E186: Where’s the Alpha Opportunity in VC in 2025? w/Abe Finkelstein

Summary

How I Invest with David Weisburd

Episode E186: Where’s the Alpha Opportunity in VC in 2025? w/Abe Finkelstein Release Date: July 14, 2025

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1. Is European Venture Capital Dead?

Timestamp: [00:00] - [04:03]

In the opening segment, David Weisberg poses a provocative question to Abe Finkelstein: "So is European venture dead?" Contrary to the popular consensus, Abe firmly disagrees. He states, "I don't think so... we can get many of the European VCs or the US VCs that are over there get there first and give them the seed capital" ([00:47]). Abe highlights Vintage’s recent strategic move to add a partner in London, emphasizing their long-term commitment to European venture capital. Drawing parallels with Israel’s robust venture ecosystem over the past 15 years, Abe expresses optimism that Europe’s best years in venture capital lie ahead. He underscores the growing entrepreneurial spirit in Europe, fueled by successful exits from companies like Spotify and Revolut, which inspire a new generation of founders.

2. AI's Role in European VC: Opportunities and Challenges

Timestamp: [04:03] - [07:37]

The conversation shifts to the impact of artificial intelligence (AI) on the European venture capital landscape. David brings up the dual factors affecting European AI ventures: stringent regulatory environments and the emergence of AI hubs like Paris. Abe acknowledges the skepticism surrounding European VC but remains cautiously optimistic. He notes, "Venture capital investment is living in this bubble that's just doing amazingly well" ([04:34]). While recognizing regulatory challenges, Abe believes that the talent and innovative capacity in Europe, exemplified by companies like Mistral and Hugging Face, will continue to thrive. He advocates for enhanced tax incentives and greater corporate R&D investments to bolster the ecosystem, asserting that European entrepreneurs will persist despite regulatory hurdles.

3. Vintage's Investment Strategies: Fund of Funds, Growth, and Secondaries

Timestamp: [07:37] - [15:02]

Abe delves into Vintage Capital’s multifaceted investment approach. He explains that Vintage employs three primary strategies:

• Fund of Funds: Investing in venture capital funds across various stages and geographies, including specialized segments like Israeli funds and health-focused funds.
• Secondary Funds: Initiated in 2003, this strategy involves acquiring existing investments from other investors, providing liquidity and diversification.
• Growth Fund: Launched in 2011, this fund targets emerging companies in later growth stages, leveraging insights from Vintage’s Fund of Funds and Secondary Funds.

Abe emphasizes the synergy between these strategies, allowing Vintage to navigate the venture landscape comprehensively. He states, "At the center of it, I would say is our relationship though with the GPS of the funds" ([07:46]). This integrated approach enables Vintage to identify and support high-potential ventures effectively.

4. Investing in First Funds: Risks and Strategies

Timestamp: [15:02] - [20:33]

The discussion turns to the challenges and merits of investing in first-time funds. David queries the rationale behind backing initial funds when many institutional investors prefer to track a fund’s performance over time. Abe responds by highlighting Vintage’s stringent criteria for first-time investments, focusing on managers with proven track records. He asserts, "We don't have a lot of... those that have actually lost money" ([10:15]). By diversifying their investments across multiple smaller funds and emerging managers, Vintage mitigates risks associated with first-time funds. Abe shares experiences where second funds outperformed first ones, attributing success to managers’ ability to learn from past mistakes and adapt strategies accordingly.

5. Generational Transfer and Firm Succession

Timestamp: [34:07] - [38:30]

A critical component of Vintage’s longevity is their structured approach to generational transfer. David references a successful transition led by Alan Feld and asks Abe about the behaviors and processes that facilitated this seamless handover. Abe credits clear documentation and defined roles as key factors. He explains, "Things needed to be put down on paper... make clear lines of demarcation" ([34:31]). By establishing a succession plan where founding members step back from raising new funds but remain involved in existing ones, Vintage ensures continuity. This foresight not only preserves the firm’s legacy but also provides a clear career progression path for new partners, enhancing recruitment and retention.

6. Israel's Venture Ecosystem Amidst Geopolitical Challenges

Timestamp: [38:30] - [43:56]

Abe provides an insightful analysis of Israel’s venture ecosystem in the context of ongoing geopolitical tensions. Despite regional conflicts, Israel's startup scene remains vibrant and resilient. He cites recent high-profile exits and IPOs, such as Melio's $3 billion acquisition and Wiz's $32 billion sale, as evidence of the ecosystem’s robustness. Abe remarks, "The Israeli ecosystem has like skipped a beat" ([38:59]). He believes that conflicts have, paradoxically, strengthened Israel’s innovation drive, particularly in sectors like cybersecurity and AI. Moreover, significant investments from global giants like Nvidia establishing R&D centers in Israel underscore the country's enduring attractiveness as a tech hub. Abe remains optimistic about the future, anticipating that peace initiatives could further enhance the market dynamics, although he acknowledges the persistent uncertainties.

7. Advice to Younger Self and Managing Investment Challenges

Timestamp: [43:56] - [49:56]

Reflecting on his 22-year tenure in venture capital, Abe shares invaluable advice for his younger self. He emphasizes the importance of resilience, stating, "Don't let the stuff you get wrong eat away at you too much" ([46:08]). Abe advocates for taking calculated risks and building strong, genuine relationships within the industry. He advises focusing on partnerships with people you enjoy working with, saying, "If there's somebody who you know that you, you don't totally gel with, find another deal" ([46:08]).

When discussing how to cope with investment losses, Abe admits, "It's very, it's very hard" ([49:07]). He highlights Vintage’s culture of transparency and continuous improvement through annual off-sites where the team rigorously debates and refines their strategies. Celebrating wins and learning from losses are integral to maintaining a balanced perspective. Abe underscores the significance of prioritizing personal well-being and relationships to mitigate the emotional toll of investment challenges.

