Strategy

Differentiated Approach

YL Ventures invests early in core-technology software companies in and around the Internet. Our specialization is transforming proprietary software technologies into game changing online services, while leveraging our highly-relevant Silicon Valley business network for introductions to customers, strategic partners, key hires, top-tier investors and potential acquirers.

We work closely with all of our portfolio companies in building successful ventures. We do not believe in a ‘spray and pray’ investment methodology, but rather employ a highly selective ‘cherry picking’ approach.

Ability to Evaluate a Wide Array of Growth & Exit Alternatives

We understand that successful startups come in lots of shapes and sizes.  Some grow to become billion-dollar (or more) enterprises.  Some achieve their destiny otherwise.  We are knowledgeable and experienced in creating value for our founders and for ourselves in a wide range of exit scenarios, by strictly adhering to capital efficiency early-on and focusing primarily on deep-technology B2B SaaS portfolio companies.

When entrepreneurs choose to partner with YL Ventures, they know that their investor will support them in whichever exit strategy ultimately makes the most sense for their company, including the following two scenarios that we have come to know particularly well:

• The Short Haul – Due to capital efficiency, oftentimes our initial investment is sufficient to take a portfolio company to profitability or close to it. In this case, founders may opt to continue growing organically in capital efficiency mode until a short-term mid-size ($20MM - $100MM) exit opportunity – normally an early buyout by a strategic acquirer or a growth equity fund. In most cases, having unique proprietary technology helps make a portfolio company a likely target for such exits. YL Ventures keeps potential buyers ‘in the loop’ from the very beginning, thereby increasing the likelihood of such scenarios. In short-term mid-size exits, YL Ventures achieves excellent multiples on investment, while founders experience great wealth creation since at the point of exit they still own a large portion of their company. It’s a win-win-win situation for the founders, the buyers, and us. Naturally, this scenario is not available to start-ups that raise large amounts of capital early-on.

• The Long Haul – Sometimes, shortly after our initial investment, it becomes apparent that the business opportunity with regards to a portfolio company is extremely large, and the founders decide they want to ‘swing for the fences’, potentially aiming to create a billion-dollar company. In this case, we facilitate further growth acceleration by investing additional capital in partnership with top-tier global venture capital firms that we introduce who are eager to invest significant amounts of equity in companies which we have shepherded to this stage. We help lead the negotiations with these VC firms, and do so in a manner ensuring that YL Ventures retains significant value-added involvement in the business after this new money is brought in. As long as capital efficiency is maintained in the early days, later-stage investment rounds are done at much higher valuations, assuring that the founders and YL Ventures experience minimal future dilution.

We see ourselves as true hard-working allies of our entrepreneurs, rather than as purely financial investors. Therefore, we seek complete alignment with company founders at every step of the way, and tend to avoid the common pitfalls of the entrepreneur-investor relationship. Our tolerance for myriad exit scenarios, both small and large, helps ensure that this vital alignment with founders is maintained.

Case Study

On May 9, 2011, Limelight Networks, Inc. (Nasdaq: LLNW) acquired AcceloWeb, Ltd., a YL Ventures portfolio company since our initial investment in July 2009.

In the press release, Limelight said: "The talented AcceloWeb team has built the most innovative solution in the sector and we are excited to join forces with them to define best-in-class for this market." AcceloWeb was quoted saying: "We're pleased to join Limelight and continue our work building Internet scale software that improves end-user experiences on the Internet." The press release went on to say, "YL Ventures, headed by Yoav Andrew Leitersdorf, participated in the transaction as an investor, strategic advisor, and board member."