Judah Taub, co-founder of Hetz Ventures, a $300M Israeli VC fund, shares insights on identifying market gaps, evaluating founders, and navigating seed-stage investments. He discusses reducing sales lead times, negotiating with corporations, and leveraging data for smarter decisions. Plus, he explores the concept of local maxima in business growth and his journey of writing a book.
Harrison Faull (00:01.794)
Hi Judah, welcome to season one of the Open VC Podcast. It's an absolute pleasure to have you on today.
Judah Taub (00:08.707)
Thank you very much for having me.
Harrison Faull (00:10.582)
No worries at all. Look, so you've had an amazing career starting in the IDF, then you became the first data hire at a large hedge fund called Lansdowne, and then you started your own VC fund, Hertz Ventures. Could you tell us a little bit about what the initial idea was for Hertz Ventures, where the gap in the market was, and how that journey started?
Judah Taub (00:33.165)
Yeah, so I think a little bit like founders when they're starting off, they're looking for a gap in the market. It was a bit similar for me. I sat at a bunch of different VCs in Israel and actually outside of Israel as well and felt that there was a gap or a market in the gap for
early stage investors with a technical background who are more similar both demographically and sort of from a skill set perspective to the type of founders they're looking to invest in. And I have a pretty strong thematic approach for why we're doing what we're doing. And that's what we set out to build. So we today are investing out of our third fund. We invest in early stage Israeli infrastructure software founders and our entire investment team.
are ex-engineers with an infrastructure background and very similar to the type of founders that we look to invest in as well. So yeah, we've tried to find a problem that we feel passionate about and then build a team to suit the problem we're trying to cater to.
Harrison Faull (01:43.424)
Amazing. Well, it's working very well because as you mentioned, you're on your third fund and I think you have over $300 under management now. becoming one of the larger VCs in the space. What kind of advantage do you think it brings to the fund of having the same, having sector expertise? Because some people do make the point that if you know too much about a problem, sometimes you might miss the next solution. So how do you overcome that criticism perhaps?
Judah Taub (02:13.569)
Yeah, guess you could also say that about founders. Well, maybe it's best not to know too much about the industry you're going to disrupt. Yeah, there's two sides, I guess, to every story. think the big picture of what's happening today in venture is that the venture landscape is shifting. And this was something that you could already see the beginning of a couple of years ago. And what we're seeing today, and it's now basically in full swing, is two big trends. The first is the big VCs are getting
bigger and the way to measure that I think is not how necessarily big their funds are but how much they're deploying every year so a fund that is I don't know ten billion dollars that is raised every five years in my mind is having a smaller impact on the ecosystem than a fund that's five billion dollars but raised every twelve months so to try and help cater to LPs that are trying to push back about
out against funds that are so big, some of the big funds are sort of not raising as much, but they're raising much more frequently. But the big picture is these large and growing funds are taking over a larger portion of the industry. And it's heavily skewing a lot of the market in a lot of ways. So without naming names, but it doesn't matter to them so much valuations they get in, they're happy to write off
tons of early stage companies that they may have invested in and the main thing for them is to make sure that when a company does become a unicorn, a dekakorn, they were able to throughout that process deploy as much capital as possible into them. And behind closed doors a lot of them will tell you that on our 5, 10, 6, 12 billion dollar fund we're not going to return much more than 3x net at best.
even to the LP base that they're catering to, they're not pitching more than that. Their pitching will give you a piece of this market, will give you access, you can write $100 million into our fund, et cetera. But that is distorting a huge portion of the market. And then you've got to ask yourself sort of, okay, so what does the rest of the market look like? And I think the rest of the market is either going to get hurt badly because these players are just big and can take a big portion of it, or
Judah Taub (04:42.619)you'll have the very focused funds, the ones like in any complex market, are carving out a small portion of the market where they are super focused and they put all their resources into it and they have like playbooks ready, cater it to this heavily and I think those are the funds that will return infinitely better returns. They'll have a much higher hit rate with their founders and frankly as long as you're not like threatening these big playersthey will work very closely in a friendly way with you. So I'll give you an example with us.We are constantly, I'd probably say once a week, I'm on a phone call with one of these large, US, but also European funds, who are saying, what are the best companies? What are the interesting ones in your portfolio? And frankly, sometimes they're even sending us companies at seed. And that's because they don't actually want to do much work at seed. The only reason they will sometimes invest at seed is to make sure one of their competitors doesn't. But their ideal scenario is what they would call a specialist really helps the company, works hard with the company or co-invests with them and then when they decide to deploy their big bucks, whether it's the series A, B or C depending on whatever that series is called these days, that's when they get to deploy a lot of capital. So the advantage we have over, just to answer your very simple question but I've given a long monologue here but still, the advantage that we have is that if you're data, cyber security, engineering,
any infrastructure software, we're likely to know the industry extremely well. We've got roughly 120 execs who are regularly working with us and are sort of an extended part of the team. And as a result, I think you will see that the performance will be very different to what a generic fund can do over long period of time.