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Notable Quotes

• On European VC’s Future:

  • "I don't think [European venture is dead]. We can get many of the European VCs or the US VCs that are over there get there first and give them the seed capital." ([00:47])

• On Venture Capital Resilience:

  • "Venture capital investment is living in this bubble that's just doing amazingly well." ([04:34])

• On Investing in First Funds:

  • "We don't have a lot of... those that have actually lost money." ([10:15])

• On Generational Transfer:

  • "Things needed to be put down on paper... make clear lines of demarcation." ([34:31])

• On Israel’s Ecosystem:

  • "The Israeli ecosystem has like skipped a beat." ([38:59])

• Advice to Younger Self:

  • "Don't let the stuff you get wrong eat away at you too much." ([46:08])

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Conclusion

In this enlightening episode, Abe Finkelstein provides a comprehensive overview of Vintage Capital's strategic approaches, the dynamic state of European and Israeli venture ecosystems, and the intricate balance of managing first-time fund investments. His insights into generational succession and personal reflections on the emotional aspects of venture investing offer valuable lessons for both seasoned and aspiring investors. Abe’s optimistic yet pragmatic outlook underscores the enduring potential of venture capital amidst evolving global landscapes.

Transcript

[David Weissberg]

So is European venture dead?

[Abe Feldman]

You're the first person that ever asked me that. Look, I don't think so. As a firm, we don't think so. You know, I think, I think you saw it recently. We actually added a, a partner in London, our first partner outside of Israel. So we're actually long European venture. We've been investing in Europe for about 15 years now, have done extremely well. I don't want to just look backwards, I am looking forwards. But I definitely think the best years for Europe are ahead of itself in terms of venture capital. We can touch on that, but it might be a little bit of a contrary intake. But we're big believers in the opportunity there in venture capital.

[David Weissberg]

And one of the reasons I wanted to ask you is because you're not stuck on a specific strategy. You're in Europe, you're in Israel, you're in US So you don't have to be investing in Europe. Why take the time to open up an office in London today? And why lean into Europe?

[Abe Feldman]

It's a great question. I actually see some parallels with what we saw in Israel over the past decade and a half, even 20 years. So some of that is around a simple, you know, going to the basics of the basics like the demographics and saying, what's the future going to look like for people, you know, in Israel? You know, kind of being an entrepreneur, I always told people it's almost like a job, like any, you know, the way I would have thought of being a doctor or a lawyer or an investor back in the day. So I, I think when I look at Europe, and that's because there were, you know, there's not a ton of different alternatives to begin with, kind of going back, way back when. I kind of feel that way with Europe as well. I think if you're, you know, a younger person in Europe, you may decide to pick up stakes and leave. But I think one of the ways to get wealthy there is probably more likely to go the path of being an entrepreneur. So I think that's, that's a good thing, that we're going to see more and more entrepreneurs coming to market again, just looking at a younger population and the opportunities that are afforded them. And then the second thing is I, I look back at Israel, if I go getting back 20 years, 15 years, you know, the foreign investors started coming over to Israel the way they started going over to Europe probably about five or six years ago, some even before that, and it ultimately just raises the bar for the entrepreneurs. You know, the foreign funds don't you know, they're not satisfied with 100 million, 500 million, even a billion dollars exit these days. So when they're putting money into your company, you better be aiming much, much higher. So I think that's, that's a fantastic thing that happened in Israel and that's something that we see going on more and more in Europe. And then finally, I think kind of, you know, success, we got success in the sense that we've seen, you know, Spotify and then, you know, we have Revolut, which now they're talking about being valued at. I don't know whether it's 40, 50, $60 billion. I mean, these are very, very large numbers. And then Klarna and a whole bunch of other ones that can be expected to be public offerings. So I think that entrepreneurs are seeing out of Europe that it's possible to build very, very large companies and that next generation of whether it's lovable or N8N or what have you, like, again, these are the next ones that we think can become bigger and bigger. So I always say when an entrepreneur, your neighbor sees how well you're doing, they say, wait a second, that idiot can do it, Then I can do it even more. So. So I think that the kind of flywheel and ecosystem is developing in Europe. It's not without its challenges. It isn't going to be a walk in the park, but I do think we're feeling that. And the last thing I would say is that we're seeing these larger companies and we saw that in Israel as well, you know, spin off the next generation of entrepreneurs. They were, they were part of a company that got built to a very, very large scale. And again, they say, wait a second, I see this as possible. You know, when you see something happen, you realize it's possible I'm going to go out and start my own company now. So, you know, that's why we're excited about it.

[David Weissberg]

The reason I asked you whether European VC was dead was not necessarily to be controversial. And it's the fact that most people, at least the consensus view is that the future of VC in least the next decade will be driven by AI. And in Europe, you seem to have this weird dichotomy where you have this regulatory landscape that's making it very difficult for AI companies to succeed. But also you have Paris, which is the hotbed of AI. How do you weigh these two factors and how are they both affecting the European ecosystem?

[Abe Feldman]

