Danny Cohen – General Partner at Viola Ventures
Todays Guest is Daniel “Danny” Cohen who is a General Partner at Viola Ventures, which is dedicated to enabling Israeli entrepreneurs to build global transformational technology companies.
He has made invaluable contributions to Viola Ventures since 2013 and began his career as a developer and product manager at a few Israeli high-tech companies, including Commtouch and Scitex. He has a BA in computer science and psychology from Tel-Aviv University and an MBA from INSEAD.
Danny Cohen segments the business-to-consumer industry into niches such as consumer Internet, e-Commerce, direct-to-consumer, games and digital media.
He provides key insights into scaling B2C companies, reserving options pools, setting founders’ and executives’ compensation, the trend towards short videos, and fraud in the reporting of subscriber counts.
Danny also reveals some of the secrets as to why Israeli companies have had so much success in growing B2C companies.
Today Danny Cohen introduces us to three fascinating portfolio companies — Lightricks, Worthy and Faye.
General Partner at Viola Ventures
Daniel Cohen is a General Partner at Viola Ventures. He has been at the fund since 2013 and his investment lie in everything B2C, including Consumer Internet, e-Commerce, DTC, Games and Digital Media.
He currently serves on the board of EX.CO, Puls, Splacer, Deep, Lightricks, Maapilim, and Ruti He was also on the board of Tapingo (acquired by Grubhub for $150M) and Origami Logic (acquired by Intuit).
1) Gemini Israel Ventures – General Partner
2) Director Strategic Development – Commtouch Inc.
3) R&D ManagerR&D Manager – Sagitta Ltd.
00:00:59 – Our typical check size would be somewhere between three to 10 million.
Let me say one thing. Viola is actually a bigger platform than just Viola Ventures. Under the brand, we have a few different funds.
So Viola Ventures is an early-stage fund. We also have a growth fund, a fintech focus fund, and a credit venture debt fund. But the ventures where I spend the majority of my time is the Early Stage Fund. Our current fund, Stitches, is a $260,000,000 fund. And we invest in Israeli companies, mostly seed in a rounds.
I would say our typical check size would be somewhere between three to 10 million. Of course, recent years that number went a little bit up, so average will be about five.
00:09:48 – There are CEOs that are fantastic business people but are not great at product strategy.
At a high level, we try to be smart about the way we make deals. And we want to take good ownership and companies, but not too much, not too much. We try to be very thoughtful on how much allocation for stock options you put right in the C or A round to make sure you have enough to allocate to new people.
But I think the most important thing is to try and analyze the management team and look at their strengths and weaknesses or gaps and make sure there’s an understanding between you and the entrepreneur and what we think or what we think the gaps are, and to agree with them that those are the real gaps. And then hire for those. Because as you said, there are CEOs that are fantastic business people but are not great at product strategy. They’re people that are great operational.
We need help on maybe long term strategy. And of course they’re great product technical people that need a little bit help in opening doors and getting first sales in the US. So it depends on the situation.
We try to be helpful, have enough ease up for hiring, and help in hiring.
00:28:23 – I think great CEOs understand that they’re in it for the long run and they have equity that will make them very rich at the end.
It’s hard to make 1000 and make a living out of that. Especially New York, I think. Or California. Or Tel Aviv. I would say that, of course we’ve run into many of these issues.
I think great CEOs understand that they’re in it for the long run and they have equity that will make them very rich at the end, and they have way more equity than the higher CMO. So there are many situations where the CEO is definitely not the highest paying person in the company.
On the other hand, there are founders that have families and they live in New York or you live in Tel Aviv, and they need to make a much higher salary compared to others.
So that’s where we benchmark and we look at situations, but the overall dollars being given to CEOs in our portfolio. Very dramatic. But again, I think good managers understand that it’s about the long-term game, not about monthly salary.
00:34:47 – Games have been an area where Israel produced major success stories.
I’ve always loved BTC. I think the reason I like that is I see myself as an active consumer, right? I always love shopping, and I think it’s just more interesting on the storytelling side. And I love marketing.
So all these areas are just very close to heart for me. Post business school in 2000 and consumer Internet company and kind of fell in love. So it’s just been an area that’s always been very interesting for me.
I think historically or not historically, overall people see Israel is great on technology side and very strong in areas like cyber security or DevOps it’s because it’s really good for its great technology talent. But when you look Israel had great success in certain areas and games, real money, gambling and other areas.
Games has been an area where Israel produced major success stories. And one of the areas and games that will make you win is the ability to move fast and be good in marketing. So some great performance marketers really kind of merged in Israel.
And as marketing shifted from just brand marketing, kind of the procter and gamble style of go to market, to that performance marketing being smart and very technical and how to do that on Facebook and Google, that created that ability for Israelis to leverage their technology talent to apply that into marketing.
00:40:16 – Just making consumer companies understand that it’s not about what you make this month…
I think great consumer companies collect data, analyze the data and understand and make fast responses based on the data. That’s the name of the game. Right? And we push companies hard to look and understand that even simple things is understanding that it’s not about monthly revenues, it’s about core analysis. Right.
So just making consumer companies understand that it’s not about what you make this month, it’s about the cord that you bought, what is the overall revenues that you make across that cord for the entire lifetime and really analyze and have a deep understanding of your acquisition cost versus lifetime value to understand what Churn means versus B to B companies major, major differences. People ask me a lot, they say look, consumers is like investing in a movie.
I said Absolutely not. It’s completely different. And one of the reason it is different is because once it’s out, it’s out, right? That’s a complete movie and whether you like it or not, that’s the end of the game. In consumer product, you put it out of the market, you get data, you iterate, you change the product and your product can be completely different a year into it because of what you learned from the usage of your consumers..
00:48:46 – The edge comes from being innovative about it and comes from being very deep and creating a massive, strong, deep, well-done data infrastructure.
Data and being smart about data and data infrastructure, that’s the big one. And why? Because the most underappreciated area in investing is marketing, by far. So many times I meet startups, they put all their energy and why they have this amazing product, and then you ask, what’s your marketing strategy?
And they say, oh, well, we buy on Facebook. Okay, that’s good. But everybody can buy on Facebook.
So do you have an edge? And the edge comes from being innovative about it and comes from being very deep and creating a massive, strong, deep, well-done data infrastructure. And by the way, we see so many data startups coming up and they say, well, companies need more help in creating the data infrastructure. It’s not an easy problem. And that’s why there’s so much innovation going on in helping companies create that.
And still I think that good companies that do a good data infrastructure have an edge over competitors.
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