Yuval Baharav, SOMV: The HR issue is also an opportunity
âThe increase in wages is detrimental to companies because it has a significant and lasting impact on their margins, their cost structure and their culture. This creates specific pressure on early stage companies that are strapped for cash and find it difficult to compete with top talent, âsaid Yuval Baharav, general partner at SOMV.
Baharav shared his perspective in the exclusive CTech Investor Survey conducted among attendees of the Poalim Hi-Tech and Calcalist Road Show event. The event brought together dozens of startups who pitched their companies to more than 20 major Israeli investment groups and investors.
What trends are you most excited to invest in?
The general shift from investing in technological innovation to a lot of what we’re doing now, which is investing in teams that use technology very creatively to innovate on business models that disrupt and deliver new alternatives to traditional, existing and large markets.
What’s your most recent and exciting investment?
A good example of the previous point is the fund’s investment in Vee, which is an early stage startup creating a market for corporate volunteering. This is a female-dominated company run by a bright young CEO who aims to build a fast growing business while doing good in the world. The big demonstration of how the people and areas VCs now look at has changed so much.
Which industries appear to be well positioned to thrive in the long term? Which companies are you passionate about (whether they are part of your portfolio or not), which founders?
In general, we believe that the world is in the early stages of a technology adoption curve, which will lead to the digitization of most of what we see around us. We are looking for amazing, hungry teams who are trying to revolutionize many different markets, using various business models. Some areas that we can note include various long tail markets, vertical SaaS companies proposing to revolutionize a large existing market, DevOps and collaboration, transport and logistics, cloud infrastructure, etc.
In which areas are oversaturated or would be too difficult to compete at this stage for a new startup?
Our view is that software-based “algorithmic” innovation has been commoditized by the ever-increasing scale of cloud providers, pushing founders towards vertical and semiconductor SaaS business models. Innovation around consumer electronics is almost impossible to grasp as a start-up, and large B2C destinations are almost impossible to create.
What are you looking for – as an investor – in an entrepreneur or a startup?
We are looking for bold, hungry and ambitious founders. We seek to partner with and be there with innovative outperforming teams as they shape their vision, build their teams and accelerate towards hyper growth. So we think our role is simple. It is about finding and empowering the founders of tomorrow.
What is your approach to involving venture capital in the management of the companies in which they have invested?
Our job is to help the founders and the style with which we do this depends on the personality of the founders and the maturity and circumstances of the company. We avoid getting involved in operational management and have great respect for the sovereignty of management. We sit on the boards of most of the companies we invest in and, most importantly, we pride ourselves on building lasting, meaningful and valuable relationships with the founders and leaders of the companies we work with.
What should be the level of involvement of a fund in solving a company’s HR problems??
Dealing with the growing challenges of recruiting is an important part of our discussions with most of the companies in our portfolio. We did not go down the path of recruiting HR partners, but rather adopted the approach of a transversal reflection on what makes employees integrate and stay in companies, as well as new and alternative operational approaches.
Where will the solution to the HR crisis come from?
We believe that a problem is also an opportunity and this situation will inspire smart and creative companies to rethink the way businesses operate and grow. We will see more and more hybrid and distributed organizations leveraging technology to stay effective. We believe large companies will find ways to uncover the talent they need and engage them in a variety of ways.
Wages in tech How long will the current wage surge continue?
The prophecy was not given to the wise, so we will avoid making these predictions. That said, it is obvious that increasing wages is detrimental to companies, as it has a large and lasting impact on their margins, cost structure and culture. This creates specific pressure on early stage businesses that are strapped for cash and find it difficult to compete for top talent.
Share with us your golden tip for an entrepreneur presenting a pitch.
Have a world-changing vision, coupled with a very practical plan for the first step. Be authentic.