That's a great question. And by the way, I think most people are skeptical about Europe and venture capital. I'm not saying that like I'm not also concerned. I have my concerns and, you know, we'll see how it plays out. But I tend to think in general, and again, there's no doubt that, you know, regulatory and government. And again, we saw that in Israel, we see that in the US can be a big boon for investment in tech in general. Investment, technology, investment in venture capital. And maybe Europe's not there around that. And I think they do need to do a bunch of things, whether it's around like, tax incentives, whether it's bringing over, you know, more of the. The large corporates to open up R D centers and things like that. You know, by the way, like, tax incentives make all the difference in the world in a lot of cases, whether it's for startups or for corporates. And so that can be a huge thing. I know Europe is having challenges with that and particularly the UK as well. And it seems like in the uk, given some of what they're doing on the tax side, is actually driving people out as opposed to having people come in. But I'll put that on, put that on the side. I think venture and entrepreneurship, it tends to live in a bit of a bubble. You know, we thought regulation was going to kill Uber and Airbnb and, you know, these are some of the largest companies in the world. And I think that the talent will just ultimately, you know, get beyond that. So Paris, for example, you know, amazing engineering schools, whether it's, you know, companies like Mistral or even hugging face as Nexus there and, you know, 11 labs, like, we're seeing those companies come out regardless of regulation now, some of them may start there and then move their operations to the US and we see that with the Israeli companies as well. But ultimately, I think the opportunity is that those companies start in Europe and you can get many of the European VCs or the US VCs that are over there get there first and give them the seed capital. So I just see that kind of stuff just operating. It's its own organism. It's kind of like here in Israel that we've had a conflict going on. Well, we've had a conflict going on for, you know, 75 years or maybe, you know, 3,000 years. But we, we've had a conflict at least since October 7th. And, you know, you could everything, you know, venture capital investment is living in this bubble that's just doing amazingly well. And I think in Europe, that's going to be the same thing with entrepreneurs. Want to get something Done. They want to build something, they're just not going to, you know, listen to the regulation and what's going on. Clearly that can dampen the opportunities. So I do think that needs to be addressed. But I just think we're going to continue to see amazing successes because there's just going to be more experienced entrepreneurs. We've seen big companies getting built and we want to build one even bigger the next time around. I mean, even though I look at, you know, you know, their Spotify mentioned, but look at Stripe, who founded Stripe. You know, it was two Irish guys that had access to the capital to do that. You know, they happened. You know, they weren't from San Francisco, you know, they weren't from New York, they weren't from Tel Aviv. So I think it's possible anywhere.

[David Weissberg]

Taking a step back, tell me about Vintage's strategy and how does Vintage invest in both funds as well as startups?

[Abe Feldman]

So we actually have three separate strategies. We have fund of funds where we invest in venture capital funds, you know, when they come back to raise their new funds. And within the fund of funds we have a number of different strategies I can touch on. We have secondary funds, which is actually where we started back in 2003. This was kind of the contrary in nature of Vintage and Nowenfeld, who started the firm, who, who saw everybody exiting technology and venture after the dot com bubble burst and exiting Israel as well. And he said, no, I'm, I'm the opposite. I'm long technology. And I think that's one of the reasons why he, he hired me as employee number one because he saw I was also long technology. So we have secondary funds that buy out investors from their investments, both in venture capital funds and direct holdings in companies. And then we have a growth fund. The growth fund was actually the most recent strategy that we added that was back in 2011. And the idea of the growth fund was to look back into the portfolios of the fund of funds and the secondary funds and cherry pick what we thought were the best emerging companies at that growth stage and go in on a direct basis. If I think about everything we're doing, it's kind of covering the venture landscape from the earliest early stages via our fund of funds, typically going into early stage funds and then the secondary funds maybe going in a click later to much later, buying at LP Interests, doing direct secondaries. That growth fund is kind of somewhere kind of the B rounds up until the last round and it's across venture. So everything is venture capital. And in our fund of Funds, we have multiple strategies. So we have a fund of funds, strategies specifically focused on Israeli funds. We have a fund of funds for smaller funds in the US and Europe, merging funds in some cases, and then a fund of funds for larger funds in the US and Europe and a health fund of funds. And they're all super synergistic. You know, we can get to, you know, a deal from multiple different ways and leverage each of the funds. At the center of it, I would say is our relationship though with the GPS of the funds.

[David Weissberg]

You mentioned you have a fund based on small fund of funds or emerging managers. How flexible is that mandate? Are you looking for the funds that have a 50% chance to be a 10x plus or are you looking for something to be diversified within itself and predictably deliver a 3x?

[Abe Feldman]

That's a great question. So that fund specifically the mandate of it is to invest in funds in the US and European $200 million in sizes and below. And typically the funds that are 200 and below are doing pre seed and seed. We, you know, I would love a 50 chance of getting a. I don't know if you said 10x or 5x but that's not great. But, but they're definitely like, it's a mix of two types of funds. It's usually funds that may be on their, you know, fourth, fifth or sixth fund that just, they want to be small. Right. So it could be like Ludlow out of Detroit or a version 1. These are funds that they intentionally want to remain small and may remain small forever or a floodgate for example. So very, very experienced investors over multiple cycles as well. And then what we also try to do is find the next great versions of those funds. So it could be that it's somebody we all, we only invest in investors that have some sort of track record. So it could be a first time fund, it could be a single gp, it could be a first time team. But we want to see a track record and the hope is that they can perform really, really well. Some of these funds will grow up in size over time. Like we were in the $100 million fund of primary Ventures of New York and we were in the $120 million fund of 0.9 out of Germany. And they've scaled up over time and kind of moved out of that smaller fund of funds or our fund of funds targeting smaller funds. But we're always looking for those new managers. And yes, what we see is that the diversification, we don't want to be over diversified lowers the Risk and therefore we can take big bets on these smaller funds. And we've had, you know, these $200 million and below funds. We have a bunch that are, you know, 10 x's and above. We have a bunch that are 5 x's and above. We even have a couple that are 20 x's and above. And then we have a few that haven't performed quite as well. What we don't have a lot of, interestingly enough, is those that have actually lost money. So obviously we're not doing, we're not making an investment in a venture capital fund to do a 1x or 1.2x. But it's very interesting to see, you know, if you get an experienced manager, you know, who's made money in the past, has a track record, it's, it's rare that they'll actually lose money for you. It happens. But it's, it's, it's pretty rare. But for sure that's the vehicle that's a bit more high beta is the way I would put it.

[David Weissberg]

And every LP will say they do first time funds. Most will not. And most like to track the fund over time. Give me the thesis for why fund ones are good investments. Why should somebody invest in a fund one?