Harrison Faull (06:44.549)
Okay, no, that's great answer. Thank you. you, question for me. There's a lot in there. A lot in there to unpack. One is a curious question, which, yeah, I'm just wondering, these big funds, do they typically charge the same in management fees as smaller funds? Do you think the scale of the two and 20 model, if they're actually pitching to LPs this 3X net return on a two billion type fund, or are they having to reduce those fees?
Judah Taub (07:12.355)
Good question. You can ask them, but the short answer is if they can get away with it, they will.
There's a lot of gray area there. So I'll give you an example. Sometimes the fees will be officially two and 20, but maybe it's not on all the capital that you've committed. And especially if you're a repeat LP committing many of hundreds of dollars throughout the funds, like I will tell you, don't worry, I'm going to recycle your capital. So my fund sort of 10 will give you back capital that you can then deploy back into your, my fund 12. So there's a lot of ways that
these large VCs can, I don't mean it in a negative way, I mean it in a positive way. They're trying to work together with these large LPs to provide a solution for them so that they can recycle capital, so that they could potentially show their investors that the management fee is somehow lower. Yeah, so especially at that size, there's some wiggle rooms sometimes.
Harrison Faull (08:19.971)
Okay, that makes sense. And that's probably the logical expected answer actually, because yeah, these entities are becoming huge. Okay, so the trickle down effects of having this much capital being deployed into venture. Do you see that hurting the seed stage investor because of the dilution that you should be expecting in the future? Should we actually be repricing seed rounds to anticipate greater dilution down the line or putting in perhaps concrete?
what's it anti-dilution rights to make sure that ownership is actually meaningful when an exit occurs.
Judah Taub (09:00.829)
In short, think the answer is no. I think that there's two sides to every coin. And while you might potentially be diluted more, the upside is many years ago, if you had a great company that now wants to raise $200 million, you really had maybe one investor to go to, and it wasn't going to be that competitive. And you may have to go to the IPO market much earlier than you would have wanted. And now there's a whole group of
So like I'd much rather take another round of dilution but grow to the 2 to 3x again. So I'm not sure I would be repricing things that seed as a result of that.
Harrison Faull (09:46.347)
Okay, no, that's a great answer. And good for me as well, because we're active in the pre-seed and seed stage over here at OVC Ventures. Okay, so diving into becoming sector specialists. You mentioned that you have 120 executives all very tied into tech infrastructure in a very tight geographic community within Israel.
Judah Taub (10:07.611)
No, no, no, sorry. The vast majority of them are not in Israel. They're predominantly US-based or European and predominantly working for either S &P 500 or similar like companies.
Harrison Faull (10:19.232)
Okay, okay. You've also been quite expert outspoken about how the culture at Hetz Ventures is different to other VC funds and how that impacts your founders and your portfolio. Does that all play into the same thing about being a sector specialist? Are you able to deliver something, a more premium venture experience than a agnostic investor do you think?
Judah Taub (10:41.241)
So there's two questions there. think our culture is one factor, and I think you could have a similar culture potentially in a more sector agnostic venture. Our culture is different if you were to walk into the office here, just to give you some examples. You would probably feel that pretty quickly. Everything's very transparent. We all, for example, sit in the same room.
and there's 10 of us. And if you walked into the room, you wouldn't know where the managing partner or the senior partners and the rest of the team sit because all the chairs and the seats look the same. And everybody can just walk over and chat with anybody else. And the rest of the office are like rooms where often you'll see one or two founders just brainstorming their ideas. Today I had two meetings with founders who literally do not have an idea and they know they want to do something in infrastructure software and they know this is
a good place to come and sit because this is where things are happening in that space. So I think there's a certain type of culture here which is definitely different to majority of the VCs that I've visited. Completely separate to that is the fact that we are thematically top-down focused and I think that, I think the culture is part of our DNA which I do think helps but the thematic part is a difference I think a benefit to our returns.
but it's a different piece. I think the fact that we're sector-focused helps us regardless of the type of DNA and culture that we've built here.
