Why This US VC Fund Likes Israeli Startups the Most

Since the October 7 Hamas attacks and the subsequent Gaza war, some pundits have predicted disaster for Israel’s burgeoning technology sector.

Sergey Gribov, general partner of the early-stage US venture capital fund Flint Capital, says those predictions may have been premature. Of the nearly 300 companies in Flint’s investment portfolio, 130 are Israeli.

“There were maybe a few American venture capitalists who had questions, but most of us remained very, very positive about (the technology sector in) Israel,” Gribov told ISRAEL21c.

“But of course it wasn’t exactly business as usual. We tried to do everything we could to help, from collecting donations for the army… to helping our Israeli portfolio companies,” he added.

Gribov explains that many of Flint’s portfolio companies in Israel were understaffed due to reserve obligations.

“For example, the CEO and founder of one of our companies was on reserve for three or four months. He would be on reserve for 12 hours, and for the next 12 hours he was basically running the company instead of sleeping.”

Israeli roots

Gribov, an Israeli citizen who has lived in Boston since 1997, is well-versed in local tech happenings. “I’m in Israel every few months,” he notes.

“I moved to Israel in 1990 from the Soviet Union. I studied at an Israeli university, did my military service, and then started working at (Israeli biotech drug discovery company) Compugen shortly after it was founded,” Gribov recalls.

“What happened was that the company had to open an office in the U.S. The founders already had families, but I didn’t. So I was ready to go there.”

In 2000, Compugen launched an initial public offering (IPO) and became an Israeli tech industry success story. “We’re even featured in the book Start-Up Nation,” he notes.

Gribov, a computer scientist by trade, has founded his own startups and even studied at MIT, the Massachusetts Institute of Technology. “I’ve basically worked in startups my whole life,” he says.

In 2016, Gribov joined Flint Capital, which had been founded two years earlier by Andrew Gershfeld and Dmitry Smirnov, both of whom hail from the Soviet Union.

Gribov and Gershfeld live in Boston. Smirnov works in the fund’s back office in Cyprus.

“We prefer cyber”

In addition to Israel, Flint also invests in companies in the US and Europe and employs nine people across its offices.

“We have a lot of cyber (portfolio) companies; in Israel we prefer cyberspace because there are a lot of interesting things happening in that sector,” Gribov notes.

“But we also have fintech and digital health. We’re pretty agile. We understand the market and we invest accordingly.”

Over the past 10 years, Flint has raised three rounds of financing, investing $100 million each.

“Each fund has a lifespan of about eight to 10 years. You actively invest for the first three, maybe four years, and then you continue to support the growth of your companies without actively investing,” he explains.

Quote: “Israeli high-tech has proven to be very resilient. Despite the war, despite the fact that some startups had 15 percent of their workforce called up for reserve service, the system continued to function well.”

“We launched our second fund in 2018 and it is almost fully invested; we launched our third fund a little less than two years ago.”

When life gives you war, create technology

Gribov believes the Israeli high-tech market is unique because it “keeps its promises no matter what.”

He explains that investment in the Israeli high-tech sector has actually increased this year, which is supported by the fact that valuations of the tech ecosystem in Israel are now higher than in the US due to an “oversupply of money.”

“One of the most important qualities of a good startup is resilience. Israeli high-tech has proven to be very, very resilient. Despite the war, despite the fact that some startups had 15 percent of their workforce conscripted, the system continued to function well.”

Gribov adds that the war contributed to the fact that new technologies “are emerging in various analytical centers.”

“At the beginning of the war, there were a lot of different groups trying to find ways to help, and we’re already seeing a lot of interesting startups emerging from all of that,” he says.

“Not to mention the entire defense sector, which is exploding with new and interesting technologies.”

Captain Flint

Just before the end of the interview, I asked Gribov why the fund was named Flint.

“It’s actually because of Captain Flint from the Robert Louis Stevenson books,” he says. “We like that character.”

“There is also a famous quote by Steve Jobs: “It’s better to be a pirate than to join the navy.”

“And we think that’s an approach that’s better suited to startups.”
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