Elan Zivotofsky: Good Management, Risk Taking Are Keys to Success of Start-Up Companies
Elan Zivotofsky is a General Partner and Head of the Investment Team at Ourcrowd, a leading global equity crowdfunding platform. Elan has over 15 years of extensive, on-the-ground experience, focused on researching, raising capital for, and investing in Israeli companies. Elan has deep knowledge of the Israeli investment landscape, startup scene and the overall Israeli capital markets. Until recently, Elan was the Managing Partner of the Prelude Israel Fund, which was a hedge fund focused on Israeli companies. Elan was a Senior Vice President and the Head of Technology investment banking at Lehman Brothers in Israel from 2005-2008. Prior to that position, Elan was a portfolio manager at a global .5 billion hedge fund with a focus on long/short, catalyst driven and special situation investing. Between the years 1997-2002, Elan was a top-ranked Israeli technology research analyst at Goldman Sachs. Elan started his career as a technology research analyst at Morgan Stanley in New York (1994-1997). Elan received a BA from the University of Pennsylvania (magna cum laude).
This is your first time in Bulgaria. What are your impressions of the country?
Yes, it is my first time here. I have been a few hours here so far. It is a beautiful city (Sofia), beautiful country so far and from an economic and technological point of view, it seems to me there is a lot of great potential here.
According to you, which area holds the greatest potential?
I am not an expert on it yet, I am just learning myself, but I think one of the key things I see already is a very large pool of highly-talented IT professionals.
How exactly would the Israeli innovation model help us?
I think it is important to realise that whereas today Israel is a very strong and flourishing technology and start-up market, it was not always that way. I think that the Israeli experience is an experience that took an economy, which was very centralised and did not have a lot of innovation, and turned it into an economy, which is one of the most innovative and exciting start-up communities in the world.
I am here as part of a conference, which is being sponsored by the University of finance, business and entrepreneurship and the Israeli Embassy to try to bring some of the lessons we have learned and some of the experiences we have had and talk about that as a model for how Bulgaria could do some of the same things.
According to you, which is the most important lesson that a start-up company has to learn in order to be successful?
It is a hard question. There are so many lessons that need to be learned. I think I will point to two things. First, as an investor, I have learned that probably the most important thing is management. I think management teams have to be both innovative, willing to take risks and incredibly creative and smart, but also they need to know how to be humble and modest and learn from their mistakes.
The second thing I would point to is for both particular companies as well as for an start-up eco-system, that is the importance of taking risks. This means that entrepreneurs and investors need to be willing to take risks. Part of taking risks is sometimes you are going to fail and failure needs to be OK in order to take the risk to actually become successful.
If we assume that start-up companies take risks easier, is the same valid for the bigger companies, which have more to lose?
First of all, I think it is important to realise that the big companies were once small start-up companies and they became big companies through taking risks, smart risks, responsible risks, but by taking risks in order to grow.
But back to your question, the answer is yes. I think that you look at some of the most successful very big companies we know today, they got there because they did something different or disruptive and changed because the market was changing. If you look at some of the companies that are struggling, it is because they stayed the same and did not realise that the world was changing and they needed to change with it.
Maybe the same is true for the investors, when they are choosing where to invest their money?
Yes, I think it is definitely true and I think different kinds of investments have different risk reward profiles, so a company, which is growing really fast and doing something which is very disruptive and new, maybe risky, but it also provides the biggest potential of returns, while a company, which is not really doing anything new, maybe safe, maybe has a smaller return, but does not really have that big upside potential.
Which is the better option: to invest in a company, which holds a good potential for fast development or in several smaller ones, which remain stable on the market?
I think the answer is different for everybody. I am in a venture capital business, in particular crowdfunding venture capital business, which is by definition a very risky type of investing.
But I think that for either individuals or institutions, you need to have a portfolio of investments, some which are more stable, some which produce income and a small percentage at higher risk, which give you much greater returns.
One of the ideas behind our crowdfunding projects is that we enable individuals globally to be able to invest in Israeli start-ups and global start-ups, whereas before they would not really have access to that kind of investing.
Is Bulgaria of interest to Israel at present?
I have been here only for one day, but I am very interested in looking at the overall start-up eco-system here and as part of the conference, which is being sponsored by the university and the embassy, I will be meeting with five or six start-ups. I have read some of the materials already for these companies and I think it is really exciting to meet with them.
Looking at the rest of the world, where does Israel have interest in investing, doing business? In which country or in which area?
Israeli investors, like myself, we do about 80 % of our investing in Israel and in fact most of the investment is from global investors into Israel and not the opposite way.
But then if we look at certain sectors, where Israel is very strong, we generally invest in areas like cyber-security, big data analysis, communications networks, mobile technologies and more recently, medical technologies have become a very strong area of investment.
Which of these areas poses the greatest challenge?
I think every sector has some challenges. I think probably the biggest challenge is investing in the companies that are one day going to turn into the really big players. The way to do really well in the investing world is to find the one, which will be a billion dollar company. In order to do this we do a lot of research and a lot of diligence. I have a team of eight people that works with me, looking at companies and I think we do a pretty good job, but it is hard to find the biggest winners out there, because it is a very competitive, global playing field. Companies need to compete globally and it is a hard business.
You have an experience of more than fifteen years in this field. What would be your advice to someone, who is beginning to deal with investments? Which was your greatest difficulty in the beginning?
I think you have to be ready to work very hard. It is a very competitive field, the investment field in general. I think you have to be willing to work very hard, willing to learn a lot of new things because it is sort of an industry, which has a lot of unique aspects and you have to find an area where you could differentiate and be very good at.
I started my career in the USA, but quickly moved to Israel and there was a real opportunity in Israel, because there were not a lot of people that had my skill set. I brought these skills to Israel and focused on Israeli companies in the beginning, so I developed an expertise that not many people in Israel had at the time.
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