Interview with Yifat Oron, Senior Managing Director Blackstone and Head of Israel Office; Israel has long been a very fruitful and productive hub for tech innovation. In 2021, nearly $27 billion was invested in the ecosystem - up from around $3 billion seven years ago. In April 2022, we were fortunate to speak with Yifat Oron, one of our featured Top 100 Movers. Yifat is an esteemed growth investor in the Israeli Tech market. In 2021 she moved to join Blackstone and set up the Tel Aviv office, where she is now building a team & empowering women to thrive in this sector.
Q. Can you talk us through your career to date and what drove your most recent move to Blackstone last year?
I started as an Officer in the Israeli military working for the Ministry of Defence in the R&D department and spent 3 years there. When I had fulfilled my military obligations and graduated, I joined a consulting firm in Israel during which time I was also studying for my MBA at night at Tel Aviv University. I worked with an array of businesses figuring out how to drive results, how to improve revenues and optimize cost structures. I then decided to join an international student exchange programme with Tel Aviv University and transferred to NYU to finish my MBA.
I was lucky enough to hit New York at exactly the right time for recruiting. I received an offer from JPMorgan Chase in their TMT Group in New York. After a few years on Wall Street, I decided to come home to Israel and I joined a venture capital fund called Vertex where I did early-stage deep-tech investing for almost a decade. Towards the end of my tenure with Vertex, I joined the largest Israeli bank to launch and run the first Israeli dedicated technology banking business. Israel, at that time (2013) was huge in tech. We had thousands of companies and a full eco-system, but we lacked the financial institutions that understood technology - especially early-stage technology. That endeavor ended up being the right thing at the right time and we became the No. 1 leading bank for technology companies of all stages. Eventually servicing about 6000 companies with a substantial tech lending business, in 2020, I was introduced to Blackstone and the rest is history. The banking business was mature by then with a global brand name. The machine was up and running and working successfully, so I thought maybe this is the right time for me to go back to my investing roots.
What is the investing landscape like in Israel?
Israel has traditionally been a productive hub for tech innovation, primarily because the country does not have an abundance of natural resources. We have also never had a big enough local market for companies that were founded here. Israeli companies have had to be global from day one because they cannot survive on the Israeli market alone. We have strong fundamental R&D power, both because we have a high level of academia but also, we've built a lot of homegrown capability given out historical fundamental needs. Those factors have led us to be a productive place for budding tech companies. We also had, and still have, a highly advanced venture capital industry with a lot of capital and typically launch between 700 and 1000 new companies every year.
What was the rationale for setting up an office of BX Growth in Tel Aviv?
Blackstone has multiple businesses - Private Equity, Tactical Opportunities, Growth, Energy, and Strategic Partners, amongst others. The firm's decision to open an Israel office was largely a result of the maturity of the Israeli market. Companies in Israel have reached global scale and significant size, creating the potential to be a great fit for Blackstone's various business strategies.
In the first two decades of Israeli tech, the local industry lacked growth capital. It was this which led many founders in Israel to sell their companies to multinational tech companies before they had really realised their full potential. In the last 5-7 years, leading funds with a growth focus have understood the great potential of Israeli companies by providing more capital to allow for extended growth and the ability to avoid selling companies too early. To put this into perspective, we have moved from about $3 billion a year invested in the ecosystem roughly 7 years ago, to close to $27 billion invested in 2021. Israel today houses 8% of the global unicorn count and had 75 IPOs of technology companies on the various equity exchanges around the world.
Q. What challenges do you face as a tech investor, why is it helpful to have a diverse investing team?
The job of assessing a good investment and separating those from the less promising ones is not trivial. Typically, you meet an entrepreneur or team of entrepreneurs, and they tell you what they're going to do. However, it is very hard to judge how successful they will be by their pitch alone. Especially since the entrepreneurs, while brilliant, are often without a prior track record. This leads many investors to invest in entrepreneurs that are closer to them culturally or gender wise, etc. However, at the end of the day, the end users of tech are not all men, or all women, they're not all necessarily American or British, and so on. Therefore, the more diverse a group of people evaluating an investment, the better. Deciding to invest is usually a collaborative process, so it makes sense that if you have a diverse investing team, you're able to judge the investment in a much more holistic and comprehensive way.
In terms of female entrepreneurs, I'd say that historically there were not as many female investors for them to connect with. Women and underrepresented minorities had a hard time getting funded. What they ended up doing is being entrepreneurial regardless, they founded their companies by bootstrapping them, and as a result, used their resources carefully. They very quickly became profitable because they had no other choice. This phenomenon was called the Zebra as opposed to the Unicorn. At Blackstone, we're lucky enough to have strong female representation within our deal teams and have invested in great companies that were founded by female entrepreneurs, which today have grown into successful global leading businesses.
Q. What are the challenges that you and investors are facing right now?
Recent events have shaken the world. Consequently, what will happen with our global economy is somewhat tough to predict. COVID caused funding to be diverted to the most challenged sectors and supply chain issues arose, which also caused inflation to rise. Prices of energy are rising because of the conflict in Eastern Europe. The combination of these factors led to an economy that is highly volatile right now. We have witnessed a complete rewriting of companies' valuations and multiples have shrunk dramatically in the public markets. All these things are potentially going to trickle down; people are going to spend less money; companies may see a reduction in demand which will lead to lower revenue levels and the core businesses may be hurt. Margins are already affected. There are market dynamics that have yet to reach equilibrium. I think as investors, we need to be watching carefully and make sure that companies do not go astray, and their businesses continue to grow. I do believe, there may be interesting outcomes from this uncertainty, because from my own experience, I've seen some great companies that were created in similar times to what we're experiencing now. Those companies tend to be more disciplined with their cash and expense management. They're worried about every dollar and that's not a bad thing!
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