Harrison Faull (12:18.043)
awesome. So you become very sector focused software infrastructure projects. Do you think there's a difference when you're interviewing founders? Are you looking for slightly different things given your invest, given your industry focus than you might if you're sector agnostic? Are there any things you're really trying to draw out from a founder or test on that first call that are different to a normal VC fund?
Judah Taub (12:43.133)think every VC is looking to try and find really great founders and then really great founders that suit the type of venture they're following. I think the type of founders that look at infrastructure software as an industry they're looking to disrupt are typically of a certain nature. mean, so if I was comparing an infrastructure software team to, I don't know, social media apps, so like the background.of the founders, so you would want them both to be very agile and at the same time good managers and founders just like you want people who would just go get us and make things happen anyway and problem solvers and all the rest of it. But at the same time the infrastructure software founders or teams are likely to be potentially more technical maybe with a B2B background versus the B2C background which is the sort of social media app ones that I've sort of created and described here.youOften you want them to have an understanding of how an enterprise operates and how best to move within an organization to try and get the most value out of your customer to shorten sales cycles and the rest of it. Again, the social media app guy that we've described or woman or woman, but that founder is probably going to be dealing more with sort of CAC payback and all the rest of sort of B2C motions. There's different skill sets there. yeah, but there's obviously certain traits, I said at the beginning, you're looking for in every founder.
Harrison Faull (14:27.194)
Yeah, okay. And that comes with the nature of the returns that are required for a fund, I think. You're not looking for a lifestyle business. That just doesn't fit the return profile for a fund. Okay, so to put you on the spot a little bit then, can you recall perhaps the most memorable pitch that you've ever had a founder give and why, what made it so special?
Judah Taub (14:54.851)
Positive or negative?
Harrison Faull (14:56.609)
It can be either.
Judah Taub (14:58.603)
Okay, so there's one negative one where I just thought it was absolutely hilarious and the idea was like horse hypnosis to try and make them recover from injuries faster. And I was just absolutely fascinated that they've gone all this way and it like the market size and how hypnosis is going to do. And I remember just taking the meeting because I actually thought it was like, I don't know, and then then and like, they were totally serious. And I didn't I don't mean it in a negative way. I just mean it like it was just you asked memorable that was memorable.
There was one founder that came in and I was...
blown away by the detail and the extent that he understood, to what extent he understood his market. It was really, really, really impressive. And I'll give you some practical sort of examples here. So typically you have like, and we verified this with 70 customers or 70 potential expert, whatever. And he had something similar, but then he had slides in the appendix, which we jumped to very quickly because it was obvious that was the interesting part where he literally went through every single
feature, how much each of these people would pay for it, what are the integrations that are required, and you can see that is why this is my roadmap.
And it was like, I've done a bloody difficult job of understanding the market. And the number wasn't small, like there was literally 70 logos. And he's like, if you want to speak to any of these as part of the diligence, I don't want you to speak to them all. It's going to drive me nuts. But pick sort of as many as you need, and you can verify all of the following things. And it was just impressive to see.
Harrison Faull (16:45.163)
Wow. Wow, yeah. It's incredible how little some founders do in terms of competitive analysis and preparation. I think it's a hard lesson to learn once you've already started your fundraise journey, but it's definitely something to bear in mind if you haven't begun because not being prepared enough is definitely a red flag that's easy to uncover for any sophisticated investor.
Judah Taub (17:10.847)
Yeah, the one thing that always surprises me is with certain founders, you feel that if you say you want to invest in them, from their perspective, they've succeeded. the goal of the company is to raise the money. And if they were able to raise the money from you, they've done an excellent job. And often I think to myself, like our job is to build a portfolio and hopefully
for the up portfolio is good enough that whether any specific company will or won't succeed, we should still hopefully do well for our LPs. For the founder, it's the other way around. Like they have put all their eggs into this basket. If the company succeeds, they do obviously much better than we do, right? They've got much more upside than we do, but it's all in that one basket. The person who's taking more risk when we're about to set off on this venture together, okay, we as the investors and you as the founders,
founders, it's clearly you. If you could take a little bit longer to de-risk something, to pick up another rock and check what it looks like underneath, it's clearly in, I'm saying you, you the founder, it's in your benefit, much more than in our benefit. sometimes, to your point, I'm sometimes surprised at the level of diligence they do for themselves, regardless as for what a VC may or may not ask.
