Transcript: Early-Stage Investing with Nicole Priel of Ibex Investors

Eyal David: [00:01] Hi, of course. This conversation is going to be in English, and with us we have Nicole Priel. Nicole, how are you today? I'm doing well, thank you. That's good. So can I start you off, as a partner at Ibex, in English, please. Yes. How many years have you been at Ibex?

Nicole Priel: [00:20] I've been with Ibex for 4 years now. I joined in 2020, already before COVID.

Eyal David: [00:26] Already before, huh? Yes. To make use of Israeli work and Israeli talent,

Nicole Priel: [00:32] 100 million dollars, in the Israeli community, to invest... now? Right. We did the first one, around 2019-2020. We brought it in, around 2020, to invest. Yes. Not so different now. We invested in about 13 companies, and yes, we invested in a couple more,

Eyal David: [00:57] 100 million dollars, in the Israeli community. Wow, you've got to invest it. Yes. Really? So, you did it pretty fast, right? Like, you just invested during the pandemic boom, and then, all the companies, right? And then, what happened afterward, and now, like, COVID, and everything going on here, with Israel. So, how was it? Pretty straightforward, no, really? Yes. It's very, very good to invest. So, I see that you invested so quickly, around age 16? Yes. Let me tell you why you got into this.

Nicole Priel: [02:32] She was a coffee-sugar-cocoa trader, on the exchanges, in New York, in the 80s, before there were kids, before I had kids. So I grew up with, like, CNBC on all the time. And she gave me the instinct to try stocks — you remember? Was it a market sentiment? Yes, yes, yes. She told me to try INTC and to invest whatever the shares cost, and that was Intel, and then she said, try MSFT, that's Microsoft. Microsoft, yes. So I grew up with that ethos and aura. And in New York, I was managing, you know, the operations, and at the same time, I started out at the New York Mercantile Exchange even before college, at around 16. And then I went to college, even before that, I worked with incredible people — options, and derivatives, and stocks. I learned a lot. I stayed on that path, throughout, and everything I stuck with. So, along the way, I stayed, I kept at it, and I did, over time, week after week, and so on, and also, throughout, and I stuck with it all the way, and there's fashion, and I wanted a bit of that too, and along the way,

Eyal David: [03:58] so tell us about your focus, Nicole — what's your focus and the industries you specialize in?

Nicole Priel: [04:07] Specifically. So let me tell you about Ibex, just to give some context. We focus on Jerusalem, we're pre-VC, pre-hedge-fund. So yes, we're among the first ones in, and we're interested in your focus.

Eyal David: [04:54] And now, I think, are you seeing more like two guys and a check, or is it a bigger focus?

Nicole Priel: [05:02] Like, what do you think? Still two guys and a check, but the volume is much larger now than it was in the first fund in 2021, I think. I like to work with founders who, of course, think they can be the next Mark Zuckerberg, and still I think people see that, in order to succeed — founders who are thinking about a few million on something, they need to do more. And a lot of them really need the discipline, to do the job, which is what they have to do,

Eyal David: [05:33] and they have no other option. So when you say they're in the first fund, so you're saying which side is more important — what are you saying?

Nicole Priel: [05:46] So, when it comes to the founders — because in the areas I think about, there's you, and then there's the idea. So, we can point to the founder, the entrepreneur, yes. That this is what they must do, and they really have no alternative — no matter the macroeconomic conditions, they're going to do it and they're going to start the company no matter what. And those are the types of people you want to back.

Eyal David: [06:13] So that's what distinguishes them from the wannabe. Yes, yes, yes. I see. Okay, so Nicole, what's your approach as an angel? I try to back exceptional founders.

Nicole Priel: [06:28] The ones I try to back, that I want to back for the next 5-10 years, sometimes. We can work day in and day out together and we're not afraid to pick up the phone from each other at 2 in the morning when shit hits the fan and say, hey, let's figure this out. So that's one, and then once we invest it's all the post-investment work. So trying to help our companies scale, grow higher and all that. So it's probably because you're investing in pre-seed companies,

Eyal David: [06:57] but like, what do you actually do for these companies? Because you're saying you're some kind of another CEO — not CEO, but a consultant in many, many ways. What's your sweet spot, what are you specializing in? I saw a tweet once that was quite funny. It said: oh, so you want to be a VC? Do you also want to be a headhunter, a publicist, investment banker, therapist, business development consultant, etc.?

