83North’s Arnon Dinur on new fund, letting entrepreneurs show the way and more

 83North’s Arnon Dinur on new fund, letting entrepreneurs show the way and more

Arnon Dinur, partner, 83North

Israeli venture capital fund 83North has been active since 2006 when it was spun off as an affiliate of the Silicon Valley-based Greylock Partners. The firm recently announced raising $550 million for a new fund and now manages around $1.8 billion across six funds.

Like before, the new fund will chase European and Israeli companies across sectors such as healthcare and automation. As 83North deploys the new fund, The Capital Quest caught up with partner Arnon Dinur for an exclusive interview. In the first part of the interview, Dinur talks about the firm’s portfolio, investment philosophy and a whole lot more. Excerpts:

You manage more than $1.8 billion across six funds. Could you expound briefly on the origin of these funds and that of 83North itself?

83North started in 2006 as an affiliate of Greylock Partners in Silicon Valley. One of the partners in Greylock moved back to Israel and together with two other partners started what was then Greylock Israel.

After two funds, we decided to rebrand with the same team and strategy. There was an opportunity to build a brand across Israel and Europe. There was no fund actively covering both geographies.

We stay very close friends with Greylock. The third fund was already branded 83North. The number 83 is the latitude of Israel and London combined.

Typically, how big is each of the first five funds? 

The fund size ranges from $200-300 million, but sometimes we go over a bit if we think the growth opportunities are higher.

Do you have any dry powder in any of these funds? If yes, how much and by when are you likely to deploy that?

It’s not dry powder for new investments but for follow-ons. I don’t remember the number but we have enough and can do it for many years. We are pretty good at projecting and sit on great access to capital and have enough to support our winners on their journey from seed to IPO.

You recently raised a $550-million sixth fund. How many companies will you back from this fund and by when will you fully deploy it?

We are quite a flexible fund in that sense. We don’t have hard, set rules on how many companies we want to invest in, or how long we would take. When we see the right company, we back it.

We don’t design the fund for a certain length or a number of companies.

How is your LP mix? Where do your LPs mostly come from? Are there any returning LPs in the sixth fund?

We have the same LPs almost from the day we started, in 2006. We added one or two along the way—some personal relationships, people we knew etc. But pretty much, it has been the same set of LPs since when we started.

Almost all of them are US-based, many endowments of big universities and big family offices. We don’t disclose their identities.

What type of companies will the new fund back?

We are a founders-led fund. We don’t have very strong opinions on what the future holds. We assume entrepreneurs know better than us, so we always keep an open mind.

For example, our entrance into fintech was led by entrepreneurs showing us the way. Almost every category that we entered was borne out of exceptional entrepreneurs showing us that the technology could disrupt certain markets. We remain very flexible in the way we think about this.

Originally, we had several areas of expertise like IT infrastructure, software-as-a-service and enterprise software as well marketplace and e-commerce. But over the last 10 years we expanded into areas like mobility, fintech, Internet of Things, media, gaming, healthcare IT and robotics.

If you look at our last fund, we had three investments in robotics and automation, which became a cluster of expertise. But it wasn’t designed top-down. Rather, we started meeting more and more smart people building great companies in the space, and it slowly grew that way.

And will that essentially be your investment philosophy going forward?

Yes.

Typically, do you have any investment ticket sizes in mind or does it vary from company to company? 

It completely depends on the company and stage. Seed funding could be around $2 million, and then depending on stage it could be $5-20 million. Later-stage rounds could be way higher than that.

According to your website, 83North has invested in about 63 startups till date and exited around 20. Is that correct?

Not all the investments are on the site. I’d say the number is closer to 80. And we have exited 21.

The Capital Quest