Multifamily property management platforms are proptech's Amazon Alexa

“I’m excited by companies that redefine categories. What’s important to me isn’t the financial engineering through which I’ll be able to show my companies that Fund No. 2, for example, is a 10x fund. That is nice, but the bottom line that is really important is to help build companies like Venn, that we’ll be able to look at five years from now and say that it redefined a category, changed people’s lives, and is worth many billions,” says Dovi Frances, Managing Partner of Group 11. Frances’ fund led a $60 million series B in Israeli prop-tech company Venn, which is developing a platform for creating neighborhood and communal residential experiences.

According to Frances, all five of the unicorns that Group 11 invested in are companies that provide a unique technological solution in their market. He believes that within a month his portfolio will have its sixth unicorn. “The tech companies which we invest in are going to replace some very big companies currently in the market. If we look at the companies currently topping the S&P index none of them were there 15 years ago. Back then it was mainly pharmaceuticals and the old economy and right now the only company that is close to that old list is Saudi Arabian oil company Aramco. I believe in this changing of the guard, which is also a changing of the guard between generations. The Millennials are seizing control of the job market and within two years 80% of the job market will be Millennials and Gen Zs. This changing of the guard will see Sunbit replacing Synchrony, Tipalti replacing Bill.com, TripActions replacing Concur and American Express, Lili Bank replacing the old banks and Venn won’t replace anyone because they simply invented a category,” said Frances.

Venn offers neighborhood residents a technological platform that promotes real and virtual world interactions between neighbors and neighborhoods by combining a set of advanced digital tools, community experts, community managers, and by creating physical spaces and events locally customized. The goal of the company is to create a sense of belonging for the residents and strengthen the business activity for its partners. The company was founded in 2017 by Or Bokobza (co-founder and CEO) and Chen Avni (co-founder and CPO) and is active in neighborhoods in Brooklyn, Tel Aviv, Kansas City, and Berlin. The platform allows its dozens of partners to manage thousands of residential units. The company has raised $100 million to date and is expanding its activity worldwide.

Venn approaches companies and firms that own housing complexes with hundreds of units and shows them how they can become more efficient and cut on their maintenance expenses by creating a sense of belonging between the residents of a particular building, street, or neighborhood. “When we founded Venn we dreamed of building a neighborhood that we would want to live in, one in which when you walk in the street you recognize faces and in which your local coffee shop knows what you like to drink and that if you forget your wallet you can come back and pay tomorrow. We dreamed of building neighborhoods in which you can feel at home due to the communal sense of belonging. Covid-19 brought with it significant growth in many geographical areas and everyone understood that activity within the community helped many people across the world to overcome loneliness and crisis. We will continue to develop our technology with a massive recruiting of the best R&D staff in Israel thanks to the money that we raised, as well as expand our growth team in the U.S.”

Bokobza explained to CTech that the name Venn comes from the Venn diagram that is used to illustrate simple set relationships between groups. “It was our vision to combine and connect the social and the financial circles. Initially, we were told that you can’t make money and also do good, but we refused to accept that. Today we are seeing this attitude in impact companies that aren’t shy about saying that they want to make the world a better place, but also want to make money and build a big company. As our vision of belonging and community is ingrained in the human soul - you need technology in order to scale it. For example, we created something called the Monthly Participating Neighbors index that is based on three elements that technology can measure: the connection between neighbors (how many new people does each resident get to know each year), the number of neighborhood decisions in which the resident participates, and the number of dollars he spends in the local economy. Through this index, we managed to successfully track the progress of our platform in neighborhoods.”

The round also included participation by Pitango, Hamilton Lane, and Bridges Israel. It came on the back of 1,200% growth in 2020 and was raised with the aim of recruiting dozens of new employees for the company’s R&D center in Israel. Venn currently employs 60 people and plans to hire another 75 in the coming months, 50 of them for its Tel Aviv R&D center.

The loneliness plague

“Loneliness is the second-biggest pandemic in the U.S. following Covid-19,” said Frances, emphasizing the significance of Group 11’s investment in Venn. “There are 100 million people in the U.S. who are living in multifamily properties and leave their apartment on average every two years due to a sense of loneliness as they don’t have a community with which to connect. This fundamental loneliness is a plague. Venn is seizing a massive market that currently doesn’t have a real technological solution to create a real connection between people that for landlords results in satisfied tenants that remain for longer.”

