Kfir Kachlon, the Co-founder and General Partner at 91 Ventures, shares his journey from being a lawyer to investing in deep tech startups. Kfir explains why he likes debating hard questions with founding teams. In addition, he points out key things founders need to do when pitching for the investor to see their startup as a great investment.
Kfir Kachlon, the Co-founder and General Partner at 91 Ventures, shares his journey from being a lawyer to investing in deep tech startups. Kfir explains why he likes debating hard questions with founding teams. In addition, he points out key things founders need to do when pitching for the investor to see their startup as a great investment.
In this episode, you’ll learn:
5:24 The product may change, but the character and abilities of the founding team is something you can bank on.
7:04 How mentorship makes accelerator programs all worth it.
11:34 How to convince an investor that your startup is a good investment for him and his LPs
15:01 Hard questions expose the behavior, dynamics and vibe of the founding team.
The non-profit organizations Kfir is passionate about: Magen David Adom in Israel
Kfir Kachlon is the Co-founder and General Partner at 91 Ventures. He is an early-stage investor focused on supporting brilliant teams who are building industry-defining tech startups. Kfir previously founded AnD Ventures, an early-stage VC firm focused on the Israeli startup ecosystem.
Prior to founding AnD Ventures, he was a senior member of OurCrowd’s investments team and the FrontierTech and AgriFood technologies lead at OurCrowd, where he led dozens of investments in cutting-edge technologies.
91 Ventures is a new Israeli early-stage venture capital firm focused on deep tech startups.
Coming up in Episode 95, we welcome Andrew Scott, founding partner at 7percent Ventures.
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Kfir Kachlon: You have to have a coherent way of pitching the company. I like to see that people have prepared in advance. I'd have to see a good deck. For me, it shows their respect, you know, sitting together and not me, but you don't need to respect me. I don't care about it, but you need to respect the time that you are granted.
Gopi Rangan: You are listening to The Sure Shot Entrepreneur, a podcast for founders with ambitious ideas. Venture capital investors and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision. Welcome to The Sure Shot Entrepreneur. I'm your host Gopi Rangan. I'm here with Kfir Kachlon. He's the co-founder and general partner at 91 Ventures.
It's a new Israeli early-stage venture capital firm. He invests primarily in deep tech startups. We're going to learn more about specific areas of interest for Kfir, and how he evaluates entrepreneurs, especially in deep tech. Are there any specific questions and types of stories that he likes to hear during the first and second meetings with entrepreneurs? What gets them excited? When does he say, "I want to invest in this company?"
Kfir, welcome to The Sure Shot Entrepreneur.
Kfir Kachlon: Thank you for having me, Gopi.
Gopi Rangan: Tell us about yourself starting with where you're from. You started out as a lawyer initially, and then you switched to being an investor, right?
Kfir Kachlon: Yes, that's right. I grew up as one of those geek kids in the early nineties building computers, putting up together the latest graphic card, data sound card. So that's how I grew with technology and computers. After my army service, which is mandatory here in Israel, I went into the world of law, completed my masters with Tel Aviv University in Berkeley. As a lawyer, I was always on the technological side. I called myself a tech lawyer. I was doing mainly IP and international commercial law. I worked within companies. I was in-house counsel with some very deep technological companies, one in the biopharmaceutical world and another one in the world of advanced optics.
I made the shift to venture capital, eventually, because I always felt like being a lawyer is kind of like being a pastor or a rabbi in a wedding. Well, you have the couple already met each other. They had the first date, the second date, they fell in love, they met the parents, and then they come to whoever does the ceremony to just officialize the relationship. That's how I felt as a lawyer, and I wanted to make business. I wanted to "fall in love and meet the parents", and yeah, that's how I see the world of venture capital.
Gopi Rangan: This is a very interesting take. Lawyers are counselors indeed. And you bring that perspective to venture capital. Why is venture capital interesting to you? What's exciting
Kfir Kachlon: Venture capital, at least for me, is being a part of this innovation chain. We're, at the end of the day, kind of like enablers, we get the money, we fund intrepreneurs who are building amazing stuff. Some of them building some life-changing products or future-defining products for our humanity. And you get to be a part of it as a venture capitalist. You get to inject them with capital and see them grow, see the teams walk with entrepreneurs, see the passion. There's also the fun of making something successful, making a nice ROI for your investors. So, yeah just being a part of that innovation freewheel, that's exciting for me.
Gopi Rangan: Yeah. Venture capital investors are enablers, indeed. We don't really build things, but we enable a lot of that innovation that is needed in the world. You focus on deep tech, right? What are some specific topics within deep tech you'd like to invest in?
