from the August 2016 issue

Intel Capital heats up with $25 million investment in three Israeli startups

Who ever said that August is a slow month for funding? Intel's M&A and strategic investment arm Intel Capital announced on Wednesday their investment of $25 million spread across three Israeli startups. Along with other participating investors, Intel Capital led all three rounds in the companies.

In the wave of funding, scored a $7 million Series A, while Sedona Systems and Velostrata pulled Series B rounds at $13.6 million and $17.5 million respectively. In all three companies, Intel has partnered with firms that are changing the face of infrastructure, whether in the area of the cloud with and Velostrata, or in the optimization of networks and the flow of traffic with Sedona Systems.

The companies: Who are they and what makes them special?
Co-founded by CEO Yossi Wellingstein and CTO Ori Gerstel, Sedona's multi-layer platform NetFusion works with network operators, improving the management of IP and optical layers by essentially combining them to provide greater control and significantly cut operating costs. The company claims that their approach allows users to push their network infrastructure harder while at the same time lowering their expansion capex (capital expenditures) by as much as 50 percent.

While Intel Capital led the round, they were joined by newcomer NextStar and previous investor Bessemer Venture Partners. Coupled with their Series A and seed rounds, this injection of $13.6 million in new funding brings them to a total of $19.6 million raised. They have offices in Raanana and Cupertino, and have stated in their release to the press that they will direct the funds towards boosting their sales and R&D efforts.

For their part, Velostrata has developed solutions for migrating applications and data to the cloud. Co-founded in 2014 by CEO Issy Ben-Shaul and Chief Product Officer Ady Degany, they work with hybrid private and public clouds, simplifying the process to a single click and reducing the need to alter the contents being transferred in order to ensure smooth operations. With their HQ in San Mateo, they maintain R&D offices in Israel. Previous investors 83 North and Northwest Venture Partners also took part in this round.

San Francisco-headquartered launched their beta solution for implementing full stack analytics infrastructures in the cloud in 2015. Co-founded by CEO Yaniv Leven and CTO Roi Avinoam, their service works with big market data players like Amazon's Redshift, Elastic, Kafka, and Spark to allow companies of all resource brackets take full advantage of their data, drawing business critical information to improve their decision making. They raised $1.3 million in seed funding last September from Blumberg Capital, FundersGuild, and 500 Startups. Blumberg took part in this current round as well, helping to bring them to an estimated total of $8.3 million raised. The value of strategic investment and solid investment partners

In all three of these deals, Intel Capital has looked for companies that are innovating in their fields, paving the way for smoother operations in the tech industry.

It is worth noting as well that they have chosen companies that have already essentially been vetted by top level Vcs, with most of the best recognized names choosing to take part in the second round, generally a sign of confidence in the company.

While investments in Israeli backend companies is nothing new, they continue to remain on the radar for major players like Intel Capital. Marcin Hejka, a VP at Intel Capital and the Managing Director of Greater Europe and India, wrote in a post released to the press that his office has invested in over 80 Israeli companies with upwards of $345 million.

Intel as a company has long had a relationship with Israel and has a facility in the southern city of Kiryat Gat. They also maintain significant R&D resources here, capitalizing on the qualified and competitive talent.

As has been noted in previous articles, strategic investments are in my view among the most valuable. While perhaps not as sexy as a straight up exit, they grant young and promising startups access to wider networks of resources and customers, allowing them to grow into bigger and stronger companies.

With this sweeping set of funding announcements, Intel Capital has put us on notice that these will be companies to watch as they continue to come into their own.

Reprinted from the Israel High-Tech & Investment Report August 2016

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