Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Oded Hermoni was recorded in October 2017.
Oded Hermoni is Managing Partner at Rhodium Venture Partners, and is also co-founder of an Angel group, J-Angels.
Sramana Mitra: Tell us about Rhodium. What is the focus of the firm? How big is the fund? What sized investments do you make?
Oded Hermoni: Rhodium is not the typical fund. It’s an Israeli-US investment arm of a family office. We have only one LP. We invest in certain areas and certain geographies. We invest in early-stage companies.
Sramana Mitra: How do you define early stage? Can you be a bit more specific? I’ll qualify that question by highlighting that in the current early stage investment universe, we have had a lot of change. It used to be seed and Series A. Now it’s pre-seed, seed, post-seed, pre-Series A. It’s a very wide spectrum even within the early stage investment. How do you qualify your specific activity? What part of this continuous do you play in?
Oded Hermoni: I agree with you. It used to be much more organized and structured. It’s mostly about equity. We usually invest hundreds to millions. It’s also about that. I would say that we are pre-A. Sometimes, we are the first money. Sometimes, we are coming as the extension of the seed round.
Sramana Mitra: I probably would call that as post-seed or pre-Series A.
Oded Hermoni: Generally, it’s before A round. We invest in different geographies. In US, we see a difference in the valuation. A seed round in Israel for example could have a valuation of $3 million to $4 million while raising $1 million. In Silicon Valley, it would probably go to $6 million to $10 million while raising up to $4 million. There’s an arbitrage that is happening between the two geographies. It’s about 30% to 50% in the valuation. Because the cost of employees in Israel is much less than in Silicon Valley, you don’t need so much money, at least, at the seed stage.
Sramana Mitra: Denomination-wise, you’re talking several hundred thousand dollars to a million dollars? Is that the kind of investment you make?
Oded Hermoni: We do much bigger checks. We did a $15 million check. Where we feel more comfortable is to get in an early stage with the company. When people talk about added value, it’s not something very defined but we look in the mirror and we say, “We do have added value if we can help companies achieve and get further.” This is one of the criteria that we have. We continue to raise down the road. We have companies who raise $200 million. We stay all the way.
Sramana Mitra: Yes, you do the pro-rata.
Oded Hermoni: Yes, sometimes we double down. We try to have more. We do internal rounds. This is where we feel more comfortable – in the beginning.
Sramana Mitra: Geography-wise, it’s Israel and the US?
Oded Hermoni: Yes. Maybe I’ll give you some background on the Rhodium family. The family itself is the Recanati family. They’re one of the founding fathers of the Israeli economy since 1935. My partner, Daniel, is the fourth generation. They own banks, carriers, insurance companies.
They were also the first one to invest in tech in Israel early in the 60’s. They saw potential in Israel to become a leader in this area and started to invest in those companies. They had many unicorns. They didn’t call them unicorns at that time. This gives us a very unique deal flow for deals that are not common.
We have two deals that only families invested in including Mobileye. Mobileye was the biggest Israeli exit ever of $15 billion. There were no Israeli VC investors in them. This is one part of the geography. The other part is, we invest mostly in Silicon Valley but not necessarily. We have a couple of companies in New York and also in LA.