[Abe Feldman]

We were, we actually had a discussion about it today in one of our investment meetings that sometimes, and we've seen this a lot where the fund one isn't good, could be timing, it could be portfolio management and then you have to make an assessment. Do I go into Fund 2 and Fund 2 turns out to be amazing and we've had that. There's a bunch of well known groups where their first fund was terrible and then they went on to do amazingly well. But you're saying, you know, if I say why invest in that first fund is because, you know, first of all like an access issue, like we see something that's amazing and we really believe in that, like we want to be there from day one. It'll give us the ability to, you know, have ball control, so to speak, to be able to increase our allocation over time. And it also might be if we're not there from day one and they do extremely well, we may not be able to get into that fund too. Now it's kind of rare that you know how strong a fund is within kind of those first couple of years before they come back and raise that next fund. But that's always a risk. But the main idea is to get there, get an early, get a toehold in the fun and then Again, if they do well, you can scale up over time. And that's the, that's the main reason to do it. And again, sometimes, you know, sometimes being in the fun can teach you a lot. So it could be that I say, okay, I'm going to skip fund one, but then I'm going to come to fun two, and then fund one looks sideways or maybe looks great for some reason, but, you know, and that can make me invest or not invest, but it might, having been in the fund one and known and see how it behaves and how the partners behave and the types of investing they're doing, that could actually change my opinion versus fun too. So being on the inside is also worth something as well. I mean, we don't do a lot of fun ones. We do do them, but that's why we keep the bar like super high on those. There's really got to be, obviously there's got to be like one sentence that you can describe the fund in is why you think it's like super amazing and differentiated for you to go do it.

[David Weissberg]

It's that edge.

[Abe Feldman]

Yeah, yeah, it's that edge. We might start with a million dollar check, by the way, and that million dollar check could become a $30 million check over time. Right, right. So.

[David Weissberg]

Said another way, if you can't simply explain the edge, then there is no edge.

[Abe Feldman]

Or, you know, I, it's not being conveyed to me properly or I can't interpret that. So again, we've made mistakes and we've missed things because I couldn't discern the edge. But I would say even the ones that I didn't do and I made mistakes on, I saw the edge. I just didn't have the, you know, maybe the guts to go do it for whatever reason. But I saw the edge and I'm, you know, so that kind of tells me like if you can see the edge, then there's usually a good, like a real, there's usually a good case that it's going to turn out well.

[David Weissberg]

Obviously, fund one is extremely risky, even from an entity level, whether the team stays together. What are some ways that you could de risk investing to fund ones?

[Abe Feldman]

So first of all, in the model that we do it is a way to de risk it. Again, we're probably investing in that vehicle in about 20 funds, about 10 to 12 of them I would call core checks. And then another, you know, six to eight are sort of these toe in the water ones. So by having that diversification, it tends to de risking it. So that's the that's the main thing, I think also. And again, I don't want to toot our own horn, but we've seen, you know, what works, what doesn't work, managers, you know, and staying close to these early stage managers, you know, giving them guidance, not telling them what to do, obviously. But I do think we have contributed over the years to making some of these groups maybe giving them a better chance to, to be successful. So that's another way de risking just because we've seen so much. But at the end of the day it's, you're taking a big risk, right? And, but, but I would say the main, the, the main de risk going in is I, I always like to, I mentioned it before, is say that, you know, we're not doing first time investors, we're doing people that have made investments. Maybe they haven't done it in kind of a classic fund sense, but they've made investments. There's feedback from entrepreneurs about them. You can kind of read something into the tea leaves from what they've done before. So it doesn't mean that somebody couldn't, you know, come out of some large organization and, you know, start just making investments and do amazingly well. I'm sure it's happened in the past, but I think we de risk it by avoiding those and focusing much more on the ones that have had some investment experience. And it least a decently robust track record.

[David Weissberg]

You've repeated this multiple times. The benefit of having the toehold in the fund, but also the information advantage of being an existing investor versus observing it from the outside. What do you see on the inside that you can't see from the outside?

[Abe Feldman]

You see how people make decisions. You see whether they're careful with them, you see whether you know how deeply they go on things they see. You could see again how they interact with you, what information they're willing to share with you or not, how transparent they are. Again, these things are real partnerships. Again, we're not running these funds, but you're involved with these people for I say 10 years, it's probably more like 20 years in many cases. And ultimately you want to be involved with people that you can trust that you have fun working with and interacting with. And again, being on the inside, you could, you can feel that. And also being on the inside, you know, it's more the, you know, it's the job of the GP at the end of the day, the fund manager. But you can also see some interesting things like bubbling up in the companies. Right? You can see a little Bit more detail than opposed to saying, okay, three years from now, start telling me about, you know, what happened. You can kind of see that, that time series of how things are progressing, I was to say. And again, we, we, I think we have okay judgment on entrepreneurs as well, but we get to interact with the entrepreneurs that they've invested over the years, listen to them, hear what they're saying and that type stuff as opposed to, again, just at one point in time when you're due diligence, you know, fun to have to make a decision, I'm in or out, based on everybody being prepped to say wonderful things about the fund. So being on the inside can just make a tremendous, tremendous difference.

[David Weissberg]

It's also what you're not seeing, which is you're not just seeing a backwards applied narrative to why you did X, Y and Z. You're seeing in real time before the decision is made. And that's just a whole different way to view a fund versus through, through a narrative that the GPS weaved.

[Abe Feldman]

A hundred percent, 100%. And again, like I said, this isn't, you know, at the end of the. It's working with people in a insanely dynamic market. And like, so that's the thing. Like, you really, you want to be in the, the trenches with them. And that's, that's really critical. Again, we've, we've invested in fund twos as well, but in many cases it's been people that, you know, we've, we've been tracking for, you know, that first fund. And even before, like, there was one fund in our portfolio where we didn't do the first fund because we didn't like the strategy related to the timing of the market, but we loved the person. And also there was some team dynamics as well. Two partners, when they came back for the second fund, the strategy had shifted a little bit, the market had shifted a little bit, and they came back as a solo gp and we're like, great, I'll back that person. And it all worked out. And we kind of been following it relatively closely along the way also because the fund manager, you know, very graciously was in touch with us, giving us updates as well, which is also. That's great. You know, like, I appreciate that also, even though, again, we had passed on.