Kfir Kachlon: Yeah, well, luckily from my career, I had the opportunity to do so many deep technology startups because I started my career at OurCrowd, which is the most active venture capital firm in Israel managing about $2 billion in AUM right now. As somebody who was on the investments team back then we had the opportunity to do everything from medical devices, to drug development, to LIDAR technology, and deep learning. I got the opportunity and I was privileged to work with senior team of investors, my bosses who are very, very deep tech focused. We always laughed about it that in Israel, when an entrepreneur comes and tells you I'm building a rocket to Saturn, it's not about can he, but it's when. So that the chronology here is very, very deep and we were very much deep technology-oriented on the team.
Gopi Rangan: At what stage would you like to meet entrepreneurs?
Kfir Kachlon: So, I started as doing A rounds and above. That's what OurCrowd was about. Then I shifted and I went out and I established my first fund. Now I'm building my second fund and I really found it that I love being as early as possible with entrepreneurs, even before they have that fine-tuned deck, I like to sit with entrepreneurs. Sometimes they come to me just for advice, just for coffee, or I meet them randomly in a meetup. That's how early I like to engage with my entrepreneurs.
Gopi Rangan: What happens in that first meeting? I see that you like to meet entrepreneurs as early as you can. What questions do you ask them in the first meeting?
Kfir Kachlon: Well, so it's either first meeting where we meet and they pitch. So that's like a pitch meeting and then many, many questions are thrown around the table. "Who are you as a team? What's the idea? How you validated it? What are your future plans? Who next are you going to hire?"
For me, it's really important to see if the team knows how to get talent and knows who they have on their side wants to get an infusion of capital. If I meet people for a meetup, I just like to hear an elevator pitch, like really quick about what they do. If it excites me, then I get those gut feelings about, wow, this can be cool. And I like to really see how I click with them. I like to see if there was a chemistry at all. Even when they come and pitch to me I usually shift the conversation to understand who they are, where have they traveled? What's their hobbies? Here in Israel military service is a big part of us because it's mandatory. So what have they done and who do they serve with? It's not important for me to get a feel as early as possible about the people I'm sitting with because products change. Usually the product that a team will show you at the first meeting, especially if your super early investor, is not what they're going to develop. They will pivot a lot of times during that process. So you can put your eggs on what the product is, but more on what the team is and how do they think about opportunities and problem solving and validation and network creation.
Gopi Rangan: This is very interesting because the first meeting is not only about the pitch, but you'll make it more of a conversation. So you get to know them as people. Can you give an example of a company? How did you meet the founder? How did you form that chemistry that you mentioned? How was that chemistry formed between you and the founder.
Kfir Kachlon: Well, I can take us back to one very cool investments that I've done. I met the team through being a mentor on an incubation program or an accelerator program. First of all, the team didn't have any technological experience. They haven't had any startup that they previously founded, but they were up to something in a very, at least here in Israel, uncharted territory, which was the world of e-sports. I felt that they have something interesting. I liked them as people, so I connected to them personally. Through that process of mentoring them in the accelerator program, I saw them evolve. I gave them homework. You know, let's work on the budget. Let's work on the deck. Here are some challenges and here's some hard questions. They really shaped themselves through that process to eventually becoming those intrepreneurs that I say, okay, not only do I like them as people but I think that they're now ready to do something with the capital that I can invest in. It took awhile, but luckily we had that accelerator program that we were all part of and we got to work together.
A lot of entrepreneurs ask, should they go to acceleration programs? I think that's a great thing. At least if you're going to have mentorship by whatever VC and you can find somebody that you match with, I think it's great.
Gopi Rangan: Thank you for that. Are you able to share the name of the company and the founder?
Kfir Kachlon: Sure. the company is called Edge Gaming. They have a founding team, but the two founders were Asaf and Omri Gazit, awesome awesome awesome individuals. Edge Gaming is developing right now playables. If a very famous streamer or e-sports athlete, let's say they create an amazing move, a video gamer can cut it as a highlight. The highlight is not only watchable, but others can play on that highlight, trying to make the same play that person has done. I don't know about you, but I grew up as a basketball fan. I used to play basketball. I love basketball and in the world of real sports, even though you have your idol, Michael Jordan like shooting a basket on the browser, you can't do it in real life.
You cannot go to the Madison Square garden. You can have, I don't know, Patrick Ewing playing against you. You just cannot do it in the real world. But in e-sports because it is so technological, because it plays digitally, if you see an athlete that you like doing an amazing move with the Edge Gaming technology and product, you can play the same move and try to be that amazing athlete. I think what they've done is just unbelievable. The company has been growing super fast since, really, really fast.