According to Frances, the basic thesis of Group 11’s investments has remained the same throughout the years, with all five funds focusing on fintech and of which around 70% of companies are either Israeli, founded by Israelis, or operate an R&D center in Israel. Another element in the profile of the fund’s portfolio companies is that their technological solutions aim to disrupt huge markets, with entrepreneurs identifying broken industries and developing remarkable human and technological solutions to solve them. “Somewhere between the fourth fund and the fifth fund, Israel’s institutional investors like Harel Insurance, Migdal Insurance, Menora Mivtachim, More Investment House, and Hachshara Insurance got excited by our fund’s performance and invested a lot of money. If in the initial funds some 90% of the money came from American investors and 10% from Israelis, now it has changed to 60% Israelis and 40% Americans.”

Over the past few weeks, Group 11 has embarked on an unusual campaign in the world of Israeli VCs, advertising on massive billboards in some of the country's busiest highways as well as across traditional media. The campaign is calling for potential employees to come work for Group 11’s portfolio companies and benefit from lucrative conditions.

Do you think that this campaign can really change something and push employees to Group 11’s companies? After all, the shortage of talent in Israeli hi-tech is so significant that if you hire someone that means another company must have lost them.

“My commitment is to my clients. The entrepreneurs on the one hand, and the institutional and private investors on the other hand. They want just one thing: that I will make sure that we are winning. That is all. My interest is to attract the best manpower available in any way possible. The rules of the game in this competitive market are changing for everyone, including VC investors. This is a unique campaign as it is the first time that a VC is directly approaching the consumer. It is an aggressive and very expensive campaign. The idea isn’t to generate focus on the fund, but on its portfolio companies.”

Are you already seeing any results from the campaign?

“We are still tracking the information, but it must have succeeded as some of the companies are reporting a 50% increase in job applications. In addition, the campaign works in that it creates a sense of belonging for the current employees of these companies. This is just good for recruitment and also for retention. I think this teaches the other funds in Israel a lesson: the good days are over. It won’t be easy to win, there are many fundamental issues that need to be addressed and you need to change the rules of the game in order to succeed as VC managers. We are challenging the old conventions. There are around 850 openings at Group 11’s portfolio companies and if you look ahead to the goals of the coming year this number could reach around 2,000 openings.”

But this doesn’t solve the basic problem of a chronic shortage of tech employees.

“True. The solution can come from companies that make money from financial engineering, which is essentially not real, should they drop to their actual necessary size and ultimately release good employees back into the market. Another direction is in training engineers through technological solutions that are different to what is being done today.”

When you say financial engineering to you mean the wave of SPACs that have washed over the tech industry?

“A SPAC is a means not a goal, just like a direct listing is a way in which to go public or M&A is a way to provide liquidity for shareholders. This is another option and I can’t criticize it for what it is, but rather the demand for this option. The number of SPACs isn’t sustainable, just as in my opinion the number of unicorns out there isn’t sustainable. In September there were 350 unicorns and now there are 700. This isn’t sustainable because there aren’t 700 categories out there to invent or disrupt. The same goes for SPACs. Of course, there will be good SPACs that win, if they combine good sponsors with winning companies.

“eToro for example is a wonderful company and I really appreciate what they have built. They chose to do a SPAC even though they could have also taken a different course. That is fine and they can continue to do great if they continue to run the company the way they have done so far. Other companies like Wish.com who didn’t do a SPAC or an IPO have seen a drop of 70% in the value of their stock in six months. Something in the company must be fundamentally not very good. That is why the methodology of an IPO, an acquisition, or whatever isn’t what actually matters, but rather if in your essence you are a product of financial engineering or whether you are creating a revolution. Usually, entrepreneurs and investors can answer this question themselves.”

What sectors are you wary of investing in?

“I don’t look at cybersecurity, gaming, edtech, or agtech. While these are really cool, I don’t really understand them so I simply stay away. From crypto, for example, I’m extremely wary. I’m not willing to touch this sector even though I have many friends who believe in it and I appreciate their conviction. I don’t understand how you can go to bed at night and then wake up in the morning and it is suddenly worth 30% more or less. I’m not willing to live with that.”

So perhaps you are actually part of the old guard which you spoke out against earlier?

“I’m from the generation that can understand the old economy and the new economy and within that spectrum, I can invest in anything which I can understand how it can make money. If the only way in which it makes money is by you investing after me - I’m not going to be investing in that.”