The Deep Future is Now
— an interview with Lior Handelsman from Grove Ventures.
Grove Ventures, a Tel Aviv-based early-stage venture capital firm, recently announced closing their third fund after raising USD 185 million. Grove’s team focuses on investing in the infrastructure that supports “the leap forward for tomorrow’s technologies and digitalization process and will shape the future of the world,” or what they call the Deep Future.
Their team is perfectly poised to deliver on that promise, and includes Dov Moran (the inventor of the USB flash drive who sold M-Systems to SanDisk), Lotan Levkowitz, who comes from a diverse background as an advisor and investor, Renana Ashkenazi, a graduate of Unit 8200 and Northwestern University who formerly led a product team at Applied Materials, and Lior Handelsman, one of the founders of SolarEdge, an S&P 500 listed smart energy solutions company valued at USD 11.5 billion and generating USD 1.5 billion in annual revenue.
Weeks before the announcement, I had a chance to interview Lior. We discussed his professional path so far, his perspective on venture capital, and his investment philosophy.
Paweł Michalski (PM): Why does a founder of a highly successful tech company become a VC investor?
Lior Handelsman (LH): I spent 13 years of my life at SolarEdge, the company I started with my colleagues from the army. I was very fortunate to go through so many steps of growing a successful business: from setting up, launching our R&D, learning about product-market fit, convincing first clients, and then scaling our sales, all the way to building an international enterprise and going public.
I had played so many roles at the company — I did sales, research and development, marketing, product development, M&A, operations… At some point, I was even responsible for our administration. In the end, I felt there was not much more I could expect from the high-tech industry.
PM: Then why venture capital?
LH: For starters, I knew I didn’t want to work for somebody else. I could have started another company, and perhaps, with a bit of luck, have another success. To take this road, I would have to decide which problem I wanted to solve first. I’m a very curious person, I love to learn new things and handle new challenges. I like to be wherever there’s a conflict between capabilities and demand.
What venture capital offers is the perfect opportunity to meet great, incredibly talented people, who are both devoted to solving real-world problems and are hungry for success. I enjoy meeting such people and advising them. Sometimes they even listen to me (laugh)… I mean — they don’t have to — it’s their companies we talk about.
PM: What kind of lessons do you try to impart to the entrepreneurs you meet?
LH: My number one lesson from SolarEdge was that not everything has to be optimized. We spent a lot of time and effort tweaking everything, including things that in hindsight didn’t matter. However, not everything has to be perfect.
I learned that you need to optimize for the critical elements, while the rest needs to be divided between good and good enough. As an entrepreneur, what you identify as essential to your success can differ, but once you know what it is, you need to invest in making this part of your business great.
PM: Do you think your background as an entrepreneur helps in your VC career?
LH: I think that investors with an entrepreneurial background have a better understanding of the value they can bring to the table, as well as more skepticism during due diligence. It’s not like you can’t become a great investor having only worked as a VC, but being a former founder makes it easier.
PM: What strikes you as the most significant difference between being a founder and an investor?
LH: There are two things. Firstly, as an investor, you can’t immediately measure your actual performance — especially in the early stages. Though there are some metrics, I believe that only an exit allows you to fully judge an investment decision. It usually takes a lot of time to know if you’ve made the right choice.
Secondly, it’s very hard, almost impossible actually, to correct your mistakes. As an entrepreneur, you can usually redirect, abandon, or change the decision you made. It’s ok to make mistakes and adjust the course over time.
However, if you make an investment, and it’s wrong, there is no way to correct it. You stay with it because you’ve already invested. If it’s bad, you won’t see a good result. You can try to pivot and support the company in many ways, to turn a failure into a small success, or a small win into a larger one, but if you missed out on a home run — that’s it.
PM: Have you made any regrettable mistakes?
LH: I haven’t been around long enough to make any catastrophic mistakes yet. At the same time, I assure you that the way I look at some companies a year after I first saw them is very different.
PM: Apart from huge mistakes, what do you struggle with as an investor?
LH: On the personal level, saying no so many times to so many people. Letting down people with great ideas and technology that are not a “home run” for us is a personal challenge.
On the professional level, the biggest challenge is setting apart the one billion dollar companies from the ten billion-dollar companies. I might have made that mistake already, but only time will tell.
PM: Do you think that the expectations towards VCs have changed over the last few years? For example, what used to be a hunt for 1 billion dollar companies (i.e., unicorns) is now a hunt for 10 billion dollar companies (i.e., decacorns).
LH: I do. A return of 3x used to be good enough, but now you’re expected to return 5x on your portfolio. More importantly, I look for potential decacorns because they have a higher chance of becoming unicorns even if they don’t maximize their potential.
PM: How do you feel about the level of competition between VCs these days?
LH: Well, I like the fact that I have to compete for the best deals. If I can’t show the founders that I can bring value to the table, they shouldn’t take my money. It’s also essential to stay relevant over time. For example, as an early-stage investor, should you remain on the portfolio company’s board if you don’t provide value anymore?
More broadly, the VC scene used to look very different. There used to be 20 relevant players in Israel, give or take, but this has changed a lot. I see many non-traditional investors at the early stage these days, a sign of this asset class’s institutionalization.
They invest primarily alongside professional VCs, which is great because we have more money available for our companies. However, I can easily see the competition become even fiercer at some point. Especially if or when those players decide they don’t need a professional to assess a company before they do.
PM: How do you succeed in such a crowded market?
LH: As an early-stage investor, I need to have access to the best founders. It all starts there. Then, it’s crucial to run a fast decision-making process. If you’re dragging your feet for more than a few weeks, then there is a chance it’s not a good investment. You’re also not doing a good service to the founders. Finally, I have to provide value to companies I invested in. For example, giving access to relevant networks, sharing my wisdom, sometimes a nice word, other times a harsh one.
PM: What do you believe will be venture capital’s biggest challenge in the coming years?
LH: Recently, someone told me that VCs are like lemmings, heading off the cliff without control. I’m not sure if that is entirely true, but there’s a notion that everything succeeds these days. I can see why. In Israel, every week last year, sometimes even twice a week, a company went public, reaching a valuation of billions of dollars.
It makes people think every company can do that, leading to inflated valuations and salaries. On the other hand, great founders are asking investors for too much money, which will hold them back when the market settles. I think that we will see more balance at some point.
Equally, I think that the venture capital model itself requires some tweaking. It’s not broken or in need of urgent action, but I don’t believe it’s perfect. The companies that haven’t made it big may need to be released from the fund structure. I can’t say I have the answer for those challenges, but I have learned that you can solve anything if you apply enough resources and energy to a problem.
