Yuval Baharav, SOMV: The HR problem is also an opportunity

“The increase in salaries is harmful to companies, as it has a big and lasting impact on their margins, cost structure and culture. This creates specific pressure on seed stage companies which are cash-light and are struggling to compete on top talent,” says Yuval Baharav, General Partner at SOMV.

 

Baharav shared his views in CTech’s exclusive investor survey conducted with participants of the Poalim Hi-Tech and Calcalist Road Show event. The event brought together dozens of startups who pitched their venture to more than 20 leading Israeli investment groups and investors.

 

What trends are you most excited about investing in?

The general shift from investing in technology innovation into a lot of what we do now, which is investing in teams that are using technology in super creative ways to innovate on business models that disrupt and offer new alternatives to traditional, existing and big markets.

 

What’s your latest, most exciting investment?

A great example to the previous point is the fund’s investment in Vee, which is a seed stage startup building a marketplace for corporate volunteering. This is a female-employee dominated company, led by a young and bright lady CEO, which aims to build a fast growing business, while doing good in the world. Great demonstration of how the people and domains VCs are now looking at has shifted so much.

 

Which industries seem well-positioned to thrive long term? What companies are you excited about (whether in your portfolio or not), which founders?

In general, we are of the belief that the world is at the initial stages of a technology adoption curve, which will lead to the digitization of most of what we see around us. We are looking for amazing and hungry teams that are trying to revolutionize many different markets, using various business models. Among the domains we can note are various longtail marketplaces, vertical SaaS companies offering to revolutionize a large existing market, DevOps and collaboration, transportation and logistics, cloud infrastructure and more

 

What areas are either oversaturated or would be too hard to compete in at this point for a new startup?

Our view is that software based “algorithmic” innovation has been commoditized by the ever growing scale of cloud providers, pushing founders towards vertical SaaS business models and semiconductors. Innovation around consumer electronics is almost impossible to enter as a startup company and major B2C destinations are almost impossible to create.

 

What are you – as an investor – looking for in an entrepreneur or a startup?

We are looking for founders that are daring, hungry and have big ambitions. We look to partner with innovative teams of over-achievers, and be there with them, as they shape their vision, build their teams and accelerate to hyper growth. So we believe our role is simple. It is to find and empower the founders of the future.

 

What is your approach to VC involvement in the management of the companies they invested in?

Our job is to help founders and the style by which we do so is dependent on the personality of the founders and the maturity and circumstances of the company. We avoid getting involved in operational management and have a high respect for the sovereignty of management. We do sit on the board in most companies we invest in and most of all, pride ourselves on building life-lasting, meaningful and valuable relationships with the founders and managers of the companies we work with.

 

What should be the level of a fund’s involvement in solving a company’s HR problems?

Dealing with the growing recruitment challenges is an important part of our discussions with most of our portfolio companies. We did not go on the path of recruiting HR partners, but rather took the approach of a cross-portfolio thought process on what makes employees join companies and stay in them, as well as new and alternative operational approaches.

 

Where will the solution to the HR crisis come from?

We believe a problem is also an opportunity and this situation will drive smart and creative companies to rethink how companies work and grow. We will see more and more hybrid and distributed organizations that will leverage technology to stay effective. We believe that great companies will find ways to discover the talent they need and engage them in various ways.

 

Wages in tech for how long will the current upsurge in wages continue?

Prophecy was not given to the wise, so we will avoid making these forecasts. That said, obviously the increase in salaries is harmful to companies, as it has a big and lasting impact on their margins, cost structure and culture. This creates specific pressure on seed stage companies which are cash-light and are struggling to compete for top talent.

 

Share with us your golden tip for an entrepreneur presenting a pitch.

Have a world changing vision, coupled with a very practical plan for the first step. Be authentic.