Harrison Faull (18:39.663)
No, it's true, it's true. And it's dangerous to set your tight sights on finishing at Aventura's because actually that's when the hard work very much begins because the rapid scaling must ensue very shortly afterwards.
Judah Taub (18:55.501)
Yeah, 100%.
Harrison Faull (18:58.812)
Awesome. Okay. So you're very select, actually, at Hertz, given the funds under management to only make, well, in my research, I've got you make six to eight investments a year. I don't know how much that's changed as of today.
Judah Taub (19:10.339)
Yeah, that's pretty spot on.
Harrison Faull (19:14.42)
Okay, can you talk us through how you get enough conviction to actually select those eight investments each year, given that you're looking at over a thousand?
Judah Taub (19:28.355)
So our funnel is...
big picture numbers is we will get somewhere between a thousand and maybe a thousand five hundred decks a year of which roughly a quarter somebody in the team will meet once of which roughly again a third maybe a half of those somebody else in the team or we will take a second meeting and roughly I'm going down the funnel we will be doing somewhere in the range of thirty to forty
thorough due diligence processes in an average year. The thorough due diligence means that we're spending tens of hours on the company, meeting the founders, making sure we're on top of the market. Obviously, if it's a market we know well, we're able to be more efficient and mainly quicker. Client sort of background calls, sometimes, or very often, we will introduce the startups to potential customers and we'll do...
like half a dozen of those and see how those play out and so we have a process and we'll do that 30-40 times a year. Typically the process is somewhere between one and three weeks long maybe three and a half weeks in total and then out of those 30-40 we're making somewhere in the range of five to nine six to eight investments a year.
Harrison Faull (21:01.169)
you tell us a little bit about the most recent publicly disclosed investment that you guys made and why you were so excited for that deal?
Judah Taub (21:12.477)Good question. So I don't know which is the last one that was publicly disclosed. There's one that just, I think came out of stealth just maybe last week when they raised their series A, but we funded them maybe a year ago. We did their seed and this is...partner of mine, Pavel, did that. the background there was we obviously, like everybody else on the planet, have been looking at sort of AI and sort of generative AI and what it's doing. We became quite skeptical and quite early on in investing directly in AI and AI applications. And we're mainly looking at second derivatives of AI. So we invested in one company that helpscorporations by cleaning their data so that an AI model, whichever you use, then, and so that's doing quite well and that's a newer investment actually. And then this one was sort of security for AI. So the name of the company is Propped Security. So it really, it's in the name. And what got us excited, I think, was two things.three, I should say. The first and most obvious one was the founders, that from the first moment they came in, and I remember meeting them, we spoke about it afterwards and we said, this is the type of team we want to back. And then there was a process of what is the right go-to market in a vertical that we were increasingly convinced was going to happen. So we must have spoken to, and I say we as the team, but this was actually predominantly Pavel and maybe another member of the teams spoke tomaybe 20 chief security officers from...a whole array of companies. And I remember him also coming back from RSA after doing some work there and he said, look, this is what the vertical is likely to look like. And we will see lots of startups in this domain. But the thesis we had was that the product that will suit the vertical is of a certain type. we think there'll be lots of cybersecurity companies for AI. What we liked a lot outside of the founders was that we thought that their take on the market was the right one and that got us very excited. We thought it could be a much more capital efficient play. We thought that a much quicker to build product could already be sold and that was why we got excited. It's still early days but it's nice to see that they raised a nice series A and they had a number of competing term sheets a year.
Harrison Faull (24:00.489)
Awesome. Thank you very much. Thank you for sharing the actual... Yeah, I had that in my notes. There is an $18 million Series A, so that must be a nice on paper gain so far. And if we pivot into that side of things, given that you're on your third fund, have you actually had... I know you've had some exits, but what have been the biggest exits in the portfolio so far or perhaps biggest private market companies that you're currently invested in?
Judah Taub (24:23.767)So fund 1 is still fairly young, 2018. So.The biggest exit from F1 was a company called Granulate that we backed at Seed and they were sold to Intel for 650 and that returned the vast majority of F1. And then we have sold a few other companies from F1 but that was the biggest. And then on paper in F1 the company that is today sort of grown the most, whatever, is a company called Drigo. They've raised to date 200 million and they're competing with Amazon doing the Amazon Go sort of checkout store which is mainly in vision product.
Harrison Faull (25:03.775)
Awesome. When you do have this exit in fund one, I'm just curious to hear, what was your obligation to actually return that capital back to your LP? Is that stipulated at the beginning when they actually hand you over the money or does it very much depend on how much time you have left to recycle that capital?
