“Looking ahead to 2024, we anticipate a continued uptick in both the volume and number of deals”

“Looking ahead to 2024, we anticipate a continued uptick in both the volume and number of deals, surpassing the momentum of 2023,” said Shay Grinfeld, Managing Partner at Greenfield Partners. “This expectation is buoyed by the ongoing improvement in global tech markets and the accelerated proliferation of AI, which are poised to unlock significant opportunities for new startups.”

The VC fund most recently co-led a funding round in Exodigo, which has developed an artificial intelligence solution for underground mapping.

Shay Grinfeld, Managing Partner at Greenfield Partners.

“In parallel, the broader global investment ecosystem has gotten more ‘fit,’ carrying lessons learned from the boom of 2021-22 in exercising more prudent and healthier investment practices,” he added.

VC fund ID
Name of the fund: Greenfield Partners
Total assets: Nearly $1 billion
Leading partners: Shay Grinfeld, Yuda Doron, Avery Schwartz, Nir Goldstein, and Raz Mangel
Latest investments in Israel: Exodigo
Selected portfolio companies: VAST Data, BigPanda, Silverfort, Coralogix, Torq

From your perspective, was 2023 a ‘lost year’, or can the events that happened during it be seen as a springboard for opportunities in 2024?

The events of last year have undeniably been a catalyst, turning potential hurdles into springboards for opportunities in 2024 and beyond. We predicted last year that 2023 would be ‘a return to fundamentals’ and from our vantage point, this was far from a ‘lost year.’ Instead, it set the stage for nurturing robust fundamentals in startups, laying the groundwork for sustainable, long-term growth.

As a result, we believe the tech ecosystem is emerging stronger than ever in the years to come. Despite challenges, 2023 witnessed significant funding rounds for some of the ecosystem's most successful companies. Moreover, a promising cohort of early-stage startups founded this year signals a trend we believe will lead to substantial growth in the near future.

What do you believe is more crucial to the state of Israeli tech: the influence of global processes and the global economy, or the local events ranging from the political protest to the war state?

It’s obvious the local market is deeply intertwined with the global tech ecosystem. While events within Israel have left some marks, their impact on the tech ecosystem has been relatively minimal. This resilience is further underscored by the continued robust activity of top global funds within the local ecosystem.

Has the prestige of Israeli high-tech been damaged, or are the protests and the war merely a 'small bump in the road' from which the sector can recover within months?

The recent protests and conflict represent a small bump in the road, but the resilience of the Israeli high-tech sector remains unshaken. We’re seeing evidence of this in the sustained revenue growth from both public and private companies within the ecosystem.

Furthermore, the continued strong interest from global investors to deploy capital into the local ecosystem, even at the height of recent conflicts, underscores the sector's robustness and global confidence in Israeli tech.

While significant, historically the Israeli tech community has been able to navigate these challenges with agility, suggesting a swift recovery and a return to its trajectory of innovation and growth.

How much effort was required of you to maintain the fund's status with your investors in 2023? What were their primary concerns and how did you address them?

Our global investor base has remained highly supportive of our fund and activities, reflecting a strong foundation of trust and alignment with our strategic vision. Maintaining this status required diligent effort, particularly in ensuring transparent and ongoing communication with our global LPs. We took a proactive approach to keeping our investors informed about the local situation and its minimal direct impact on the performance of our portfolio companies and the local ecosystem.

How are you preparing for the most pessimistic scenarios, such as the continuation of the war in Gaza deep into 2024, the opening of another front in the north, or further reduction of government support for high-tech?

Greenfield Partners continues to take proactive measures to ensure the strength and resilience of our portfolio companies, no matter how pessimistic the scenario may be.

We work closely with the management teams, guiding them toward operating efficiently while maintaining substantial cash reserves. This approach is designed to provide them with a robust financial runway, enabling them to not only survive but thrive, even if challenging circumstances persist.

Despite the current uncertainties, we're encouraged to see our companies continuing to exhibit strong growth, with no material deterioration in performance observed. This preparedness and underlying strength position us and our portfolio companies to navigate potential adversities effectively, maintaining our commitment to long-term success and growth.

Did you raise fund money in 2023 for an existing fund or a new one? What are your expectations regarding this matter for 2024?

Last year we meaningfully grew our AUM, underscoring the trust and confidence our investors place in us.

How many investments did you make in 2023, and how does it compare to 2022?

We significantly ramped up our investment activity in 2023, identifying several new investments that we strongly believe will serve massive markets, reflecting our commitment to fueling innovation and growth within the tech ecosystem.

Throughout the year, we completed three new investments in floLIVE, Torq, and Exodigo, along with six follow-on investments, marking a substantial increase in the number of deals compared to 2022.

In your view, will the amounts and/or the number of deals in 2024 be more like those of 2023 or 2021-22?

Looking ahead to 2024, we anticipate a continued uptick in both the volume and number of deals, surpassing the momentum of 2023. This expectation is buoyed by the ongoing improvement in global tech markets and the accelerated proliferation of AI, which are poised to unlock significant opportunities for new startups.

In parallel, the broader global investment ecosystem has gotten more ‘fit,’ carrying lessons learned from the boom of 2021-22 in exercising more prudent and healthier investment practices.

Which high-tech sectors will you focus on in the upcoming year? Which areas will maintain their prominence, and which ones appear less attractive?

In the upcoming year, we anticipate AI's significant advancements to drive innovation across nearly all software and tech sectors, cementing its role as a cornerstone of our investment focus. Our targeted areas will include companies benefiting from these tailwinds like Data & AI Infrastructure and Applications, Cybersecurity, Enterprise SaaS, and Fintech.

