“The pandemic has created an abnormal situation in the industry and led to acceleration in many businesses and fields and the value of enterprises has reached unreasonable heights. There was overheating which suddenly stopped and led to rethink. But, I like a good crisis because the best companies are built then and it’s a good way to see that we’re focusing on the right things. I’ve built part of my career through crises and I am very excited about this period”, says Mäelle Gavet, who since the beginning of 2021 has led Techstars, the largest accelerator in the world, in an interview with Calcalist. Techstars invests in around 500 pre-seed startups each year, and Gavet believes the coming years are going to be very challenging for the high-tech industry.
“In 2021 we saw companies that achieved unimaginable value with a very small business base and we saw seed companies that were valued in the tens of millions of dollars without any financial consideration. seed investors are supposed to be happy when the value rises but it doesn’t work that way there are companies whose rises in value are unhealthy we still don’t know when the crisis is going to end whether it’s this summer or five years from now. There’s a lot of uncertainty. We have thousands of companies in our portfolio and many investors in our companies and institutional investors who are our partners, and I’ve heard all kinds of opinions from them on the end of the crisis. Nobody really knows what will happen and we teach our companies to be flexible and ready for anything.”
What do you think will happen?
“Unfortunately, what I think will happen is that 2023 and 2024 will be a graveyard for startups. Companies still have a lot of money and there are still big rounds. Some of the companies who received money at a very early stage and did not build themselves are not ready for the crisis Companies that have not had time to raise enough funds are expected to face quite a lot of difficulties .”
Gavet has been in the high tech industry for several years. In her last position, she held a management position in Ori Allon’s company, Compass. From her perspective, she sees a difficult future for the industry in the near term. “Besides the aforementioned graveyard for many startups, I think we will also see a zombie army among venture capital funds, who will not raise new funds. They will work and invest, but mainly deal with money that already exists. There will be many funds that will not survive in the future. There are more than 2,000 active funds in North America, Europe and Israel, and in my opinion, the world does not don’t need that much.
Will the impact of the crisis be different depending on the company?
Gavet thinks the main problem will be with late-stage companies. “We’re in tough times for companies there, with 70% declines in value and great difficulty in raising funds in general. These are companies that were built for a quick IPO, either through the either through SPAC or through a direct IPO, and all of that no longer exists.
“Additionally, companies that issued through SPAC and in general created a negative impact on the industry affect the future. Companies at earlier stages will be able to increase, primarily through their existing investors, even if this comes with a drop in value In the very early stages, I think it is possible to raise, but I don’t see any more insane value scenarios in the seed and pre-seed stages. due diligence that takes much longer at each stage of the investment.”
We see many layoffs in the industry in Israel. Where does he go from here?
“Unfortunately, I feel like we are only at the start of the wave of layoffs and we will see many more in the years to come. I don’t think companies have internalized the crisis and some of the challenges. ‘between them still live off the funds they’ve raised in the past and haven’t yet hit a wall.”
Gavet doesn’t like the industry’s use of the term “unicorn” (a startup that raised over $1 billion), which has become synonymous with success, and she says she doesn’t even never heard of the term “centaur”, which refers to startups that have surpassed the $100 million mark in annual revenue, which she refers to as dragons. “The industry has focused on flashy companies, like Airbnb and Uber, while we see more positive sides in less flashy companies. Unicorns and dragons are mythological creatures. Dragons like to fight and win, so we should be focusing on them and not unicorns,” she says. “The unicorn-only focus has created most of the problems in 2021, growth at all costs, very little financial capability, and we prefer dragons having the financial capacity to weather any crisis that comes their way.”
You worked at Compass, which is of Israeli origin. What do you think of this period?
“Compass has changed the residential real estate market in the United States. In 10 years, they have become the largest real estate brokerage and have invested in technology more than any other brokerage to help their agents be more productive. “
Gavet recently decided to put his familiarity with the field in writing and published a book titled: “Trampled by Unicorns: Big Tech’s Empathy Problem and How to Fix It”, the main focus of which is on the lack of empathy in managers in industry. “Big tech companies create a sense of lack of empathy and don’t think about the impact they have on people,” she says. “Being a good leader is measured by how you influence others, but you have to be aware. My book tried to answer the question of how we have become a very unempathetic industry and how to deal with it. But there is has hope Most companies are not empathetic because they are run by engineers and humans are part of the formula and they try to take people out of the equation and that makes them not empathetic.
“The book was written after working in the industry for 15 years and not understanding why good people make terrible decisions from a human perspective. I tried to understand why companies suffer from a lack of empathy, then I also looked for the solution.”
Techstars is one of the leading early-stage business development programs today. Hila Ovil-Brenner recently retired from managing Techstars Israel, leading Gavet to come to Israel to try and find a new manager. “We have had nine programs here in six very successful years, but we can do more. We are looking for a new manager here and see great importance in Israel. I think we will have two programs next year and we have an obligation to do so the year after also We will continue to invest in 50 to 70 companies in Israel and this is only a small part of what can be invested here.
“We’re like an early stage index and operate all over the world in a variety of industries, such as agritech, edtech and foodtech. We’ve even invested in music and have successes and partnerships there. There is a lot of innovation in the world and I am very optimistic about the Europe, Middle East and Africa region. Israel is a major center of innovation, also beyond cyber and AI There is also a lot of potential in Africa and we have opened offices in Lagos.
What are you mainly looking for?
“An area that has been of great interest to us in recent years is foodtech and agrotech. Food insecurity is something that has not existed for many years. My grandmother may have felt it in the past when she was at war, but it is a phenomenon whose thought was irrelevant until the climate crisis and Russia’s war in Ukraine. This phenomenon requires technological solutions from the world of entrepreneurship .
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