Oren Zeev is not the classic investor. He has no partners or analysts, and his office is actually a café (Café Venetia) in Silicon Valley. Since 2015, Zeev has headed his own venture capital firm, Zeev Ventures, which manages $1.65 billion he has raised from the endowments of leading universities and private investors such as Peter Thiel. In 2021 alone, Zeev invested $683 million – $170 million for 10 new startups and the rest to beef up existing investments – a pace and scope similar to that of a massive venture capital operation with dozens of people.
Zeev is not committed to any specific strategy, but mostly he invests in the first stage of a startup, often as its first and main investor. He now sits on the boards of 30 companies, but he only attends the meetings in person if they are a short drive away – otherwise he pops in via Zoom.
“It’s 30 two-hour meetings a quarter, in other words, twice a week,” he explains.
Last month he was profiled by technology news site The Information, and in the interview he opened his books and showed how his fund had performed. Those numbers, as well as additional figures regarding specific investments provided at the request of Haaretz, are being presented here.
Zeev’s investment portfolio does not echo with the iconic names that made the careers of many venture capital investors – and he does not maintain a brand image in leading investment circles, the way Mark Andreesen from the a16z fund or Bill Gurley from Benchmark do, wrote The Information. His Twitter account has less than 3,000 followers, but the figures from his fund reveal that underneath the radar he is making phenomenal yields – on paper at least.
For example, the first fund from Zeev Ventures started in August 2015 – its vintage year as the professionals call it – with $20 million; and it has an annual internal rate of return (IRR) of 49 percent, or an 11.3 multiple (TVPI). In plain terms, the fund received $20 million from investors and today its holdings are worth $226 million – on paper. The second fund with $50 million, which Zeev completed raising in February 2016, is now worth $660 million on paper, a 13.2 multiple, with an IRR of 72 percent. All these amounts are net – after deducting Zeev’s 30 percent share of the fund’s profits (carry), and the 1.25 percent in annual management fees – which represents Zeev’s salary.
Venture capital is a risky channel for investment and problematic from the viewpoint of institutional investors, and they expect outsized returns that match the relatively high risk compared to investment benchmarks – usually indexes such as the S&P 500 or the Nasdaq, which have no management fees and are completely liquid. The comparison between Zeev’s first two funds and these reference indexes shows that the Nasdaq had average annual returns of 20 percent and 24 percent, respectively, during the same period – and the S&P 500 had yields of 16 percent and 19 percent. In short, Zeev beat the indexes hands down.
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Zeev’s seventh fund, which the fundraising was completed for back in January 2021 – a total of $284 million – is already worth, on paper, three times that: $824 million. During that same period the Nasdaq returned 22 percent on an annual basis and the S&P 500 returned 29 percent.
Zeev’s returns may be even higher in comparison with the reference indexes because the money committed by the funds’ investors when the fundraising is completed – is not invested immediately, but instead it is invested over a period of a number of years. Nonetheless, IRR is also a result of timing – it is based on the valuations of the companies in their latest rounds of investment. Quite a number of technology companies have benefited from the rising high tech sector over the past two years, and this has allowed them to raise money twice – and sometimes even more – within a relatively short period of time. It is possible that the fall in the markets will also have an effect on Zeev Ventures’ startups and the valuations of some of them may tread water for a number of years. In that case, the value of the funds’ holdings will still remain high – but the annual returns will drop.
So far, Zeev has made about half the money in the first two funds – $30 million – liquid for his investors, his LP’s (or limited partners) as they are called, as part of a secondary deal with Next Insurance, an online insurance company headquartered in Silicon Valley founded by Israelis, but the rest of the money is still only on paper. Currently, Zeev is raising his tenth fund, with a $500 million goal, less than a year after closing the ninth with a similar sum.
A new method
Zeev directs on average about 80 percent of the money in his funds to follow-on investments in the startups he backed when they first started out, he told The Information. Among the follow-on investments he has made in the past year, he mentions the online course company for “creatives” Domestika. In 2017, Zeev Ventures held about 26 percent of the startup after writing it a check for $9.4 million. Today, it owns a 48 percent share, after investing $148 million through all the company’s fundraising rounds. The most recent valuation for Domestika came in its funding round completed in January of this year: $1.3 billion. Similarly, Zeev has increased his funds’ holdings in Firebolt, an Israeli company in the “cloud data warehouse” business, from 20 percent in 2019 to 26 percent in 2021 – in a fundraising round that valued the company at $1.4 billion.
Zeev Ventures has quite a few investments in prominent Israeli firms. Until not long ago, it was the biggest investor in the business tourism startup TripActions. Zeev’s first investment in the company was done at a value of $10 million for the firm, and today its valuation, on paper, stands at $7.3 billion. The fund also has a holding of between 5 percent to 10 percent in the design marketplace startup Houzz, which is valued at $4 billion. When Zeev bought his first shares in the company at a valuation of only $3.6 million.
Zeev, 57, grew up in Haifa. His father was a professor of electrical engineering and his mother was an economist. He got his bachelor’s degree in electrical engineering from the Technion – Israel Institute of Technology in Haifa and has a master’s degree in business from INSEAD. He worked as an engineer in the multimedia group and in chip design at IBM, and in 1995 moved over to the investment business at private equity firm Apax Partners. After 12 years there, he took time out to work as a math teacher in California. From 2008 to 2015, he invested only his own money – before starting his own fund and managing other people’s money. His personal net worth was recently estimated by Forbes Magazine at some $3 billion – a large part of it only on paper for now.
One of his prominent successes was the audiobook and podcast service Audible. Today it is a huge company owned by Amazon. It was on the verge of being shut down when Zeev led an investment round in it in 2003, and a year later Audible had its IPO and was sold to Amazon for about $300 million. Apax saw a 12-times return on its investment.
Don Katz, Audible’s founder and executive chairman, told Haaretz two years ago that the $130 million return that Zeev received might not sound like that much money, but it seems that was one of the most successful venture capital investments at the time. "It's fashionable today to put the founder at the center and offer an entire ecosystem that works for entrepreneurs - but Zeev invented this system years before the trend", said Katz.
As an independent investor, Zeev led an early funding round for Chegg, which provides services for students – such as textbook rentals and online tutoring. Chegg had an IPO in 2013 at a company value of $1.1 billion, reaching a peak of $14 billion in 2021 and now valued at $2.5 billion.
The original version of this article was published in Hebrew on April 9, 2022.