Judah Taub (25:25.634)
No, you don't have to return it. can recycle it. Typically you put in your LPA to what point are you allowed to recycle capital? So yeah, in most docs I think it's 110 % of the total size of the fund and the idea there is if you do enough recycling like that it's in theory lowering the blended cost of management fee because you're deploying more dollars and you're not really charging management fee on the capital that you're recycling.
So yeah, recycling is generally a good thing to do if you manage it properly.
Harrison Faull (26:01.746)
Awesome. So how does Hertz now think about follow-on funding? Do you hold back a significant amount of capital to double down on your biggest winners?
Judah Taub (26:13.126)
Well yeah, the fund one is fairly mature at this stage, or maturing, we still have reserves when needed, but I don't think we're very different to most faeces on that front.
Harrison Faull (26:37.479)
You've said that, actually no, let's go for this. Because you're a sector specialist in typically B2B infrastructure software plays, what have been some of the smartest techniques that you've seen founders use to reduce their sales lead times? Because when you're selling to large enterprises, it can genuinely take years to actually get from an LOI to a paying customer.
Judah Taub (27:05.537)
Yeah, it's a good question. There's two strategies that I've seen work well.
The first is we have a number of companies that what they've been able to do is take their product, slice it and sort of sell a very easy to deploy feature as something that is quick and easy to sort of get into product into customers hands. Ideally get through the sales process but on something that maybe a team lead can already approve because the budget is not so big or because you can just
download that from the Amazon market, AWS marketplace or something along those lines. And then very often what you're able to then do is upsell that down the line. The second strategy is sometimes you're able to provide a level of predictability into when the sale will happen because of other parts of the process. So if it's a very big sale, sometimes there'll be pilot or there'll be something that the enterprise
start showing that they're putting the effort into it to make it happen now etc. The commonality between those two solutions that I've suggested is ultimately what we care about it's it's not revenue I know it might sound crazy but it's care about revenue it's it's knowing what the revenue in the future will be so I'll give you two examples like if one company is making three million dollars this year and next year will make sort of six million dollars it's not as good as a company making
Judah Taub (28:45.851)
$1 million this year and doing $9 million next year. Obviously, that's much better, right? So what I care more about this year is not the one or the three, but it's knowing as well as I can, what does next year look like? And to what extent can you give me information that makes me sort of comfortable that that's going to be the case? If you can give me a guarantee that even though one now is not as high as three, next year will be nine. I'm thrilled. So we've had
companies that have been able to provide a level of confidence by consistently showing that this is right, that like the beachhead of the product in x percent of the cases leads to the acquisition of the rest of it, or the first product leads to the upsell within this type of timeframe, or once somebody downloads this from the AWS or puts their engineering team, which is a huge cost for them, on deploying and adopting this type of product within two quarters
the rest of it will come. Usually it's providing a predictability into the future and sometimes making the product lighter.
Harrison Faull (29:56.751)
Awesome. No, think, thank you. That's super tangible insights and advice that founders can use today to help reduce those sales lead times. Do you have any advice when it comes to actually negotiating with these big companies? Because typically a startup, you're very low resourced. You don't have a legal team. You don't have a finance team. And you might be going up against an industry expert on behalf of a large corporation that is very risk averse and it's their neck on the line if something goes wrong with the contract.
Is it a situation where you just simply have to accept terms and say yes to everything to keep things moving along? Do you have any guidance on how to handle those negotiations when you might feel like you have very little leverage?
Judah Taub (30:44.857)
So I don't really agree with that. I think if your product is good, you should have a lot of leverage. If your product is not very good, or it's very similar to everything else in the market, your leverage is going to be very poor. So I think the starting point is have a really good product. And before you know it, you'll have a lot of leverage. Okay, putting that aside, I would say I care so much more about long-term than short-term. So for example, if you're negotiating and you
write in the contract for year one I will give you a 50 % discount that disappears in year two, fine because the 50k that you've given a discount is not going to break your back at least I hope it won't this year but what you're showing me that the customer understands and ideally when it comes to renewing next year they do renew that it's a product that is providing the value of $100,000.
Harrison Faull (31:41.499)
Okay, yeah, that makes a lot of sense. Thank you. And you're very good at giving out advice and feedback and you've actually become an author with a phenomenal book which is How to Move Up When the Only Way is Down. So could you tell us a little bit about the inspiration behind this book and who you'd like to read it?
