A fine batch of Israeli high-tech talent showed up for the conference hosted by law firm Amit, Pollak, Matalon two weeks ago. One star at the event was Moshe Hogeg, founder and manager of the venture capital fund Singulariteam, which was crowned the most active of its ilk in 2015. It made 12 new investments, according to Amit, Pollak, Matalon and research company IVC.
- Israeli start-up takes on Internet giants with photo search app
- TechNation: Singulariteam made 12 first investments in 2015
- Story of Yo: The app about nothing and everything
Hogeg didn’t mingle much. “He sat on the side,” says an industry source. “In social terms, you could say the high-tech people are afraid of him, or daunted by him. They figure, let’s stand aside and see what happens with him.”
Why? “He’s a young entrepreneur from Be’er Sheva who came out of nowhere; someone who isn’t connected to those guys in 8200 [Military Intelligence vets], and who set up a company in the United States. And there’s a big question mark over whether he knows what he’s doing as an entrepreneur.”
In the venture capital world, the norm is one to two investments a year, so 12 is extraordinary, especially for a brand new fund. Hogeg’s style is also anomalous for the industry. He’s ostentatious. He doesn’t waste time on modesty. He snorts at the models of other VC funds. He talks a blue streak, crassly and with confidence. And he can elaborate on the technology of all the companies he’s invested in.
Hogeg drives a Mercedes S-Class, and he has a personal assistant and two PR firms on the payroll – one for the Israeli market and one for the American. one. When receiving a reporter, he's dressed in a white T-shirt and scuffed black pants. But when you look closely, they look expensive.
It’s hard to ignore the fund’s offices on the 18th floor of Tel Aviv’s Museum Tower. The conference room features a statue of the superhero Iron Man, the hallway is graced by a portrait of Vladimir Putin, and the coffee table is made out of train-track rails.
Hogeg’s office is crammed with statues, pictures, model cars and superhero action figures. Is there a message behind the Putin portrait? “No, it’s just a joke by one of our investors,” Hogeg says.
Why Iron Man? Hogeg says he likes superheroes – “But as I matured, I connected less with supernatural powers and more with technology and science. That’s Iron Man.”
Hogeg has been in the business for less than two years, but in that time he has set up three funds and raised more than $150 million. Singulariteam has invested in 30 startups and is in talks with five more.
The money Singulariteam raised probably generates management fees of over 15 million shekels ($3.8 million) a year, and the fund has already achieved some exits – it has sold stakes in startups.
“I work 15 to 16 hours a day, constantly traveling the world. I get more done because I’m young and super-professional. I constantly learn through online courses and I’m always researching,” Hogeg says.
“And I make money. What am I supposed to do, enjoy it in my grave? Wait for the high-tech community to give me permission to spend it? I earn my money. I pay taxes, a lot of taxes. Why can’t I buy an Iron Man if I like it? I like coming to the office when there’s an Iron Man there.”
Hogeg stresses that everything he has is the fruit of his hard work. “And how much do these statues cost? 5,000 shekels?” he says. “I don’t have paintings here by Leonardo da Vinci. And if there were, I’d be proud of them.”
Serena Williams and Lance Armstrong
But he’s flamboyant, which stand outs in the conservative venture capital world. And it will take a few years before that world knows whether Hogeg really has a knack for finding promising startups.
“He raised a lot of money, that’s hard to argue with,” says an industry insider. “It’s hard to raise sums like that but regarding Singulariteam, the jury is still out.” And it’s not extraordinary anymore that Singulariteam has Chinese investors.
But Singulariteam has an unusual mix of backers; no big American banks, but managing partner Kenges Rakishev, the billionaire son of the Kazakh prime minister, and Mexican billionaire Carlos Slim.
And Russian billionaire Roman Abramovich is in one of Singulariteam’s startups, while among the backers of its very first startup – the mobile photo and video-sharing website Mobli – are Leonardo DiCaprio, Toby Maguire, Serena Williams and Lance Armstrong.
“Why did I choose celebrities as investors? Because I thought I’d get a lot of marketing. I thought they’d bring me people who would stay. It wasn’t true, because you can’t fake authentic content. If DiCaprio had uploaded to Mobli pictures of himself brushing his teeth, it would have worked,” Hogeg says.
“But when he uploads pictures of tigers that need saving or promotions for his next movie, people don’t care. What people want is Justin Bieber in a selfie. Two years ago, I didn’t know that.”
