether you should focus on investing in more unicorns if you already have one.

At Glilot, from day one we were trying to treat founders equally. We focus on every single company like it’s the only one in our portfolio. For me, it’s the only way to go. I believe it’s part of the reason why we became successful — not because we were so smart about picking the winners but because we were putting all of our efforts into helping our portfolio companies.

PM: Is there something about the industry itself that you would change?

KS: I never thought about it because I prefer to focus on the things I can change. Right now, the market is a bit crazy. Money is widely available, and we are seeing more teams who, though they are good teams, don’t know where they are going with their ideas.

It would be better if they didn’t get funding and instead spend some more time thinking about their ideas. Unfortunately, in today’s market, they are often getting financed immediately and it’s terrible for everyone. Once they get the funding, they start running around, committing to a half-baked idea. If I could change that, I would.

When we see a fantastic team, but we figure out that the idea is still not right, we try to invest but convince them to take it slow for the first couple of months. We know that if we don’t invest, then someone else will. If we invest, we will at least try to give the founders some room to breathe.

PM: Is there enough space for VCs to be unique today?

KS: Yes, definitely. There’s room to create uniqueness in our industry. Venture capital has seen so many new developments over the last ten years. When Andreessen Horowitz launched their first fund about ten years ago, they didn’t just copy the classic VC model — they created something new, something else.

When we started, we didn’t think about being just a group of smart people that can pick great companies and deploy money fast, but also about an organization that has a unique value proposition.

If you are assuming that startups are the future and entrepreneurship is the way to go, you expect more and more money to flow into venture capital. This creates competition and automatically calls for more innovation within our industry.

Promising founders will always have the ability to choose their partners, so as VCs, we need to adapt and create new tools and new ways to support these entrepreneurs. Some of the innovations within venture capital will fail, be we need to be committed to innovating regardless. I think it’s only the beginning!

PM: In this context, what is the most rewarding part of your job?

KS: Great financial returns are always rewarding because usually everybody is happy: founders, limited partners, general partners. To me, however, the most rewarding part is the returns delivered after tough times. If we made a mediocre situation become an amazing one, like working hard and pulling it off despite the challenges, those are the stories that we keep telling ourselves.

PM: Do you have any favorite achievements?

KS: As I said, I’m most excited about the things connected to companies that went through hardships. I can give you one example — we invested in a company with an idea about a cybersecurity product. After the team created that product, it didn’t take off.

Nevertheless, we believed in the founder, so we invested again, and they tried solving the problem from a different angle. That still didn’t help, so we put even more money into the company. Finally, after about three extra rounds, the company found the right direction and created a product that led them to a decent exit.

Those are the memorable stories, and they are more difficult to tell than the usual fables about shining stars who had no issues, went from zero to a hundred in a year, and exploded.

PM: Have you made any mistakes that you regret?

KS: Yes, of course. Unfortunately, we have. Most of the mistakes we’ve made resulted from teams not being firmly bound together. Even the brightest people make mistakes, and when they do, teams might start melting down, people start leaving, which is when a failure is most likely to happen.

We had a few cases of teams not being strong enough. They see the first hardships, and they say: ok, we’ve tried but now let’s work for someone else. If this happens, there’s not much you can do as an investor. If people are not excited about starting a company, your hands are tied.

PM: After 20 years as an entrepreneur and 10 years as a VC, what is it that keeps you going?

KS: It’s funny because I’m working harder than ever, despite those 30 years I’ve spent in business. I have two major drivers. First of all, I’m passionate about working with entrepreneurs. I try to put myself in the entrepreneur’s shoes with every company I see, and I feel like it’s the first idea I’ve ever seen.

The second point relates to how I see myself. I don’t think I’m the finance guy — I’m still an entrepreneur at heart. I still think of Glilot as a startup. We have just launched our first early growth fund. Until now, our focus was entirely on seed-stage startups. We are planning to do more exciting things this year.

I believe there are so many new things that we can bring to the VC ecosystem, and simultaneously, there has never been a better time to be in this industry. It’s fascinating for me.