Judah Taub (32:03.511)Yeah, well thank you for that.The inspiration for the book was off the back of speaking to many, many, many founders and a lot of them discussing some of the points that you've asked. So I think the challenge of a local maximum is something that is very close to home for a lot of engineers, but it's probably even closer to home for founders who may have never heard of the concept local maximum. So just in a nutshell, what the concept means, and engineers run into this the whole time, is imagine you aredropped off in a desert and your goal is to get to the highest point possible. And so you look around, I don't know, the Sahara Desert and you're trying to look for a tall mountain to climb and after a while you see a really tall mountain, you start climbing up and I'll cut the story to the end, so you're sweating, you're this, you're that, whatever, you get to the top of the mountain and...you see there's a taller mountain behind it or somewhere else. So you're at a peak, you're at a maximum, any step you take from the peak you're on right now will have to be down. Left, right, forwards, back, you're at the peak, you're going to have to go down. But the bummer is you're not at the global maximum, you're at a local maximum. And to be able to move up now, you actually have to go down. And this is a problem that engineers, especially sortcutting-edge engineers run into the whole time when they're programming software algorithms because they're trying to train the software algorithms to find global maximum solutions or minima in the sort of world of software but that's what they're trying to do they're trying to teach the software to look for the best possible outcome not just one outcome that is good compared to the ones around it and this is things that sort of Google runs into with Google search Amazon when they're doing Amazon Prime, NVIDIA, Netflix, Walmart, they all are dealing with local maximums and when I speak to entrepreneurs very very often the challenge they have with their own businesses is how do I navigate my startup?towards ideally a global maximum and away from local maximums that I'll hit along the way. If I start prioritizing revenue too early, will that lead me to a local maximum? If I go towards sort of a golden handcuff situation, does that lead me to a local maximum? And when I speak to our entrepreneurs and other entrepreneurs that we just try and give advice to, very frequently the conversation either with the actual words local maximum or not is at the heart of the discussion. It's how do we plan our steps to avoid plateauing at some point or reaching a glass ceiling that actually we'll find out later in the game that the only way to get to a better scenario would be tracking back or going through some painful process of down to go back up. So the core of the book is really taking solutions that engineers
use. It's not an engineering book. You don't need any engineering background but through stories showing how one could potentially use this with their own day-to-day lives or their startups etc.
Harrison Faull (35:27.813)
Awesome, thank you. So am I right in thinking that you actually hit a bit of a local maxima when you're writing the book? Because it didn't originally start as a non-software engineering type book, but then as you were involved at Harvard, Harvard Business School, some people helped you, some people helped you rewrite this into a bit more of a stories and case study and a bit more of an accessible.
Judah Taub (35:53.387)
Interesting, think is the word you're looking for.
Yes, so what happened was I started off with writing it in quite a technical manner and then basically had it ready-ish and just to give you an idea is it had code snippets in there as well and then
of people at Harvard, friends and a professor who basically said, this is so much more powerful if you could write it in more of a Malcolm Gladwell or an Adam Grant style through stories. so the process was I had a little bit of a difficulty letting go of my local maximum. so at the beginning, what I did is I said, okay, I'm going to do that. And I started rewriting it. But to make myself
feel more comfortable, I kept at the end of the chapters a part that I called a little bite of data science where I put the technical stuff. And then when I went to a publisher to have it published, they said to me, you know what, the book is really good, but the technical bite of data science is too technical. And so even that bit got changed and there's still at the end of every chapter, a two pages of a bite of technicals. So it's called a bite of data science, but even that is not technical.
and it is basically a short story from Google, Amazon, Nvidia and the like. So anybody who wants something technical, you're to have to look somewhere else. For everybody else, hopefully it's more interesting.
Harrison Faull (37:33.978)
Thank you. Okay, so thinking about AETs and your portfolio, is there a memorable time where you've seen a founder get to that local maxima and then had to climb down off that peak to find a global one?