Gopi Rangan: This is exciting, indeed. You started the conversation as a mentor. You didn't know where the company was going. You got to know the founders quite well and then you invested in the company once the chemistry was formed and now the company is growing rapidly.
I see this can be a very exciting way to experience basketball in the digital world without having to travel to Madison Square garden. How long does it take for you to form this chemistry from the time you started meeting the founders as a mentor, and then eventually when you decided that, Hey, I want to invest in this company?
Kfir Kachlon: I'm not going to lie. I think the first signs of a decision comes from the gut and the gut feeling. And I've learned to trust the gut feeling for my processes, you know, as a venture capitalist and growing in this world. We have a first meeting with the field. Click when you meet somebody in a meetup.
So you have that click. You see, okay, these are people I can speak with, I can relate to, I can have a beer with. For me, it's important. I try to take every entrepreneur that I have any idea or any wish to maybe invest in them. I take them out. We go out. We eat. We beer. We laugh. So that decision of at least taking them through that journey of a prospect and investment is made very, very quick.
And then I take them through that journey and I'm a very analytical, deep diligence person. So, I take them for a very excruciating process, shooting a lot of holes in their boat to see if they sink and to see if my thesis will sink. I leverage on my network and the people that I know and my investors in the fund to help me validate, innovation directors in multinational corporations who helped me. I put them in front of the team. They ask the harder questions than myself because at the end of the day, I'm not the smartest person around.
That first decision, if I'm going to take them through the journey, I think happens super super quick. Of course, there are some external things that matter, like is the investment within the fund thesis? Is this an industry that I'm interested in or not? If all comes to place and I feel a great gut feeling about the team, then I will take them for the journey.
Gopi Rangan: You're giving some specific examples based on your experiences. It's very insightful.
What can entrepreneurs do to prepare for the first meeting, the second meeting and go with you on their journey to form that chemistry? What's your advice to entrepreneurs?
Kfir Kachlon: There are two things. One thing is to remember that at the end of the day, you're building a company and a product and a technology that needs to be a good investment for me as an investor who took money from his LPs. I have a very high respect to that and I will do everything I can to make a profit for them. So you need to come to me when you present the company ready to answer hard questions. You need to be thorough on your understanding of the market. Sometimes I know the market and I know the competitors and I will ask and I will put you on the spot.
You have to have a coherent way of pitching the company. I like to see that people have prepared in advance. I'd have to see a good deck. For me, it shows their respect. And you don't need to respect me. I don't care about it, but you need to respect the time that you are granted in order to show your company and the potential in it as soon as possible, because you will have thousands of those opportunities as an entrepreneur. Some of them will be an investment. Some of them will be a potential client. I need to see that you understand how important words are. So that's one thing. The other thing is try to be authentic as you. Bring your true color, bring the colors of your team. If you have other team members, don't try to speak on their behalf. If that's your CTO, when he's doing something super, super deep, give him the mic. When we start hitting those hard questions about the technology and the algorithms, give them the stage. I give a lot of weight to how the team corresponds with each other through that meeting. So yeah, those are the kind of things that I care about most.
Gopi Rangan: This is a very debatable topic. How did your process change, especially in the past two years during COVID? In real life, it's possible to watch the interaction between the founders. I like the way you said it, like give the mic to your colleague if there is something interesting to be said about a topic that we're discussing, don't interrupt them and don't dominate the conversation.
Those dynamics are more clear to see in-person. How do you watch for that in the remote world where you don't get to meet founders often?
Kfir Kachlon: First of all, most of the funders I invest in are in Israel. So even through COVID, we just put masks and we met in a room, but those were only meetings that I wanted to take to the next level. Intro meetings or first meetings that happened for Zoom, for example, I try to be attentive to what's happening in the room. And if the video is on, you can catch a lot of things and you know, how is somebody sitting more comfortably in the chair or not? You can notice things in the nuances of their voice. I'm not an investigator or like a police detective that put you in the room and like, and knows when you're lying. I'm not that, but they're all signs that you pick up and you can sometimes even through Zoom, you can sense it. Us as human beings, we are super adaptable creature. COVID fell in our heads and then we learned how to adapt to doing meetings through Zoom. Our sensors adopted to understanding other people's emotions through only looking at the screen and hearing their voices. But yeah, those that impressed me and those that I like and those that I feel there is a good vibe with, I will call for a second meeting and take the chance.
