The years 2021 and 2022 saw a steep rise of tech startups raising funds left and right – a first since the .com era. But when we hit 2023, we’re seeing that the market is making a strong, aggressive correction, especially with early-age startups.
In this exclusive interview, I talk to Tal Abuloff, a renowned VC investor at Grove Ventures, to discuss the current state of the startup markets, secondary deals, and how Grove Ventures values startups.
In this thought-provoking conversation, Tal Abuloff shares her insights on the dynamic landscape of the startup markets. She delves into the challenges and opportunities faced by entrepreneurs in today’s highly competitive environment and provides valuable advice on how startups can navigate these waters.
Omri: Tal, you’re an impressive individual. You studied at Harvard Law School, and Grove Ventures is your first big official role, is that true?
Tal: Yes, in a way. Before I went to Harvard Law School and joined Grove, I was a clerk at the Court of Israel. But this is, I guess, the first “grown-up” job. And I think it’s the first time that I actually found my purpose as far as my career goes. I did a lot of positions throughout the years. I used to work in a startup company, a law firm, and then the Supreme Court, and all this time, I had questions like “Is this it?” “Where do I land?” “What do I do when I grow up?” and I think ever since I joined Grove, I kind of settled in in my natural habitat.
Omri: When you joined Grove Ventures a year and a half ago, the tech bubble was booming. We’ve seen startups raising funds at a pace we’ve never seen before. But now, we’re seeing that the market is making a strong, aggressive correction, especially with early-stage startups. What’s your take on that and how does that affect your work?
Tal: I think we all feel it in the VC scene in Israel. When I first started, we see deals getting done quickly. We didn’t have as much luxury to dive deep into markets and ask all the questions we usually do, and we have a very specific timeframe to decide if we were going to invest or not. And now, I think it’s a bit more relaxed. In Growth Ventures, he had a lot of luck in the way we raised a third fund in December 2022, more or less when I joined the firm. So we weren’t personally affected by it. We did have a lot of capital to spend, but we do feel like the general ecosystem has called down a bit. Having said that, we still see a lot of deals happening and a lot of excellent entrepreneurs building amazing stuff. So I wouldn’t say that we’re at a standstill, but there’s definitely a difference.
Omri: Do you feel like there’s more emphasis on analysis and research? And do you feel that there is less stress in the office to actually make quick decisions?
Tal: That’s a complicated question, I think. It was always in Grove Ventures’ DNA to do very thorough due diligence. We never skipped any steps. We always dive deep into our analysis. We always interviewed a lot of people before making any decisions. We always built a thesis surrounding the investment before investing. It’s a yes and no, I guess. In a way, we do have more time. It’s a bit more relaxed. I do feel like the entrepreneurs choose to wait for the right investor, and not just make an opportunistic round. But I wouldn’t say that we’re not stressed or completely relaxed. We want to make deals, and we want to do it in a proper time frame. We don’t want to exhaust our founders. We have our own framework for doing stuff, and we pretty much stick to it.
Omri: You talked about thesis. When investors talk about thesis, or if they’re hedge fund managers, I can understand that. But if you take like Bill Eichman and he says “I’m a value investor, I’m an activist investor, this is my thesis.” But if we translate that to the VC world, it gets more complicated because the time you need to spend with each of those investments is much longer. The rising is much longer. The investment isn’t liquid. There are so many factors at play. How do you approach building a thesis?
Tal: When I mentioned the thesis, I mostly refer to the thesis surrounding the product, the market, and the team. We’re an Old Stage fund, so usually when we need entrepreneurs, we don’t have much but the founders and the smile. They have an idea, they have the market they’re going to operate in. But we don’t usually know much else. The product can pivot a lot throughout the way. Sometimes they can even change the market. So how can you make an informed decision based on so little? Some funds are more intuition-based and less thesis-driven, but we are not so much like that as we try to analyze everything that we possibly can before investing. And this relates to the founders themselves – interviewing them and spending a lot of hours with them. We try to gather as much information as possible – trying to understand this market, what’s the balance between different players, and where can you add value. Then, there’s the question of technology. We only invest in companies that have significant technology to them, so we do a lot of due diligence on that part.
Omri: So what happens when you’re investing in an idea but 2 years later, you see that the market has shifted?
Tal: I think when we reach such a point when a pivot is made, it’s usually after a lot of discussion with the board, a lot of validation process, and a lot of due diligence process on our part and the founder’s part. We usually see ourselves as partners of the founders. If they decide to make such a move, they have our approval and help to do it. We take into consideration that, when we decide to invest, we don’t know the full picture. We understand that it’s part of the process, and we will try to help them as much as possible.