Which type of companies stand a better chance of garnering increased attention from VC funds this year - early-stage or advanced rounds?

We believe a healthy company is a healthy company, both across the early and late stage. However, a notable trend from 2023, expected to persist into 2024, is the heightened threshold for securing attractive financing at both stages, shifting away from the lenient criterium of 2021-22.

Late-stage companies demonstrating rapid and sustainable growth, akin to our portfolio companies like Vast Data and Silverfort, are likely to continue to secure favorable financing terms. Simultaneously, the burgeoning innovation in AI presents massive opportunities, prompting the formation of early-stage startups aimed at tackling challenges previously locked behind bespoke solutions.

What changes will you implement in your approach to evaluating investments in startups in the coming year, compared to the previous two years? What practices will you abandon, and what criteria will you now demand from founders?

We’re evolving our investment approach to accommodate the massive disruption caused by AI across all software categories. A key change will involve a deeper focus on the defensibility of a product and its long-term moat, particularly considering the pervasive undercurrent of AI innovation.

Startups that not only navigate this disruption but also leverage AI to enhance product functionality, as well as optimize their go-to-market (GTM) strategies will be positioned favorably this year. This shift means deprioritizing practices that emphasize growth at all costs without a clear differentiation or competitive advantage in an AI-driven landscape. Instead, we're seeking from founders a clear articulation of their AI strategy and how it fortifies their product's position in the market, ensuring sustainability and growth in an increasingly AI-dominated arena.

Do you think it is likely we will witness encouraging IPOs, the emergence of unicorns, or remarkable exits in 2024?

Whether 2024 will bring a wave of IPOs, the emergence of new unicorns, or remarkable exits remains to be seen. The opening of the IPO market is uncertain and may either materialize in 2024 or take longer, heavily influenced by macroeconomic conditions and U.S. inflation rates. Despite this uncertainty, there exists a strong cohort of Israeli companies, such as Wiz, Tipalti, and TripActions, that are at IPO scale and could lead significant market movements once conditions improve.

In parallel, we anticipate a more measured emergence of unicorns as the market rebounds. These new unicorns are expected to not only exhibit rapid revenue growth but also demonstrate significantly larger revenue bases and stronger fundamentals than their predecessors, reflecting a shift towards valuing sustainable growth and solid business models over-inflated valuations.

Provide an example of an intriguing investment you made in 2023. What sets this company apart, or what is distinctive about its sector?

A notable investment we completed in 2023 is Torq, a cybersecurity company that's driving hyper-automation within cybersecurity utilizing AI.

Torq, founded by veterans within the cybersecurity space, is revolutionizing automation and efficiency for customers within security operations. The company, utilizing the latest in GenAI, offers security teams a no-code platform that allows for seamless integration of security infrastructure and communication tools. This capability not only automates workflows across these systems (saving considerable time and resources) but also significantly strengthens the security posture of organizations.

As cybersecurity continues to be a critical concern, Torq's role as an AI enabler within this space has provided it with significant tailwinds.

We believe Torq's distinctive approach and the value it brings to the cybersecurity sector highlights its potential to impact and transform security automation, a theme we believe will be top of mind in 2024.

Practical and current tips for founders planning upcoming money-raising efforts:

In today's growth-stage investment landscape, investors prioritize companies equipped with the right infrastructure to support rapid growth and expansion. We recommend founders to focus on the following GTM elements before fundraising:

1. Implement Scenario-Based Budget Planning: Prepare for various market conditions by adopting a flexible budgeting approach. This strategy should enable you to balance prioritizing growth and emphasizing efficiency, depending on market sentiment and your company's performance. Being able to present a well-thought-out plan that adapts to these conditions can significantly boost investor confidence.
2. Focus on Account Management: Enhancing your relationships with existing customers can be a game-changer. Invest in practices that not only retain customers but also expand revenue within your existing base. Improving your Net Dollar Retention (NDR) through efficient account management demonstrates to investors your capability to land cost-effective revenue streams and leverage the foundations you've already built.
3. Strategize Sales and Partnerships for Territory Expansion: Develop a sales and partnership strategy that emphasizes doubling down on your key territories while also exploring growth in secondary areas with minimal expenditure. Showing investors that you have a strategic approach to scaling, one that maximizes impact while minimizing costs, sets you apart in competitive fundraising landscapes.

Name two portfolio companies that you think will thrive in 2024:

VAST Data
Sector and description: The Engine for AI-Powered Discovery / AI & Data Infrastructure
Funding: $400M
Founded: Renen Hallak, Jeff Denworth, Shachar Fienblit, and Alon Horev in 2016

Why is this their year?
VAST Data, fresh off their $118 million Series E funding, unifies storage, database, and containerized compute engine services into a single, scalable software platform architected from the ground up to power AI and GPU-accelerated tools in modern data centers and clouds. The platform uniquely enables organizations to understand all data, both structured and unstructured as it exists in the natural world, to generate superior insights and unlock new value.

Exodigo
Sector and description: Solving the Underground / Construction Tech
Funding: $120M
Founded: Jeremy Suard and Ido Gonen in 2021

Why is this their year?
Exodigo stands at the convergence of pioneering technology, a critical market need, and visionary leadership. Their groundbreaking AI and non-intrusive mapping solutions address a multi-billion dollar challenge in the construction industry, offering unparalleled accuracy and efficiency in underground infrastructure detection.

Led by a team of elite IDF veterans with deep expertise in signal processing and artificial intelligence with several strategic partnerships in place and a robust go-to-market strategy, Exodigo this year is poised to disrupt and dominate a sector ripe for innovation.