[David Weissberg]

The first fund and you mentioned that oftentimes the fund one is okay and the fund two is great. What would make a fund to suddenly pick up and be a good fund where wasn't as a fund one great example?

[Abe Feldman]

You know, it's it literally was one of the first fund to fund commitments we did, we did back in our first fund to fund. So the situation was the first fund, to be fair, this was the first fund was raised in 99, 2000, which was like, or maybe 2000, right. That was one of the worst vintage years ever. So ultimately I think the fund did a 1x. So I don't know if that was top quartile or. So they, they didn't lose money, which I'll give them credit for. But what was really interesting when we were analyzing the first fund, we saw that out of the whatever, you know, 100 great exits over whatever period of time, you know, they were in, you know, they had picked four out of the 20 portfolio companies that they invested in. I was like, wow, you know, these guys seem to know what they're doing about picking. But we analyzed the portfolio, we saw they entered with very low percentages relative to their fund size. And a lot of their following capital was used to help, let's say the more challenged companies survive versus putting more capital into their great companies. Now when we talked to them about Fund 2, we sat down with them and we were going to pitch them that that's what we saw in the first fund, like okay, so why we wouldn't do the second fund. And they literally came to us and said, look, you know, we see where we made our mistakes. We, we want to change it. We think we picked good companies. Where we went wrong was around portfolio management and construction and that's what we plan to do differently this next time around. Now it could have been, they would have screwed it up. But it turned out that that second fund ended up being, I think it was something like a Forex Net fund. So again, I think it was that it was picking up on some of the, you know, what they were doing well and where they weren't being able to exploit that and take advantage of that. So again, it doesn't always work that way. But, but I do think, and also, by the way, I think it also says a lot about managers when they see, you know, what they did wrong and, and they want to correct that. You know, a little something that isn't necessarily public information. But. And I blame myself as being here in the beginning, but you know, Vintage's first fun was our worst fun so far. And I think a lot of it is okay, you know, you think you know what you're doing and, but there's a lot, a lot of learnings. And we, you know, we do three off sites every year where we beat the crap out of ourselves to figure out what we do wrong and what we need to do better. And that's something that we started, you know, way back in the day in 2003 and again, you know, fun. One of ours should have been much, much better for a few clear reasons. And we changed that. And you know, so far the future funds have been, the subsequent funds have all been better than that first one. First one was okay, but the next ones have been better.

[David Weissberg]

I think the top LPs, like the top VCs look at the managers rate of change. You mentioned that fund not only did they react to feedback quickly, they actually internally generated what was wrong with the strategy and improved before they even met with you. That's even better than being reactive to feedback. So you also have to look at the trajectory, not just the point in time.

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[Abe Feldman]

Get started today 100% and that could be around things even like sectors that you're investing in. This fund was also very interesting because you know, they, they were invested in a particular sector because they had a, a view on it. And again that first fund did a 1x in a period of time where again 1x was not bad but a lot of it had also do with sector they were investing in. And they said okay, this next one we're going to have a thesis around, you know, these three sectors. And that's where, because we believe that's where you know, the puck is going. You know, where the world is going. So that's also something like, to think about. We're seeing, I, I'm, I'm, I'm seeing that more and more with funds, and I respect that more and more. I would say if I had to go back 20 years, he asked me, I said, oh, if, you know, funds are changing the areas and the sectors that they're focused on, I'd be like, I'd be a little wary about that. I'm a little wary about that. But even if I'm a fund, but within fintech, I got to always have new, you know, themes that I'm looking at. So I think that's critical.

[David Weissberg]

A lot of times these labels we've put on things like strategy drift versus changing strategy or evolving strategy, it's only clear in retrospect whether that was a positive or negative. And people kind of paint these narratives to try to highlight or de emphasize parts of the strategy. You guys have these off sites every year where you're constantly just rigorously debating your own strategy. Tell me about the process on that. How do you evolve your strategy year over year and what have you found that works best as a fund?

[Abe Feldman]

It's a great question, you know, just from a, just from a specific process point of view. You know, we pick a number of topics. Some of them return on themselves all the time. You know, like, how do we handle, are we handling our reserves properly? And our, in our growth fund, you know, in, in our, in our secondary deal, should we be buying LP interested managers that, you know, we think, we don't think quite as highly of? You know, things are always going, we're always doing analysis to understand that. But you know, really the whole idea is to focus on, you know, a few different topics, you know, dive in deep and then out of that come back and say, hey, you know, let's, let's try to implement that in what we're doing. So, you know, I'll give you a great example. Like over the years, you know, we may be able to be accused of being, and this is even me personally, a bit too conservative. And when we would price companies, for example, when we were doing growth deals or when we would, we would look at LP models on the secondary side, we would hone in on the winners and we'd often put in like what we think the outcomes could be, be, you know, low base, high. And we always found with the best companies that our high case was always too low. Right. So, you know, and again, in the moment you look back, you're like, you're saying, okay, wow, we put you know, a billion dollar exit on that company. And you know, now it's back then that's crazy, right? And now it's a $100 billion company. And then in another case it might be, oh, we put a $500 million exit. Oh, now that's going to be an IPO at 9 billion. So, you know, a lot of that work is then to say, okay, when we, when we look at deals, you know, if we're, if we feel good that we've honed in on who we think the great companies are, you know, let's figure out if we're not being, you know, too conservative around pricing deals. So that's just one example. But that's the idea is that we, we go, we, we take the data of the deals that we've done, we look at the analysis at the off site and then we come back and try to implement it in our, in our workflow. We had things around like, you know, diversification of portfolios, you know, where if we're buying on a secondary basis, like how to think about that if is, is a more diverse portfolio, a much better opportunity than one that maybe has a couple of, you know, amazing companies in it or at the time that we think our amazing companies are not, and so on and so forth. So it's really like practical things that we deal with when we look at transactions and then do the analysis and see what, what the outcome should be and then come back. Now a lot of it ends up being as always, more art than science. But it's just a, it's, it's important to go through that. And then we also just talk about strategies in general. Like our fund of funds, for example, you know, our fourth fund of funds, you know, we started with an Israeli fund of funds only and then started investing outside of Israel. By the time we got to our fourth fund of funds, it was Israel funds, big funds, small funds, US Funds, European funds. It was this big mishmash of, you know, 50 or 60 different lines in our fund of funds. And you know what we realized it didn't make sense to have all that in one fund of funds. And that's why we ended up breaking it up into different vehicles just because a, they behave differently and also to give more flexibility to our investors, you know, to pick and choose what type of strategy they might want. So it's also those types of topics as well. So. Yeah. And then now, by the way, like we're, we're going to have an off site where a lot of it is around, like, how do we, you know, want to play what's going on in AI? You know, Again, this is a conversation that we've been having for the past two years, and it comes up each one, but we're gonna have another one to say, hey, you know, where are we today in the market with that? Because we've invested in a bunch of different companies. We're doing well with a bunch of different companies, you know, but we want to dive deeper and see, like, where we're making money and where our investors are making money in the sector thus far. So it's those types of things.

