Creating Liquidity While Growing Giants

We raised our first late-stage venture fund, Qumra I, during 2013, when the case for tech growth investments in Israel was still questionable. While fundraising, we were constantly questioned by investors about the size of the market and the opportunity. Israel, at the time, was considered a hotbed for innovation and early-stage investments, but not for growth stage investments. We successfully raised $100M for Qumra I with the majority of the money coming from private investors and family offices, most of them business owners and entrepreneurs themselves.

The Thriving Israeli Growth Market

Fast forward to the present – there is no doubt any longer. Total late-stage capital raised in Israel grew 20x and Israeli late-stage investment has become a real asset class, with over $4B deployed in 2019 into Israeli growth companies. As we entered our sixth year of operations, Qumra I has assembled a portfolio of some Israel’s best-performing growth companies, and the fund today is one of the most successful late-stage venture funds by global standards.

The companies we backed in Qumra I had several things in common. The founders and management teams all had the vision, passion, and ability to transform businesses into global, market- leading companies in their domain. Out of eight investments in Qumra I, five are already at revenue levels exceeding $100M annually and employ thousands of people in Israel and around the world. We believe that companies such as Fiverr, JFrog, AppsFlyer, Riskified and Minute Media, all Qumra I companies, are the greatest testament to the fact that there has been a pivotal change in the Israeli tech market. A testament that Israel is now home to some of the most exciting world-leading technology companies, in a wide range of applications and markets. Even though these companies have reached an impressive scale to date, they are continuing their hyper-growth, growing at rates of 50-100% annually.  These trailblazing companies are an inspiration to a growing number of start-ups and create confidence in younger companies that all glass ceilings have been shattered, and that Israeli start-ups could, and should, become large global companies.

Providing early liquidity to our investors, while maintaining our ownership positions in our portfolio

While in the past, such companies took an IPO or M&A route when reaching meaningful valuations, part of the Israeli tech market evolution includes companies staying private longer and remaining independent, while continuing to create significant shareholder value along the way. In response, the private capital markets need to create new and creative means for venture capital funds to provide liquidity to their investors, without the need to sell a company or take it public prematurely.

As we have seen the valuation of the portfolio growing significantly, and remain committed to supporting these companies for as long as they should to remain independent and private. In late 2019, we embarked on a process of seeking partial liquidity for our early investors, while maintaining our investment positions.  We ran a competitive process with several leading investment firms, and ultimately chose StepStone, one of the world’s leading private markets investment firms, to lead the deal.

Today we are happy to announce that we have completed a GP-led secondary transaction, to our knowledge, the first of its kind in Israel. Through this transaction, investors in Qumra I will sell a minority portion of their holdings to funds managed by StepStone Group for approximately $80M. We have set up a dedicated continuation fund for StepStone’s holdings, managed in parallel to the original Qumra I fund. This transaction leaves our relationship with our underlying portfolio companies unchanged as we will manage the new fund on behalf of StepStone, continuing to support our portfolio companies as they continue to successfully scale. We are able to lock in the success of our first fund, while still maintaining ownership in these great companies and continuing to support them in their growth.

We take pride in the fact that through this transaction we are able to honor our commitments to both portfolio companies and investors through the continuation of support alongside the provision of strong capital returns, at a relatively early point in the fund’s life.

The process of closing this transaction took place during a globally challenging period. This was an intensive process spread over two continents with everyone working from home. With this milestone behind us, I would like to thank the founders of our portfolio companies for the extraordinary work they have done and continue to do.  A very big thank you goes to our early group of investors for their trust in us.  We are appreciative and grateful that you believed in us, in a time when a lot of faith was required to believe in our vision.  Thank you, StepStone, for joining our journey, having a partner of your caliber will surely benefit our portfolio companies, and the Israeli investment ecosystem.

Lastly, thank you to our lean and mean team that pitched in to make this happen.