Nicole Priel: [07:29] And it's so true — in some areas you do the hands-on work, and there are some you won't get into, of course, on the management side. So it can be helping you directly, it can be connecting you with senior people, to point you in the right direction. Have you done that? Yes. Really? Yes. So what's yours?

Eyal David: [07:51] Is it like juggling? Is it like multitasking? When I think about it, let me show you. That's pretty much what you do. What do you think it is? I think it's...

Nicole Priel: [08:03] It's important, but it's about loving what you do, because it doesn't feel like work — it just looks like this, but it also looks like a dream, maybe like the dream in Pulp Fiction, right? You picture it and you chase the dream, right? So there are several aspects where you need to, as you said, multitask. There are almost not enough hours in the day to handle everything you need to do, and I look at it that way. But you need to be able to figure out who you can hand things off to, in areas where you might not have that domain expertise or functionality. So it's being able to connect folks. It's being able to network, right? You need to grow a network to have enough referrals and recommendations for a plethora of different things, but you want to be able to make recommendations for folks. And you want to make the right matches, whether it's internally within our house or wherever you're trying to. So yes, there you go.

Eyal David: [09:11] I love to talk, yes, yes. How do you structure your day? It sounds really interesting, because you have 4 kids in between, but we can come back to that later, if there's time. So let's talk about your process internally. What is it? Because I'll say, first of all, given that there was COVID, and then we'll talk about, you know, once you're internal, your process — so, okay, this really sounds like a product podcast. So what's your process internally, the founders you're handling, Nicole, at the moment for the time being. Right. And in English — talking about people trying to help those companies, your portfolio companies.

Nicole Priel: [10:03] What kind of challenges do you perceive there? Yeah, so every company, depending on its stage and sector and strengths and weaknesses, and team composition, faces different challenges and obstacles. So, sometimes it can be around pricing — are we pricing too low, are we pricing too high?

Eyal David: [10:18] What about that? If we get into certain areas, are there regulatory dimensions? Are there people around? Is there an entry point? So you try to address all of that as you try to help, so there are things to weigh. So, for example, regulatory dimensions, say. And still, regulation too, huh? So how do you handle these processes? You now... you sit on the boards, huh? And you see a lot of things, so you've already seen it, after you've seen many things, or things that are going to come later, how do you handle the things that come up?

Nicole Priel: [11:04] On pricing, for example — why do you do it that way? Yeah, I think it was, by the way, and I'll say it again, and someone there — because, not because of technology or product, but because of distribution. Therefore we do see a lot of the same common problems. A lot of the people we bring on board for go-to-market roles, we think are going to be great, who promise us they're going to deliver this on the moon and the stars. Generally that doesn't happen, so it's struggling a lot with how do we identify the right folks — how do we read the situations, how much time we spend discussing the hires and the management, and a lot of that time goes into refining it, talking about the right hires and the right strategy. In a lot of cases, I think it drives a lot of good outcomes over time, because it drives our strategy, so if we need to have, say, a certain hire in mind, on the management side, we are not going to find a digital marketing expert — it's just not gonna work — and so the person who we bring in helps dictate the rest of the strategy. On the product side there's, as you can imagine and appreciate probably, there's a lot of A/B testing and a lot of market research, and all of that takes time and energy. That is a challenge that we certainly experience. But 100%. We are deferring to the founders. We're deferring to the management team to make the decisions. Us as board members, we are there to advise and lend a hand. We're not there to run the company, we're not there to run the business. So we certainly leave it to the management teams to go do that. And we try not to interfere too much.

Eyal David: [12:58] Wow, that sounds like a hard task, to defer that, for me at least. Now, because you see all kinds of cases, do you have a read on what's called the first product that you see in their early stages?

Nicole Priel: [13:19] Over-optimism in these cases — yes, simply calling momentum momentum — and I know, it's hard for a lot of technologists in cases coming from a tech background not to over-focus on the technology — and yeah, that's what it was. And that can lead you astray sometimes. So it's over-optimizing on the product, instead of over-optimizing for sales and distribution, these are things that come up again and again, and it's like two sides.