[David Weissberg]

We'll get right back to interview, but.

[C]

First, we're looking for the next great guest.

[David Weissberg]

If you or someone you know is.

[C]

A capital allocator and would make for.

[David Weissberg]

A great guest, please reach out to.

[C]

Me directly at [e-mail] it sounds like.

[David Weissberg]

A lot of what you're doing in off sites is you pick these sacred cows, these things that you're never supposed to question, diversification, conservatism, valuation, and you attack it systematically. And the off site gives you the, the mind space to have everybody in the room talking about these things. And I sure. A lot of times the takeaway is we're doing things how we should be doing them. It's not always, let's, let's change this. This is bad. Sometimes you double down on your strategy, which itself could have value.

[Abe Feldman]

Yeah, yeah, for sure. Although most of it is just us beating ourselves up for, for the stuff that we wish we would have done better. But it's, it's interesting. Another part of it, I mean, again, is that, you know, Allen, who started the firm, you know, he says when he comes to the offside, he likes to be the first one to talk and talk about all the mistakes that he made. So it kind of sets the tone and just gives it kind of that space to say, hey, you know, that's really, you know, we, we want to get better. And you're right. It's not just about like, let's beat everybody to a pulp and depress everybody, but it's like saying, okay, let's take a serious look, like you said, these sacred cows, and, you know, and, and figure out how do we get better at what, at what we're doing. So it's, yeah, so it's a really important part of what, what we do.

[David Weissberg]

One of the things that makes you guys unique is you use the same team against different strategies, which sounds kind of intuitive, but then you look at, you have Funded funds, you have growth investments, you have secondaries. Personally, my bias is I consider secondary is a completely different animal from the rest of the industry. But you guys have it in one team. Why is that?

[Abe Feldman]

It's a good question. I'll say this from a bottom line perspective. It's just, it's like data and information flow and intelligence. My partner Saf likes to call us an intelligence organization. You can tell he was in the army here. But that's really the idea is that I think if we had a fund of funds, team and a growth team and a secondary team, you would just have siloed information and it's just so super synergistic. Like there's not a phone call that I have with a GP where somehow something doesn't come up around potentially doing a secondary, maybe even a growth round in a company could be a secondary company, could be even an LP interest. And I think if it was, then like, okay, I have this relationship with the GP and then okay, let me go turn it over to the, the team that does secondaries. I just think some people get lost in along the way and maybe even lost in translation. So again, it's all super synergistic. At the end of the day, it's venture capital. You know, the companies are the building blocks. You know, the fund managers are at the center and you know, if I look at, you know, a secondary deal, at least the way we do them, meaning like they're very like curated, you know, this kind of rifle shot secondary, smaller deals between, I don't know, 1 and 10 million typically they're usually things where we're working together with our GPS because they might have an LP that wants to sell and we know the portfolio because of the relationship with the fund. I would say as a team, there are some people who spend a bit more time with working on the fund of funds deals and working on the secondary deals and working on the growth deals. But it's all, it's just too synergistic to separate all that. At the end of the day it's about making, you know, it's about evaluating the underlying companies and the fund managers who are involved, whatever way you want to get to it. Even when we're doing a growth deal in a company, we look at just as much as who else is invested there. You know, it's not going to cause us to make an investment or not make an investment. But that's also a critical part. Are these trusted partners around the table or not? And again, that just might get Lost, you know, somebody then had to come over me and start asking me about, hey, you know, there's this deal and there's these funds in it. And I know you're closer to them and like, those conversations do come naturally. But if it was that separation, I think it wouldn't, you know, be as. We wouldn't be as successful and it wouldn't be as efficient.

[David Weissberg]

You recently had a successful generational transfer with Alan Feld, who I previously interviewed.

[Abe Feldman]

Yep.

[David Weissberg]

And just to give you a sense for that, I tried to interview him again and he introduced me to you. So he, he lives by his generational transfer. He's a man of his word.

[Abe Feldman]

That's right.

[David Weissberg]

What are some of the behaviors or processes that the firm went to in order to have this successful generational transfer?