Judah Taub (37:49.292)Yes.and actually many times and some of them I've mentioned in the book and some of them obviously it's their story not mine.So I keep it, but I can give numerous examples. So the exit that I described earlier from fund One didn't start off very well, the company. You would have thought that a company that's launched in 2018 and by 2022 went from C to selling, and that was sort of up and to the right the whole way. And the truth is it really wasn't. a year and a half, maybe even two years into the venture, into the startup, there were real issues.really tough conversations with the CEO who I became really friendly with throughout the process. But like it was hard conversations and none of the customers really wanted the product to be completely honest. And it comes to the earlier point that you mentioned, which was it was an absolutely brilliant product, but the sales cycle and it was so technical for them to start using it was just too much. And so they actually had to sort of go down from where they were.and give up on a lot of the potential upside of the technical product, dumb it down a bit, make it more digestible, and then start selling that. And when they started selling that, it caught fire. And everybody wanted it. And then later, eventually, they started saying, by the way, we have these other clever ideas that we could add onto it. And some of them were like, yeah, yeah, great, we'll have that as well. And some of them were like, no, no, no, we like this enough. But at that point, it didn't matter. Once you're flying, like you're in different space. So yeah, like, I mean, the revenues for that company was very, very little for the majority of the lifetime of it. And when it when it when it hit it hit hard.
Harrison Faull (39:44.791)
Wow, amazing. Yeah, so very much raining true on you not necessarily focusing on the revenue that's currently being generated, but the potential to generate revenue. So they'd built a product that could generate a lot of potential revenue. It was just a bit too advanced for the customers. So they dumbed it down, their sales cycle, got inside these big organizations. And then once they had enough traction and trust, started upselling to the ones that wanted it.
Judah Taub (40:12.749)
Fantastic. Exactly.
Harrison Faull (40:14.346)
Perfect. And it applies to things outside of founders, right? So you're a big volunteer for the Ethiopian community in Israel and helping them get jobs in tech. Could you tell us a little bit about why you think that's important and how you actually help?
Judah Taub (40:33.209)So I do very, I try and help, but this is specifically an NGO and they do a phenomenal job and I say they do a phenomenal job. I'm an avid supporter, but I'm not in the trenches as much as they are. So yeah, so I like this particular sort of...foundation, this particular sort of NGO for a few reasons. The first is because I just think tech is amazing because if you do it right, if you give people the right education and you can get them a job in tech, in some cases you really change their lives. And I'll give the example from this particular NGO. So they focus on Ethiopians in Israel and they take Ethiopians that typically and some of them work inplaces like gas stations etc and most of them have absolutely no background in computing or maths or anything like that. Some of them can't speak English nearly at all and remember coding is in English and within 10 months they take them out of the world they were living in before and train them to be very sort of primitive but software engineers so they'll get jobs in things like QAfront-end engineering, cyber security sort of alert specialists and things like that. And to date they're doing, I think it's a thousand, it's 150 a year and 93 % of them succeed in moving out of their previous jobs and into tech. So I like this a lot for two reasons. First is because when you do that to somebody who comes from a background that doesn't and have all these opportunities, you've really changed their lives and their family's lives. Like the average salary they're getting on day one of their tech job is roughly double what they were making beforehand, literally double. And over the course of the next five years, it will probably double again, where here it may grow with inflation. So like you've really put them on a different track. only I think in tech, or tech is one of the obvious places.
I think that you can really do this. If somebody's really willing to work hard for 10 months, you can really move them from no background whatsoever to one where they can get that first job. And from there, if they're good and they work hard, they can progress on their own. And then the second is that it's, me, a phenomenal example of a local maximum. So if you think of this Ethiopian beforehand, he's at the top of a mountain, okay, he literally can't get another job. If he quits his job working at the gas station, he doesn't have a job. So it's not a very tall mountain in the desert, it's not a very high mountain, but it's the peak of a mountain. I've met many of them at Tech Korea, that's the name of the nonprofit, and they said, like, we looked, we were in our jobs because that was the best we could do. So they were at the top of a mountain, it wasn't like they had an easy step up. But within 10 months, they went, down off that mountain and the tech mountain is infinitely bigger. So from a local maximum perspective, you've really taken them off a really difficult local maximum, them and their families, and you've put them at the bottom of a mountain that now they can literally climb for the rest of their working careers.
Harrison Faull (44:09.211)
Yeah, amazing. No, I definitely can see the impact of that. And it's quite hard to do because it's not just the knowledge, it's also getting companies to give these people a chance because they might not have the same credentials as a recent graduate or money to pay for courses that might give certificates. So there's got to be a bit of trust in the training process.
Judah Taub (44:25.939)
Yes and no. So yes and no. So if you were trying to train them as doctors, you'd have to go through all the certificates, etc. The unique thing in tech and especially in the tech world that I come from,
People don't care that much about what certificate you may or may not have. They care about what you can actually do. If you go to any of our founders and I sit and look, we've got this most amazing person who's got like a PhD from here and here and they're like, listen, I need somebody who can get this job done.
