The Garage

Glad to be a partner at Tel Aviv University’s #AIweek! The Israeli Academia is an integral part of the Israeli tech sector. A recent Stanford University study found that 5 of the 7 top universities for unicorn founders outside the US are Israeli. We are happy to support initiatives that combine the business and academic sides of Israeli tech. Together, we can drive groundbreaking advancements and cultivate the next generation of tech leaders.

Today, our own Shay Dan and Romi Littman took the stage at Money20/20 in Amsterdam, diving deep into the revolutionary potential of quantum computing in the finance world. Here are a few takeaways from their insightful session: 1. Quantum computing holds immense promise, particularly for the financial industry. However, fully realizing its potential will still take several years. We recommend assigning a team and starting to explore.  2. Quantum computing holds great risk. This risk is imminent and must be addressed by financial institutions immediately. The cost of inaction far outweighs the cost of proactive preparation.  3. As a fintech investor, there is a lot at stake - quantum comes at a high cost and still constitutes a risk (timelines to market). That said, quantum computing is positioned to be the next big disruptor to the financial industry, and in our humble opinion the reward will be worth reaping. We are incredibly proud of Shay and Romi for leading the charge in such a critical and emerging field. Stay tuned as we continue to explore and invest in the cutting-edge technologies that will shape the future of finance! 🌟 Bank Leumi בנק לאומי  #QuantumComputing #Fintech #Money2020 #Innovation #FutureFinance

Insightful read by Elizabeth Lumley. When we established The Garage, we understood that legacy financial institutions have long been struggling to innovate, incorporate start-up solutions, and cooperate with fintechs due to differing mindsets, bureaucratic constraints, regulation, and potential misalignment. This misalignment and even conflict of interest are evident not only in the accelerators, but also in labs and even more so in CVCs, which unlike the founders, are measured not on their financial success but on the strategic value to their parent company. Most early-stage startups soon realise that the fact that they received an investment from a CVC or are accepted into a bank’s accelerator rarely turns into a real engagement - not a POC and let alone a financial agreement. Over the last few years, a few pioneers have understood this and started building different models. These included bank-tech focused VCs having a large number of financial institutions as their LPs (BankTech Ventures, Anthemis, Mendon, and Jam Fintop), traditional CVC which have started to distance themselves from their motherships (Mouro for example) and single LP’s venture builders like CBA’s X15, Standard Chartered’s SC ventures and more. We at The Garage chose another approach. We invest in fintech and enterprise-tech companies and have built our vehicle from scratch to specifically address the above challenges when connecting startups to legacy. We have tried to combine the perks and avoid the pitfalls of traditional vehicles. As a sovereign VC, measured only upon financial returns, we maintain full alignment with entrepreneurs, and are entrepreneur-first in our approach. On the other hand, our strategic partnerships with our LP banks provide fast-lane access to their knowledge, experience, and tangible resources such as their data. This intimate partnership also allows us to almost guarantee initial engagements like design partnerships, POCs, or commercial agreements with the banks when it's relevant for the PortCos. This partnership doesn’t prevent us, however, from investing in fintechs that are not related to bank-tech. We chose to work with top-tier banks that are large, advanced and open to innovation, yet agile enough to enable (relatively:) fast progress when working with startups. We believe—and have already proved—that it’s much easier to build a product within these institutions. Having some of them as customers makes it significantly easier to approach industry giants and to scale and sell to smaller financial institutions. Valley Bank, Bank Leumi בנק לאומי

Get ready to witness the next big thing in finance! Join Shay Dan and Romi Littman at Money20/20 in Amsterdam on June 5th as they dive deep into the revolutionary world of quantum computing and its impact on finance!  #QuantumComputing #Money2020Amsterdam

Big congratulations to Sedric for being selected as one of the 50 Most Promising Israeli Fintech Startups of 2024! 🏆 A pleasure working with you guys.

What Happened to Lend-Tech Unicorns? Between Q1 2021 and Q1 2022, lend-tech unicorns were being born at an avarage rate of 7 per quarter. Fast forward 8 quarters, and we've seen only 9 more join the unicorn club. Although the whole fintech sector experienced a steep decline in both funding and valuations during that same period, data indicates that investors' appetites for lending startups was even more volatile. We believe this primarily comes down to these reasons: 1. Rising Interest Rates: Increased debt costs have squeezed profit margins, making previous business models unsustainable. A shift toward more conservative spending and borrowing habits has also led to decreased loan demand. 2. Financial Challenges: Investor pressures have tightened, making it harder for startups to secure essential funding to sustain operations. For instance, many U.S.-based banks, currently struggling to maintain capital adequacy, have reduced their debt allocations to higher-risk startups. 3. Commoditization of AI Technology: Advanced risk assessment technologies, once a distinctive advantage for fintech startups, have become widely accessible. This has leveled the playing field, allowing traditional financial institutions to compete more aggressively. For new lend-tech startups to thrive, innovation must extend beyond risk assessment algorithms. Fintechs will need to pioneer new approaches in customer acquisition, capital sourcing, and interest rate pricing to differentiate and succeed in the current landscape.

Last week, our analyst, Itamar Lahav made us proud on Israeli national television, reaching the final question of the “Top One Percentile” trivia show. Itamar, although our investment thesis doesn’t support placing second 😉, we applaud you and are happy that you are with us on our journey! #venturecapital #trivia

Yesterday, I had the pleasure of watching and learning from great deep-tech companies and the VC's industry experts. Wishing good luck to all the companies. Thank you Intel Ignite for demonstrating the Israeli High-Tech resilience 🇮🇱 The Garage

Last week, we welcomed a dozen CEOs and senior executives from the financial industry to The Garage. During our morning together, we showcased Israel's strong and persistent tech scene, bringing entrepreneurs together to lead talks and panels. The gathering was part of the delegation's 4-day visit to Israel, which introduced them to Israel’s economy and the Israeli resilience in light of the events of October 7th, and also included a meaningful visit to Kibbutz Be’eri. Big thanks to Ira Robbins, Valley Bank , Hanan Friedman and Bank Leumi בנק לאומי for bringing these leaders to Israel, we are sure they will represent Israel’s strength in the USA. Thanks you Startup Nation Central for hosting the event. Thank you also to our participants Avi Hasson ,Romi Littman, Aviel Erdis, Dvir Ginzburg, Ido Neeman, GIL BUFMAN, Yuval Samet, Dona Raz Levy, Noa Srebrnik, Omri Yacubovich, Michael Gabay, Ori Kaufman Gafter, Noa Shalom

Fraud is currently at pandemic levels in the UK, and the UK regulator is taking action. Last week, the UK's HM Treasury published a draft bill enabling financial institutions to delay a payment for up to 4 days to complete investigations of suspicious payments.   UK authorities report over 500,000 undetected fraudulent transactions last year, resulting in losses exceeding $1.5 billion. These fraud incidences are further exacerbated by the real-time payment rails. With instant money movement of up to $1 million per transaction available in the UK, banks are unable to analyze transactions and respond fast enough.   The issue extends beyond the UK; it's likely a global crisis. The UK regulator currently stands out as one of the few that mandates the reporting of fraudulent incidents.   The fraud solutions market needs innovation to help the financial world respond. A more effective toolkit is needed, one that enhances both response speed and the breadth of data analyzed. We believe in the CheckMate team, under the leadership of Aviel Erdis and Israel Rosilio,to be at the forefront of this battle.