Gopi Rangan: I see that you have adapted your style to fit both the in-person meeting and Zoom meetings. You can tell a lot from the interactions even online between the founders in a meeting. What's your most common reason to say no?
Kfir Kachlon: I hate saying no, but you just have to say it a lot. That's the statistics of investing. The times where I can reach a no super fast is again, dynamics of the team. If some founder just dominates fairly insensitively over their co-founder. I hate when people are arrogant and I don't put them on the spot as if like I know more than themselves. I usually do not. But there is something in the tonation that you can feel if somebody just gives you the vibe that they're not an easy person to work with. You can ask some questions and see how people answer them. You can try to sometimes pull a harder question to see what happens when you debate something even more intensively and see how they'll respond back.
When I feel somebody that I can cannot speak with and I feel that we will not be able to work together and guide each other because, you know, we guide each other. It's not just the VC guiding the startups. If I feel that, then for me, it will be an easy no. Yeah. So it's always about the dynamics and the vibes. And then the other cases where I can say no, is when it's not a good fit to my thesis. Maybe I have invested in a competitor in a way and then I feel it's not cool for me to invest in this company.
Gopi Rangan: I see that you ask hard questions and see how they behave, the dynamics and the vibes matter a lot to you. And of course the thesis fit needs to be perfect. It needs to align with what you're investing in. I'm going to ask you a hard question. If you were to change one thing about venture capital, what would you change?
Kfir Kachlon: What I would love to change about venture capital, it's the world of hyper valuating companies. I've seen a lot of times where people were just giving away super generous valuations, and now we are hitting a crisis in the markets and we're seeing how it trickles back to growth companies, et cetera, et cetera.
At the end of the day, people's jobs are being cut and that has massive implications on people's lives. Maybe in 15, 20 years from now, London Business School, Stanford will teach a class about the ethics of venture capital and we look back and discuss those over-valuated situations that we were at. I think that's something that I would love to change. I would love people to be more respectful of the valuations. Another thing is that I would love to see a way for entrepreneurs to be on the other side of the fence, like to be more active in this world of venture capital. It shouldn't be just venture capitalists who are taking the reins or doing whatever this world of investments is.
But I would love to see more of how the intrepreneurs communicate with each other. I know that they do here in Israel. I don't know how they do globally, but for them to really work for each other to succeed because you never know when karma will hit. So that's what I would love to see change.
Gopi Rangan: Very well said. Behind these numbers, venture capital supports ambitious growth plans. So it's understandable when valuations go up and when these numbers increase recklessly in the greater fool theory of selling equity downstream to an even greater fool, those type of trends takeover. It creates some ethical issues. It needs to be studied more closely and I do hope that more academic research is done in this topic to highlight the negative effects of inflated valuations.
We're going to see some changes hopefully in the next few months as the market changes and brings everything back to normal and entrepreneurs can expect to build meaningful businesses and not just increase valuation from round to round and create a hype around all of that. Thanks for highlighting that it's an important topic indeed.
Kfir Kachlon: Well, I wonder how much heat I'll get from other VCs but it needs to be said.
Gopi Rangan: Needs to be said. I want to switch to the last part of our conversation and ask you about your community involvement. Is there a nonprofit organization you are passionate about? Which one?
Kfir Kachlon: Yeah. Well, just as in the United States you have all those ambulance services, we're here in Israel we have Magen David Adom, which is, let's say the Israeli Red Cross and the ambulance services as a kid growing up in high school I volunteered with that. So I was trained as a medic and I rode in the ambulance. A lot of my character was built on those experiences. My best friends ever, I met through volunteering with that organization. So that's an organization that I am very, very passionate about.
Gopi Rangan: Emergency services are critical to any community. I'm glad that you are involved in this community activity. Kfir, thank you so much for spending time with me sharing deep insights on your work based on specific examples from your experience, I'm very grateful to you for highlighting some important things in the venture capital industry. I look forward to sharing your nuggets of wisdom with the.
Kfir Kachlon: Thank you for having me. It was a great time. And if any entrepreneurial gets any value from this, I can help in any way. Then, you know, I feel I've done mine. Everybody can feel free to reach out to me. I'm very accessible and I try to answer as fast as I can. And thank you for this. Thank you very much.
Gopi Rangan: Thank you, Kfir. Thank you for listening to The Sure Shot Entrepreneur. I hope you enjoyed listening to real-life stories about early believers, supporting ambitious entrepreneurs. Please subscribe to the podcast and post a review. Your comments will help other entrepreneurs find this podcast. I look forward to catching you at the next episode. .