Interview With Our Founder
Jack Lahav specializes in the launch and growth of new businesses. He founded Remarkable Products in 1980 and served as its president until 1993. He went on to co-found Lamar Signal Processing and hold top executive positions with Advanced Technologies, a robotics company, and Vocaltec Communications, a publicly traded telecom equipment provider, which had a $200 million IPO on Nasdaq. From 2001 to 2004, Mr. Lahav served as chairman of Quigo Technologies, a private search-engine marketing company acquired by AOL in December of 2007 for some $360 million. Mr. Lahav currently serves as chairman of both Phoenix Audio Technologies, a private company that provides audio communication solutions for Voice over Internet Protocol (VoIP) and other Internet applications, and Doclix, a privately held Internet marketing company. Jack was also more recently a founding shareholder of Hexagon Technology and Buzzilla…..
You’ve been involved with startups in many different industries. How do you select projects?
The fundamental rules of investment apply whether you’re talking about telecommunications or biotechnology. First, I look closely at the individuals involved. They have to be qualified and trustworthy. If someone claims he can develop a certain thing in a very sophisticated sphere, then obviously he has to have the background for that. I also attempt to ascertain the integrity of the person. I am seldom disappointed. I have terrific relationships with most of the owners of the companies I have invested in or co-founded. We remain friends long after we no longer work together because they are good people.
How would you characterize your investment style?
I treat money very respectfully. I usually invest the initial seed money, and that enables me to talk with other people with credibility, with decency. I always, always invest my own money first before trying to interest other investors. As of this morning, I have invested in 31 startup companies. The amount of money I invest varies, but it’s usually between $100,000 and $1 million dollars. I consider $100,000 seed money, and it indicates my serious intention and belief in the company.
Are you investing all over the world or are you solely interested in Israeli early-stage companies?
With the exception of one American company, I invest only in Israeli companies. I read an article saying that the US government had never bothered to clean up after making the atomic bomb in 1945. I thought it was criminal that atomic waste was contaminating the waters of Tennessee, where the bomb was built as part of the famous Manhattan project. So I became an investor in Perma-Fix Environmental Services. Other than this one company, all my investments are in Israeli projects.
Any particular reason?
I’m Israeli. I share my life between Israel and the United States. Investing in Israeli companies gives me reasons to travel there often and to be involved in the Israeli economy, which I care for deeply. Beyond that, however, Israel has a huge concentration of incredibly bright people. Education has been the trademark of the Jewish people for generations, and that investment in education pays off. Israel’s wealth of know-how is recognized around the world. Nearly every major US corporation has research facilities in Israel, including Google, Microsoft, IBM, Intel, HP, the big pharmaceutical and telecom companies and on and on.
I’ve been involved in many Israeli companies that have created breakthroughs for the world. Companies like VocalTec Communications, which introduced VoIP and soft phones.
How do you typically select projects?
Sometimes I’m led to invest because the company is offering something very practical and I’m a practical person. But the common denominator is that there be a benefit to mankind. In whatever I do, I look at it from the perspective of how it will benefit people—kids, students, individuals or people in the business world. I’m very well known in the Israeli investment arena, so people approach me with projects. I always investigate further. This investigation phase is very important. Here’s a good example. About five years ago, a young biologist from Jerusalem approached me with a project. He told me a very unique story. There is a disease, much like AIDS, called the Koi Herpes Virus that causes serious disease and death in Koi fish around the world. At first, this was unimportant to me because I thought of Koi fish as decorative fish collected for ponds. Koi can live to be 80 to 100 years old and sell for as high as $1 million dollars a fish. What I did not know initially is that Koi are a member of the carp family, the number one consumable fish in the world. Over five billion carp are consumed each year in China. Fifteen billion carp are consumed annually in Indonesia. These two countries comprise nearly half the world’s population and carp is their fundamental source of protein. All of a sudden there’s this disease that is highly infectious and killing millions of carp and driving up the cost of a staple food.
The father of the young man I met in Jerusalem is one of the world’s leading microbiologists. He had identified the cause of the virus and created a vaccine. So they were looking for money to market the vaccine. To make a long story short, after a very brief evaluation, I decided this project was right up my alley and I gave them the money they needed. We have a very successful company called KoVax, which is already selling the vaccine in India, Indonesia, all over Israel and Europe and we’re in the final stages of getting FDA approval to market it in the United States. So this is how a small investment can benefit mankind. You begin with a conversation about something seemingly insignificant, like the Koi fish, and after studying the subject further, you learn carp feeds half the world.
So every project you’re involved with has a compelling story?
Absolutely. Each project is incredible. VoIP communications changed the world. People all over the world communicate using Skype and video, and Israel developed the technology for both. The telecom company that developed VoIP went public in 1996 for $200 million dollars, just seven years after my initial investment. This is one of my more recognizable projects because of the technologies developed there.
What’s your benchmark for how long your money is tied up?
That’s a very good question. When I came to America years ago, long before the idea of a fast exit, I read an interesting article. It was a study done in the early 70s and it said that it takes a company seven years to reach maturity, meaning it is able to stand on its own feet and be profitable and productive. I always remembered that number. And let me tell you, every single company I’ve ever been involved with sold for a lot of money and each one took seven years, without exception. So I aim for seven years.
What kind of ROI do you expect?
Seed capital involves higher risk, and so of course you hope for high returns. Nevertheless, you have to be reasonably flexible. As a rule of thumb, you hope to reach a minimum of five times what you put in, and sometimes you’re lucky enough to get ten times your original investment. If it’s less than that, it’s not necessarily worth it, because the risk is extremely high.
Do you prefer to have co-investors lined up before you commit to a project, or do prefer to be the lead investor?
I almost always prefer, and almost always find myself in, the lead position. I grew up in Israel and became an officer in the Israeli army. Knowing how to lead others is embedded within me. I am generally the first investor right after the founders of the company. That gives me much greater say in the project. One of the key elements in my investment strategy is that the people I invest with are in Israel and I’m in the U.S. I know how to conduct business in America. If the project founders already know everything they need to know about doing business in America, then they don’t really need me. My real value is my network of contacts, my experience and my reputation. Most of the time, the founders ask me to serve as chairman or a member of their board. I can’t always agree, because I don’t have the time, but in most cases, I serve as the strategic leader of the company. Whether it’s a new device or a new pill, I know how to find the right strategic alliances for developing the product and getting to market fastest.
Are you typically involved in the day-to-day business?
Absolutely not! But when they need me to think about an issue, I take a day or two to study, inquire and then come back to them with an answer. In general, I devote about one to two hours per week per company. This has proven to be a very successful formula. They don’t need me all the time, and I don’t want to be committed all the time. I’m 62 years old and life is short. I’m traveling the world and meeting people. I enjoy creating, doing and producing all kinds of wonderful things for people.
What is particularly compelling or satisfying about early-stage projects?
Helping a person succeed. When you can fathom the notion that a person can succeed, and that you can provide a critical element needed to help him reach that point. Recently I was travelling throughout South America and Argentina. I was in one city for only 24 hours and went looking for an Internet café. Inside there were about 40 little glass booths and kids from Switzerland, Norway, India, Israel, all over the world were in there using the Internet to talk with family and friends and send pictures and videos of the things they’d seen. They were all so excited. And I thought, well done, Jack. You did work that helped create this technology. You can’t get more satisfaction than that.