Eyal David: [13:51] Like over-optimizing on the product, huh? What needs to be best in order to deliver what you're trying to, and not to over-engineer it? And you still see this,

Nicole Priel: [14:03] even in our cases, like sometimes the trade-offs, huh? Yes, I still see it, because... I think you see it. The CEO said, look, we have a few big trade-offs, and if we take them on, it's going to define the company, but they want A, B, and C. Well, that's the discussion — whether to take them on, given that this is precisely what we do today, but it could take the company in another direction. So, how do you approach this? Like,

Eyal David: [14:39] as you said, you always defer to the companies, but you've seen this many times, huh? Maybe you think like, ah, this is where it's at, huh? Yes, so,

Nicole Priel: [14:51] I think, as things go, so, the first wave, I'd estimate, still going, you know, some of the rough edges get worn down, so, everything happens over time, more and more of it, day by day. And then I guess the third one would really think about whether — and do the work on whether, not to call it a shift, but whether that feature development or that angle or direction is really going to move the needle for the business overall, if it really is complementary to the strategy,

Eyal David: [15:45] adds to the upside, or if it's net a distraction. And probably it's also worth, according to what you said, seeing whether it can basically be duplicated for more potential prospects or customers. So, how do you see the PM role in the companies that you're working with? The PM role is critical.

Nicole Priel: [16:11] First of all, a lot of founders avoid it by not hiring a product manager for a while. A lot of founders, right at the start, think they can manage product themselves. And that's usually not true. And I see founders, when they make their first PM hire, 9 times out of 10, they say, wow, we should have done this much earlier. It sounds like, doing it,

Eyal David: [16:36] how often does that happen? And yes, so, when do you think you should bring a product manager into the company?

Nicole Priel: [16:46] I'd say, around the first year. Oh, really? Yes. Maybe even before you launch the MVP, meaning hire 6-8 months before launch. I think it's good to bring product into the company. Because a product person can prioritize by data, and can understand what's there, and build it right, right? Yes, and they're very involved with the founders, since the founder is the CEO and the manager. And if they can prioritize and build on top of other things. Yes, that's also important, because the founder's first product launches, but with product, around 6 months, or something like that. So they need to start with it, either prioritizing data during the MVP, or it can take a bit longer, because even if it comes out in 6 months, there will also be a product that launches, so it could be a year, right? So it's a bit more. Yes, but think about it, they think about it from the very first moment. Yes, right? Every one of the early founders thinks, wow, I think we need a product manager. And time and again, they also think about figuring out the first MVP and the digital assets, like products and operations, they think there's a product manager, and there's a lot of management, and then it launches product operations. So they think about it from the start, but it takes time, until they put in the time and resources to focus on the MVP.

Eyal David: [18:17] Yes, yes, yes, right. That makes a lot of sense. So what do you think about the founders that you've backed, actually? Wow, so first of all,

Nicole Priel: [18:29] I love, I love my founders, because they really work with dedication on hard things day to day. It's really hard. I think dedicated founders need to hand off some product to management. It's not simple. We have many big ones, small ones, and management, of course, some products and operations, yes. But first, I want the founders to know that it's okay, and to know that it's okay, what I'm trying to say is, it's perfectly fine. You see, so suppose someone calls you today and says, hey, there are founders, and they've been at it for a year. Even if they're in Israel, isn't it...? Yes. Okay. Average leads convert at 30, 40 percent. Good leads convert at 50, 60, and even more. I've also seen excellent leads convert at 110 percent. That was a bit of an outlier. But I really want to see that you know the market and that you're going to validate the hypothesis to validate your 10-year market against the share that really exists. Yes. Because that would be a way to test some way to try something that no one else wants to do. So, because you're a founder, because you have breadth, understand the market against expectations and no one wants to do what we do, namely to validate — the geography, the geography, the sector, and so on. Here's the breadth, here's what you're going to validate, here's how they try to validate your market, and so on. It's someone who is a founder for their market and can validate the market

Eyal David: [20:45] and the product-market fit. Right, because that's special, right? But what would you say about B2C companies? Because this is really tied into the, you know, I'm working with enterprises, it makes sense. But what about B2C? How would you like to see the validation there? So that typically does come

Nicole Priel: [21:06] in the form of traction. I think, you know, consumer social, let's put aside, because that's an extremely tough category, and I think there you just have one way of showing traction. Sorry, do you even see B2C companies these days? I do. I do. I know Israel is known for enterprise software and cybersecurity, and that's very well documented, but think about the largest venture-backed exits that we know of today. Uber, Airbnb, Facebook, right? These are all consumer-facing companies. That's right. At least in the beginning, right? Now they're ad companies. That's what I wanted to say, right?