Other big names are associated with Hogeg. Asked why former Prime Minister Ehud Olmert, who’s now in prison on a fraud conviction, was chosen to chair the first Singulariteam fund, Hogeg explains: The fund’s Kazakh limited partner thought Olmert could open doors.
So did he? “Yes.” Another big name was Yuval Rabin, son of the assassinated Prime Minister Yitzhak Rabin. The younger Rabin worked as a consultant.
Hogeg was born in Be’er Sheva and grew up in nearby Meitar to a housewife and a career soldier. He served in the army’s canine unit and spent four more years as a company commander. He graduated from high school but that’s it. He may not have degrees, but he’s constantly learning.
From age 15 he’s been online. “At night we’d switch the modem line and phone line and play at hacking into forums and managing them,” he says. “We’d send a Trojan horse to the video game Digger and take over people’s computers. On ICQ I’d look for people who chose usernames like Hitler and plant an Israeli flag as their screensaver.”
Keen on math and psychology
His first startup was Web2Sport, broadcasting Kiryat Shalom soccer games over the Internet, but the timing was bad – the financial crisis erupted in 2008 and nobody would put a cent into anything. So he did all sorts of things.
The in 2010 he founded Mobli, moved to New York, founded the fund, and returned to Israel. Mobli, which has raised tens of millions of dollars, competes with Instagram and is still trying to prove itself.
Rather than wait for an exit, Hogeg skipped to the next phase – venture capital. Usually technology investors achieve an exit and get into venture capital with their gains, but Hogeg says he does have an exit – he made money on Mobli after Carlos Slim and others put $60 million into the company and insisted he take some profits.
Hogeg distinguishes between startups that involve risk because the technology is unproven, and startups that don’t, like financial technology, FinTech. “There’s no technological risk,” he says. “It’s a matter of time, that’s all. But venture capital funds that get most of their money from pension funds don’t see things that way.”
The first Singulariteam fund is the only one with results so far. One of its startups, Storedot, raised nearly $70 million, notably from Samsung, Abramovich and Chinese companies.
Good funds achieve an internal rate of return of 12%; Singulariteam doubled its money on Storedot, Hogeg says. The investors could exit it any time, but he thinks it will keep growing. He says another great investment by the fund was the virtual reality startup Infinity.
Another is Effective Space, which builds minisatellites and which Hogeg believes could be bigger than Storedot. “A microsatellite is like a tow truck; it sticks to the satellite and evacuates,” he says. “It can carry out six such missions a year, which translates into $120 million to $160 million a year.”
As Hogeg puts it, “My philosophy is to invest at an early stage in startups with a fantastic team but only with experience. So the average age of our CEOs is 37, while in the industry it’s 25. I also don’t invest unless there’s a clear business model, despite what people think because of the success of Yo.”
All the Yo app does is let you send the word “Yo” to your smartphone buddies, along with an amusing sound. That’s it, yet it broke a record for achieving a million users. “In four days we brought an app from zero users to a million, so I guess we know products and understand the Internet,” Hogeg says.
So how does he get people like Carlos Slim to put in money?
“I say that I’m a psychology and mathematics enthusiast, that I have tens of millions of users who can attest that I know how to build products,” he says. “Very few entrepreneurs can reach numbers like that.”
People invest based on faith, professionalism and the existence of a plan to achieve returns, he adds. “I say, listen, Israel is fertile ground for early-stage investments, and better for investments than Silicon Valley because company valuations are better here than in the U.S. After all, in the States, everybody is full of themselves and every ex-Facebooker wants a company value of $20 million for a startup. What? You just opened up yesterday. People are a lot more modest here.”
Hogeg begs to note that he’s not a banker.
“The way you see me now, that’s how I go to meetings with bankers. I build companies,” he says. “I know how to say ‘that’s the entrepreneur we need,’ I know what the company structure should be, I know when the direction needs to be changed. I know how to obtain the right team and build it. Even people who don’t admire me say I know how to market.”
To know marketing and sales is critical for companies, he says. When they want to raise money and go beyond Israel, they see his team has global contacts. “I may be young, but I have strong connections in South America, the U.S., Russia, China. There are bigger mysteries than us,” he says.
“It’s a mystery when a pension fund lets the former CEO of an insurance company manage $200 million in startups in Israel. We aren’t a mystery. We’re professionals who work hard.”