And they do it or can't they do it? And it's a massive advantage for these Ethiopians and people alike, which is sometimes a degree may give you a whole bunch of other things, but the practical side, sometimes you can acquire much quicker. And that's what Tech Career focuses on.
Harrison Faull (45:18.767)
Awesome, thank you. I have a following question about data. How are you using data at Hertz to generate alpha above other funds? Are you doing anything particularly sexy with it that you can tell us today?
Judah Taub (45:35.641)
Yes, we do a lot with data. Some of it I...
I'm happy to share some of it will keep internally, but I'll give you some examples. So the first thing is we monitor quite a lot of what we do. So the funnel that I described earlier of decks, first meetings, second meetings, et cetera, we keep trying to optimize that because unlike a startup, we don't really have a product. Our product is us, expert network, our time. And so the reality is every hour that we've spent on a company that
we didn't invest in outside of things that we've learned a long time is not necessarily well spent. So we have these data quadrants where we track this and we try and see what could we have done to have potentially ruled this out or told the founders as well we used to waste their time earlier on it's not relevant. And as a result we've gotten better at managing the funnel and it's something we track. We obviously track companies we've passed on and how they've done and all the rest of it because we've been investing quite a lot in open
source. We have a variety of tools that track different open source out there and sort of monitor them and give us a whole variety of insights. Some of these tools we've built for founders. So founders of ours that build tools such as open source, don't know, pieces of software community that they release will very often utilize some of the internal tools that we've built so that it's helpful to them. They get a lot more information about their open source and their competitors open sources that way.
Judah Taub (47:13.104)
We've got a variety of other systems that help us, I would say, people and help us optimize different sort of internal processes that way. Yeah, given my background, I would like to do even more.
I think we're probably at the extreme edge of what VCs do today and I think the challenge is how do we still keep it a human led process because it really is, especially at the seed stage, so much of it is just getting to know the people but at the same time leverage a lot of these technologies that we're investing in that we come from to maybe make our sort of world better.
We've released, I think we're one of the only VCs that we've released pieces of software as well. So sometimes we've done it as a gimmick. So I think we once released a GPT that was like a fake board member. So you can pick your board member and tell them what's happened. it was more of a joke. So you could pick like different board members and see what they say. But other ones we've released were things like how to track styles on GitHub better.
how to sort of, there was a variety of these that we released in the past and we'll probably do some more of them later this year.
Harrison Faull (48:38.378)
Amazing. Okay. And when you have these data points, do you use them as hard and fast rules or are you willing to break, make exceptions when things might warrant a break, an exception?
Judah Taub (48:58.905)
Can you give an example?
Harrison Faull (49:02.026)
So some funds like to only invest in founders or non-solo founders. They have to two co-founders or three. And they see that as a very important data point in terms of the skill set and if people are complimentary and how that de-risks investing in a team. So as a fund that collects so much data before you make an investment decision, are you willing to break some of these rules? Or does everything have to be in the green for you to actually commit capital?
Judah Taub (49:26.627)
I think this is.
Okay, so I think there's two different things. I think we are a fund that utilizes data or in general collects a lot of data. I think that's very different to having hard rules. You could be a fund that has very little data sets or uses very little data points, but has extremely harsh rules and you could have the other way around. So I think we're on the extreme end of both opposite ones. So we try and utilize both data and in general collect as much information as possible in a very short time, ideally automating processes.
things like that along the way and at the same time I don't think we have too many actual rules for the decision we must make given the data we've collected.
Harrison Faull (50:08.636)
I think that probably sounds like the best approach because people otherwise seem too rigid and you know when the new disruptor comes along it doesn't necessarily fit with old models or data points that you might have been looking for. Hopefully it does.
Judah Taub (50:24.429)
I'm biased because I believe so, but there might be others who disagree.
Harrison Faull (50:27.964)
Hopefully it does. But perfect. I think this has been a really, really amazing episode. Thank you for your time, Judah. I really appreciate it
Harrison Faull (51:16.488) Judah, thank you. For the founders out there that need to read your book, where can they find it? For the founders that want to get investment from Hertz where should they go? How should they connect with you?
Judah Taub (51:36.131)
Great, so anybody who wants to get the book, The Easiest Place on Amazon, you can find it in Barnes and Nobles and Wiley and the rest of it, but if it's on Amazon, just put in how to move up when the only way is down and it will be there. And to get in touch with Chetz or with me, the best things are through our website, it's Chetz, H-E-T-Z dot V-C. And yeah, and best of luck to everyone. again, thank you very, very much. It's been very enjoyable.
