He says SoftBank chief executive Masayoshi Son thinks and operates like no other venture investor in the world.
The CEO of Softbank has been known to outline 30 and 300-year plans, which reflect Softbank’s style of investment.
‘Vision Capital’
“Softbank’s CEO has even coined a new term ‘Vision Capital’ to replace Venture Capital,” Weiss says.
“His vision is to become the 21st century Rothschild for the information revolution the way Mayer Amschel Rothschild and his family did for the industrial revolution.”
He says SoftBank has copped a lot of scorn for its investments, including accusations that the investments were overvalued or ill-timed.
“But they are often part of a master future plan, which only becomes known to the public over time,” he says.
“Softbank’s tentacles spread to almost every industry on every major continent and the ability to add value to their portfolio companies through their web of subsidiary and investee companies is unparalleled.
“If the adage that ‘knowledge and information is power’ is true, SoftBank is hands down the most powerful technology investor in the world.”
Weiss burnished his tech investment credentials last week with his 15th successful exit from an Israeli start-up investment.
This was the takeover by Intel of workload optimisation start-up Granulate for $US650 million ($875 million) – a stunning price compared with the previous valuation of $110 million.
Another successful exit by Weiss was the initial public offering for business intelligence software company SimilarWeb, which listed on the New York Stock Exchange last year.
The company, whose stock has fallen 40 per cent since listing and is valued at $US965 million, has opened an office in Australia.
Weiss says several Israeli government policies could be replicated here to promote increased investment in technology.
Safety net
He says the latest program to encourage institutional investment in start-ups is the one launched by the Israel Innovation Authority to underwrite losses over seven years.
The authority has put aside 2 billion shekels ($833 million) as a safety net for institutions that back a start-up and incur a negative yield.
They will be compensated for up to 40 per cent of their losses.
The program prompted a fivefold increase in institutional investment in start-ups in 2021 to $US900 million.
“If they put that into place in Australia, essentially you would get risk-free investments by the big institutions, but God knows how that would pass through government these days,” Weiss says.
He says the Israeli government encourages angel investors by allowing them to write off the value of the investment in the year of investing.
This is similar to Australia’s Early Stage Venture Capital Limited Partnerships program, which offers tax exemptions from income and capital gains from eligible early-stage venture capital investments and income and gains from disposing of eligible venture capital investments.
Weiss says most of Israel’s successes are in deep tech, business to business software and cyber, which require more substantial investment in product development and a longer time to market.
The Israeli government provides multi-year funding of up to 50 per cent of the R&D budgets.
Israel also has funding programs to encourage workforce participation and high-tech innovation in minority groups, including Arab and Jewish Orthodox communities, to offset the current shortage of skilled labour.
The program is working, judging from news reports that say the number of ultra-Orthodox Jews working in the country’s tech sector has jumped 52 per cent from 2014 to 2018, with women leading the way.
10 lessons from seven years in tech investing
Weiss shared with Chanticleer his 10 lessons from seven years in tech investing.
His first is about the need to build trust with entrepreneurs and fellow investors.
“Successful entrepreneurs and VC funds in the top tier start-ups are very selective in their choice of co-investors, so it is important to be known, liked and well-respected,” he says.
Second, is the need to accept and tolerate prior failures.
“Many successful Israeli companies have been founded by entrepreneurs that failed multiple times before finding success, so keep an open mind when meeting people and be careful not to judge past activities too harshly,” he says.
Third, he says a start-up company needs to think global from day one.
“Success in the home market does not automatically lead to success in a global market so the product or solution should be designed for the major markets from day one.”
Fourth, a company’s culture is critical.
“There is a shortage of skilled labour and a company’s ability to attract and retain talent is key to future success,” he says.
“Outsourcing of skilled labour to countries such as Ukraine and Russia were useful alternatives in the past but cannot be relied on moving forward.”
Fifth, the execution is more important than the idea or vision.
“A company’s ability to attract and retain good businesspeople is no less important than its ability to attract and retain talented engineers.”
Sixth, there is safety in numbers.
“You want to have good, deep-pocketed co-investors around to help in both the good and bad days both with capital and other added-value and introductions,” he says.
Seventh, prepare for the long haul.
“Companies are now remaining private for longer periods and secondary sales are becoming more commonplace as a way for venture capital funds to exit their position.”
It was this lesson that prompted Weiss to launch in Israel a secondary fund that purchases shares in private companies from existing investors, usually at a discount to the valuation.
“We’re picking and choosing investments, and we’ve done $US65 million of investments in the last 18 months and we are launching a new $US100 million fund and the backing is all coming from Europe and the UK,” he says.
His eighth lesson from his tech experience is to be careful of inflated valuations.
“There are often large disconnects between the valuation multiples of private companies versus their public comparables,” he says.
“If a company’s exit plan is via IPO, be careful not to overpay in private rounds.”
The ninth lesson is to maintain good relationships with the founders and management throughout the journey.
“They will very often influence and determine the value of terms of the exit and early, minority investors can often be left out.”
Finally, he stresses the importance of having an exit strategy.
“Know the way out of the investment before you go in,” he says.
“The IPO window is hard to enter and fickle at times and be sure there are plenty of potential private acquirers to reach out to when ready.”