Eyal David: [21:45] So that's true. And are there any specific verticals, I'm asking again, that are super relevant for you?

Nicole Priel: [21:52] So, sector agnostic. I know. But what do you like to work on? What former

Eyal David: [21:58] expertise do you have that you can bring value into those companies? Listen, I like to think about the moonshots,

Nicole Priel: [22:04] because 99% of the time I see the traditional AI, semi, deep tech, cyber, infrastructure, software, you name it, and I love it. I can geek out about that for days. But what I would love to back are some of these crazy moonshot ideas that take us back to the original meaning of venture capital — building something that's revolutionary, that's going to change the world in ways that you and I can't even think about today. We can't even fathom, right? But in 10 years or maybe 15 years, it'll be ubiquitous. So let's say if someone came to me building Neuralink, I would invest in that company. Or if someone's going to come and say, hey, we figured out how to extend human life by 30 years, I would get really excited about that too. Yeah, I was actually thinking about the same thing, because you were saying like 15 years

Eyal David: [22:55] and I was thinking about myself getting old. So, Nicole, maybe you can mention, like we discussed before, about validation, right? So maybe you have a practical tip on how to do it quickly, maybe from something that you saw before or that worked for a specific company. Yeah, I can actually give you two examples. Yeah. There was an example —

Nicole Priel: [23:13] a couple of companies have done this, actually, and I really like it because, again, it's a proxy for how hard you're going to work, and validation in the market with very minimal effort required. But they simply set up landing pages, put a couple hundred bucks into Facebook and Google ads and ran a campaign and had folks fill out a form, and it was not an easy form, right? But, you know, it created some friction and that was able to show them that, hey, there was demonstrated interest, and it showed me as an investor that they're willing to, you know, put their hands in their pockets, and I like that a lot. That's one example. So you saw like leads piling up

Eyal David: [23:52] and lots of conversion, which led to a validated assumption, right? Yeah, I mean,

Nicole Priel: [23:58] basically it was an empty landing page. They collected information, but it demonstrated that there was interest in potential conversion. Yeah, okay. So that was one method that I quite liked, and actually just a couple of weeks ago I met a founder who told me that, in addition to the traditional methods of validation and reaching potential customers like through his network and through cold outbound on LinkedIn, he actually employed the services of an expert network. So, again. That's so smart. So smart. Yeah, he paid some folks who he really wanted to get to, couldn't get to them through other channels, and paid the cost to get them on the phone for an hour, and that gave him incredible validation, and I think actually one of them converted into a design partner. Right.

Eyal David: [24:42] So that's an awesome tip. Thank you for that. Now let's talk about AI. This is something that interests me a lot when thinking about the future and the near future. I'm not sure if it's going to happen in two years, five years, one year or six months, but how is it going to affect companies as you see it, and getting into the market in general? I might be the wrong person to ask because I'm an AI skeptic at the moment. Yeah, really? Let's discuss that. Yeah. What are you thinking around that? I mean, I've been investing in AI-related

Nicole Priel: [25:16] or AI-first companies for years, and then when ChatGPT came out and I just saw the hype cycle rising, that's when I said, okay, I'm going to halt. Right? This is getting too crazy for me. It was like two, three years ago, Bitcoin at 60,000, right? Today we're over 70, but at the time you looked at that and you scratched your head and you said, hold on, what is this based on? So when the market gets really frothy, that's when I tend to pull away and say, hey, let's wait until things come down. In my view, we've got to let the dust settle on a lot of this AI stuff. I think there's incredible potential, incredible technologies being built, but so much of company success is due to timing. That's okay. So investing or building companies now in AI, when I think the needs are not yet well defined, is particularly risky. And I don't think that, you know, in six or 12 or 18 months from now it's necessarily going to be too late. I think we're going to have more clarity and more kind of answers to the outstanding questions, that will help us all build and invest in AI-driven companies or AI-first companies in a more sustainable way.