[Abe Feldman]

Yeah. So it's a great question and I appreciate Alan highly. I'm going to do all his future podcasts, I guess, but. But with pleasure. But no, it's really like kudos to Alan. Basically, about 10 years ago, the trigger was actually. I mean, I'm sure Alan had in his head before that. I mean, Alan's very visionary type person. But, you know, when Assaf Horace joined us as a principal and then quickly became a partner and then, you know, promoted to general partner, you know, he was, I guess, you know, in his early 40s at the time. You know, I was somewhere when he joined probably in my mid-40s to, to late-40s. And then, you know, Alan said, look, I want vintage to last forever. I guess he saw, he felt between a meet myself and Asaf, there was a good core that could take it going forward. And he ended up doing research among other funds both that had successfully handled a succession and those that, that hadn't. I forgot the number that he spoke with, but I think he came away with a few core ideas. One was that, you know, things needed to be put down on paper. Right. Both, you know, to sketch it out and also just legally. Right. And then you had to really make clear lines of demarcation. So in the case of what Alan decided, advantage was that at the age of 62, you're no longer involved in new funds. And it just made it a clear line is that you're, you've, you've raised these prior funds, you've been investing out of these prior funds. You're involved with those over time. You know, the, there's maintenance. Again, it's probably more than maintenance. That's probably belittling what you have to do. But still, it's much less, but 62, you're not involved in raising the next funds. That's what happened in the year that we raised our fourth growth fund, now our eighth fund of funds. So how and isn't going to be involved in those going forward, but it just set the process going forward. So when Amit hits 62 in a couple years, the same thing will happen with him. And then when I hit 62 in about a decade, that'll happen with me and so on and so forth. And it just makes it clear to everybody. And that's something that we've, we've told everybody within the firm that that's how it works. And we've told that to our investors as well, which is extremely important. And we've now been telling that to our funds as well and other people in this. So the idea is to, you know, set it down on paper, make clear lines of demarcation and then start to message that well in advance of that happening. And, you know, so far that's working. It's been an important thing for myself and Amit stuff as well. Because.

[David Weissberg]

That must help with recruiting as well, right? Because you have, you have a clear path for the next generation.

[Abe Feldman]

Yeah, yeah. 100. And again, you know, most people aren't going to get there, but we have enough proof points in the firm. I always say, like, you know, technically, I don't remember what my title was, but I started as an associate. Amit was a venture partner, soft was a principal again, we brought on a couple of partners as partners as well. But the idea that you can, you can move up, you can stay here forever and move up over time if you want to. It's 100 the case. And, and I think, you know, the other thing is that, you know, Alan, like stays in the process of retirement, but, you know, probably next year sometime he's going to go down to one day a week and he's, you know, that we have an equal partnership now and there's no, you know, after, there's going to be no long tail of the founder. So nobody's going to get that going forward. So he's really, you know, somebody who set the tone also around that, that you have somebody, you need that if you don't have that. I mean, you see other firms that there's somebody who just holds on forever. And you know, that can work too in some cases. But I don't think that's someone wanted and it's not what we want either.

[David Weissberg]

Let's talk Israel, just to give you a sense for how quickly this has evolved. When we had our pre interview chat, yeah it was before Israel and the US had taken out Iran's nuclear program. That seems to be very positive for Israel. Tell me more about Israel's ecosystem today. Post kind of the, the dismantling of the Iranian nuclear program.

[Abe Feldman]

So, so first of all it's like, you know, there was that and now it's on to the next problem, right? Like we have to deal with hostages and what's going on with Gaza sort of, that's never ending. But what I would say like even, you know, day before that and day after, I mean I know it was only 12 days. I, I don't think like, and even since October 7, I don't think that the Israeli ecosystem has like skipped a beat. Like it's pretty incredible. Like we talk about all the time, the resilience and things like that, but it's actually only getting more and more active. I'm losing my track of time. But I think immediately after that there was the announcement of Melio getting bought for $3 billion. That's an Israeli company. A few months back, Wiz was bought for $32 billion. Next insurance 2.6 billion. The same week we had the IPO of eToro, which was the first VC backed IPO this year. It's an Israeli company but now that kind of Iran has happened, you know, I don't know if more, you know, we'll have to do something else. There's going to be additional conflict. I actually think like when I look at the whole region, it's probably been de risk dramatically from where it was on October 6, 2023 and maybe de risk to the point where it's been less risky than ever, to be frank. So I think that's fantastic and I definitely think there's renewed momentum to end the war in Gaza and then there's renewed momentum to actually have peace with more of our neighbors, which when you take a step back, it's pretty incredible. And if I had to make a bet, I suspect that within the next 12 months, you know, the war with Gaza will be over and that we'll have peace with Saudi Arabia and that's the craziest thing, maybe even with Syria and like, you know, who would have thought so I'm not naive enough not to worry about the next thing that's coming around the corner, like, who knows? But I definitely think like all that's been de risked with all that being said in the middle of a war. Sequoia reopened up their office here Greylock reopened up their office here. We had these massive exits and IPOs and you know, tons of money getting invested here. Just yesterday Nvidia announced they're going to build a massive R D center in the north here in Israel. I mean, incredible, right? So, I don't know, it just keeps, it just keeps going on the television Stock exchange was the best performing stock market I think over the past month, including during the time of the Iran war. Again, I'm not sure that's the best barometer in the world to judge things, but it just tells you something. And the Shekel is like the strongest it's been in a couple of years probably. So things are, things are chugging along here, that's for sure.

[David Weissberg]

And I'm pretty optimistic as an asset allocator. Investing, you guys are obviously based in Israel, but you're also investing in Israel. Do you see a peace premium, a post Iran and maybe a post Saudi peace deal premium to the Israeli market or is that already priced in?

[Abe Feldman]

Unfortunately, yes. I don't know. As an investor, I do think, you know, there's this new generation of people who are going to be coming out of the, you know, the war that had, you know, a type of really unique bonding that may lead to a real like ramp up in the number of startups, which is amazing. We're seeing startups getting started in new eras, whether it's Quantum or Defense. But we're seeing is again, have, have not. So we're seeing it's much harder to raise and again I feel this is, in all the markets, it's much harder to go from a seed round to an A round in general for, you know, it's not like 2021 when anybody, you raised the seed round got to an A round pretty much. So that, so that's the, that's the challenge. With that being said, we're seeing tons of money flying into the best companies and tons of M and A and companies are continually raising 100 million dollar rounds, 200 million dollar rounds, 300 million dollar rounds at amazing valuations. So I do think there's already a premium on the market and I do think, you know, there's a chance it only goes up and it's just simply going back to the basis kind of supply and demand. You know, there's only a finite number of companies to invest in every year here and the whole world is investing here. And as soon as things calm down even more, more people will come over to seek investments. So there may be something macro that goes on globally that for some reason depresses investing in venture. But the supply demand dynamic in Israel is only just, I think there's going to be more demand than the supply will be able to match and that's just going to cause, you know, prices to go up.

