By now, Term Sheet readers are well aware of the challenges late- and growth-stage companies have been facing to raise money. And startup markets from the U.S. to Europe to tech-heavy Israel have suffered amid the downturn. That’s why I was surprised to hear that Team8, a Tel Aviv-based firm that started as a studio-slash-incubator-type model and since expanded into early-stage VC, is thinking about dipping its toe into growth.
It’s “the next thing in our vision,” managing partner Rakefet Russak-Aminoach told me, referring to what she’s calling “early growth”—or what I’d consider late stage. She says that coming out of the rocky fundraising environment of 2022 and 2023, a lot of companies in the Series B and C stages need to raise more money. “Some companies will not make it to growth in this new ecosystem, but the ones who will, will be amazing companies,” she added. That’s the potential opportunity for Team8, she believes: “I think we could do B, C, [and] get one step further along the line, and leverage this expertise that we have” to “catch these amazing companies that made it."
It’s interesting to me that, although Team8 is now more than just a company builder, other ultra-early investors like Y Combinator have recently gone the other way. Earlier this year, the startup accelerator’s new president and CEO, Garry Tan, made the controversial decision to end YC’s late-stage fund and lay off employees. (He later told me that he stands by the decision, and that stepping away from funding later rounds helps YC be a better partner to other VC funds.)
But Russak-Aminoach is optimistic. “We can do much more” beyond building a couple companies a year and investing in early VC, she says of Team8, arguing that the firm’s operating platform—spanning research to business development—could benefit startups at later stages. The firm last raised a $160 million early-stage fund in 2020, they told me, and a filing from May 2022 shows they are raising another fund. Team8 would not comment on the new fund.
Team8 was cofounded in 2014 by Nadav Zafrir, Israel Grimberg, and Liran Grinberg (Grimberg and Zafrir hail from Israel’s elite military intelligence team, Unit 8200) as a venture studio-type model, or foundry, as they call it, originally focused on cybersecurity. They work with entrepreneurs to build startups from scratch, and, since 2020, also invest in existing startups. Russak-Aminoach was serving as the president and CEO of Israel’s Leumi Group before she joined Team8 in 2020, where she focuses on the fintech practice. (Team8’s other big focus areas are digital health, enterprise tech, and, of course, cyber). Team8 is backed by heavy hitters like Walmart, Cisco, and SoftBank, per PitchBook.
The firm’s potential move to invest later in the cycle could be some ways away, Russak-Aminoach hinted, but it will be interesting to see how Team8 and other VCs handle the challenges of investing in the current market—particularly in Israel. Funding for Israel-based startups fell a whopping 74% year over year in the first half of 2023, per PitchBook data—a steeper drop than other markets as judicial reforms by the government have worried some investors.
Of the downturn, Russak-Aminoach argues Israel is “the mirror of the high-tech sector in other places.” (Team8 invests in other countries in addition to Israel.) She expects to see more M&A as the IPO market, though beginning to thaw, remains fairly chilly.
Despite the current market malaise, Russak-Aminoach is taking a rosy view. “I believe that when we talk about 2022 [and] 2023 in three, four years, we will be able to say, 'Wow, this company and this company and this company came from that period,’” she says. “We just have to make sure that we find them.”
See you tomorrow,
Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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