Eyal David: [26:30] But that's cool. But what do you think about, you know, companies that don't put AI at the center, and, like, would you invest in them? Like, if we're talking about risks, right? So AI can, like, again, in the near future, in five years from now, AI can get into multiple niches. It can train itself really quickly, right? It's going to affect many of the companies that you're seeing today, right? Don't you have this, you know, this thinking while seeing a company that says, I don't know if they'll make the cut, like in five years? It's a big risk. It's not like any other risk, I think, no? I mean, it's hard to speak

Nicole Priel: [27:15] to an enterprise today, actually even a small business or a mid-market-sized business, who's not incorporating AI in some way or fashion. So even the ones that are the most, quote, backwards old-school companies are utilizing the technology in some way. I'm seeing it across my portfolio as well. Companies that didn't necessarily incorporate AI initially have already done it in some ways, both internally and outward in customer-facing. So I think it's here and it's going to make an impact. Very few of the companies that I'm meeting today who are starting out are not utilizing AI in some way, and it's part of their story, and sometimes they even laugh when they get to the AI slide. Sorry, the obligatory AI slide. The truth of the matter is, AI has always been a great technological moat and differentiator for companies. So that's why we were investing in them in the first place, not just in the last 18 months. So I think there are elements where it really does make sense. But you don't want to try to fit a round peg into a square hole if it doesn't make sense. That's for sure. I can actually see your brain working through that,

Eyal David: [28:33] because you mentioned the companies that you work with and the focus needed to maintain. So probably you see lots of things like that in those companies. So you still let the founder — you defer to the founder to decide around these features? Yeah, absolutely. Okay, cool. So, Nicole, do you have any tips for founders? You know, like something that you can think of that can improve their success, right? Yeah, I'll share with you something that I come across on a regular basis,

Nicole Priel: [29:06] whether it's founders just starting out or founders who have already been running businesses, some quite successfully. And it's quite basic, but it's communication. It's keeping your entire network, whether it's your employees, your investors, your board members, your advisors, your customers — keeping them informed and staying up to date with them, and not hiding behind bad news, not trying to shy away from tough conversations, but really updating and reporting, sometimes in real time. That's how you build relationships and connections. And I think that if you want to leverage all those people, you need to stay front and center. Don't assume that just because they put some money in you, or just because they've signed a contract with you, that it means they are thinking about you all day, because they're not. So I think to really get the most out of those relationships, you should maintain very regular contact with them. And that can be over like quick voice notes, even on WhatsApp, or just grabbing drinks, or regular email updates. Like, really great founders will send monthly updates about what's going on in the business, even if it's just a couple of lines. Hey, updating you. Here's our new hire. Here's a picture of our new office. Here's the happy hour we did. Here's a new POC that we started. Here's the JD of the role that we're looking for. Can you help us? So you won't be bothering people. You'll just be leveraging your assets, your network, for your benefit and for the company's benefit. So communication, communication, communication. So it means it helps to stay top of mind, right?

Eyal David: [30:43] Also to communicate in the right amount in order to keep everyone aligned, and that would be more efficient. Sounds good. And that builds trust. I mean, especially today, in today's environment, right?

Nicole Priel: [30:58] In Israel, it's not simple times at all. A lot of people are wondering what's going on here. They don't understand what it feels like on a daily basis. So I think it's best to address the elephant in the room. Be really upfront about everything that's happening. Don't assume that what you're experiencing and feeling and reading is what the person on the other side is. Last week I was in New York and I was in a taxi, and the driver, who's from Puerto Rico but lived in New Jersey for years, was shocked to hear that Israel is the size of New Jersey. Yeah, I've heard that three times. He thought it was a massive country on the forefront of world domination, based on what he'd heard. He's like, you're not scared? Like, you can leave your house? So don't take for granted what people think and assume. Get ahead of it. Stay on top of it. Just over-communicate. I think it's really just going to help you and help your company. Awesome. That's a great tip. Thank you, Nicole. It was awesome. See you next time.

Eyal David: [31:57] Bye-bye.