[David Weissberg]

Perhaps the ultimate champagne problem. But one just to take the counter of that is if there are no wars, if Israel is in peace with all its neighbors, will Israeli entrepreneurs still have that same edge that they currently have? Because they are literally battle tested VCs love, love battle tested entrepreneurs. Israeli entrepreneurs are literally battle tested.

[Abe Feldman]

That's, it's a great take. I mean, look, I, unfortunately, I don't think all of our conflicts are going away. You know, I think for example, if I take like, you know, cyber, where it's just going to get more and more intense globally, you know, there's always going to be enemies from somewhere. They don't need to necessarily be your neighbors. So I think that that's, that's something I also think when we see how AI is just changing the world, like Israel realizes that it can't fall behind on that, so it's going to continue to invest tons of money around that. That's going to become a bigger, bigger part of warfare in the future, for example, and quantum. And so I think Israel is always having this mindset and, and you know, to be ahead of the curve on things. But you're right, I mean, I don't want to, obviously I would love a world where there are no wars, but there's no doubt that the conflict in the region has been a big boost for, you know, the entrepreneurship in Israel. But I don't think the conflicts are going to, you know, I think that some of the conflicts are going to calm down locally, but I don't think they're going to go away completely, you know, forever. That's for sure. And I would just say, I also think again, we're in an ecosystem where, you know, the, the Israeli teenager gets up and he sees that somebody just sold their vibe coding one man company for $80 million. Like, you know, that's, that's something to aspire to, right? Or that again, that whiz gets sold for $32 billion or you know, Etoro, which I, you know, they use on a daily basis, goes public. So, you know, they, they have a lot of examples of what to aspire to. And I think that, that, you know, that's going to drive them as well. But I don't think we're going to be unfortunately dismantling our military anytime soon.

[David Weissberg]

You've been in venture now for 22 years, which I mentioned earlier. You know, countless cycles, countless paradigms, countless ventures dead now. Venture is the hottest thing now. Ventures that again. What is one thing that you wish you knew? When you started in 2003 in Venture, what advice would you give to a younger ABE right before you have started?

[Abe Feldman]

Wow, that's a, that's a tough one. You know, it's fine. I probably would say, like, don't, don't let the, the stuff you get wrong eat away at you too much. Maybe within our business model that we could have probably, we could probably be a bit more risk tolerant is the way I would put it. You know, take more swings on certain things. And I would also say, if it's advice, I would say the key thing is just building close relationships with people as much as possible that you like and working with people that you like. If there's somebody who you know that you, you don't totally gel with, find another deal, right, like, and there'll be something else that comes down, comes down the, the pipe. Now I went to a dinner with one of the, a local, was a local GP at a fund here and I was trying to figure out how long I know him for. And it's like when I say, wow, it's been 20 years already, it's like, it's fantastic. And it's somebody who, like, I'm glad I got to know for 20 years. I would say really focus, you know, you can make good investments in people that you like and you can avoid. You don't need to make. And you know there'll be good investments in people you don't like, but you don't need to make them. It's all right.

[David Weissberg]

For some people, 20 years feels like two years. And for some people, two years feels like 20 years.

[Abe Feldman]

That's right.

[David Weissberg]

You mentioned you don't want to be overly critical. I struggle with this as well. I'll listen to a podcast or look at a deal and I'll look at the one thing I might get everything right, but I sold three months early in the public markets. Have you found a solve? Whether as a team at your off sites, how do you operationalize being kinder to yourself and giving yourself more benefit?

[Abe Feldman]

It's not easy. Again, on the one hand, like we said, we want to start off with the mistakes. So I guess it does make it sort of like a safe space in that sense because, you know, if the person, the, if the, the people at the top of the firm are talking about their mistakes, then you realize that you should talk about them and admit them and not just, you know, brush them under the rug. But look, we also celebrate our wins, and we celebrate as a team. And, you know, I find that maybe that's the challenge, is that I. If I had to give advice to somebody, is that I find that very fleeting, is that I enjoy the wins for, you know, until I have to go on to the next one. And the losses just eat away at me for a very long time. And that's, you know, that's. It is what it is. But we try to celebrate the wins as well. You know, ultimately, again, we've been in business now for over 20 years. I. I'm, you know, I'm very happy about, you know, even the relationships with our investors, which I hold dear, dear to myself. You know, they. They put us in business, and they continue to put us in business. So I. I try to focus on much of that, like, we're doing the right thing for them and, you know, ultimately making them the returns that they want to make. And, you know, so far, we've been able to do that. But it's hard. I don't know. You know, it's just very. It's. It's very, very hard. I'm not sure I have a great answer to say how to, you know, not let it eat.

[David Weissberg]

It's.

[Abe Feldman]

It.

[David Weissberg]

It's something. It's something I think about often. It is hard to make those losses eat away at you less. So I think you have to do the opposite, which is spend more time doing things that you love. Spend time with people that you love and let that. Let that take up more space in your life than the losses, which will be painful. And maybe they should be painful. Maybe that's how you learn from them.

[Abe Feldman]

Yeah, totally. And again, occasionally I'll look back and I'll see some deals and I'll be like, oh, wow, that was a good one. You know, and then I'll chalk it up to luck and move on. But. But yeah, it's. It's not. Not an easy answer for that. That's another podcast, maybe.

[David Weissberg]

Well, we'll leave that for the next podcast. Abe, this has been absolutely wonderful. Thanks for jumping on the podcast.

[Abe Feldman]

My pleasure. It was great. Really appreciate it.

[David Weissberg]

Thanks for listening to my conversation.

[C]

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[David Weissberg]

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