Jonathan Schwartz Chief Innovation Actuary

January 2019

Trivia fact of the day: Your pension is helping to finance innovative startup companies.

Wait, what? Let’s dive into how startup funding works.

Startups need to raise cash in order to build innovative products and solutions. VCs (Venture capital funds) are specialized investors that supply startups with the cash to rush their operations. But where do VC’s get this cash from? LPs (Limited partners) invest in VCs. These LPs can be pension funds, life insurance companies, sovereign funds, university endowments and high net wealth individuals.

The investment “food chain” looks like this:

Startups report to their VCs who report to their LPs who report to their customers.

Elad Givoni, who heads private equity at phoenix’s investment department explains – Phoenix has a very consistent policy of investment in the local Israeli venture capital industry.  We gets dozens of investment offers from funds every year but only actually invests in a selected few. Because it can take a long time to see a return from these investments they are looked at as a long term relationship with the fund managers.

Phoenix likes to invest in small funds with a solid founding team, usually with a specialization in a certain segment. The private equity team periodically meets with the fund managers and follows the growth and performance of the portfolio. Occasionally, Phoenix might co-invest directly with a VC in later stage companies.

So, what is Pix’s investment policy?

It needs to be clear that we are not a VC fund and we will only investment in companies that we partner with. Being in a strict regulatory environment we have a maximum check size of a couple hundred thousand dollars and will only invest in a valuation were this amount would make sense.  Also, PIX only invests out of Phoenix’s nostro funds and not via policy holder’s funds.

  1. Can lead a round but don’t like too.
  2. Usually invest via SAFEs & CLAs but not necessarily.
  3. Usually don’t require board seats.
  4. Can’t take an equity stake larger than 20%.
  5. Out of the box – Can sometimes utilize some pretty creative financing solutions.

So if you’re an entrepreneur looking for a strategic partner in insurance don’t hesitate to drop us a line!