Always invest in yourself first. Acquiring great knowledge by education or experience is priceless.
As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Oren Barzilai of EquityBee.
Oren Barzilai’s current life mission is to empower startup builders, the employees, to take part in the success of the companies they have helped build. Oren is the CEO and Co-Founder of EquityBee which helps startup employees to get funding to exercise their stock options by connecting them with investors.. EquityBee is Oren’s 3rd startup. Oren was born and raised in Tel Aviv, the Startup City, and now lives and leads EquityBee from Silicon Valley.
Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
Ever since I could remember, I was always fascinated by technology. I taught myself how to code, and started getting paid for writing code at the age of 13. Earning a BSc in Math was a natural fit for me. Following my studies, I founded my first company, Tapingo, and sold it to Grubhub. I found that I still had the urge within me to build something new, so the journey to founding my second company was short: Start A Fire. During my time in the startup ecosystem I witnessed colleagues, friends and other startup employees, not giving the proper attention to their equity, and not exercising their stock options. As a result, they did not participate in the success of the companies they helped build. Enter EquityBee, my third, current, and most mission driven company.
Our mission is to empower the startup employees, we call them ‘Startup Builders’, to participate in the success of the companies they have helped build. We provide startup employees with the optimal solution by connecting them with investors who are looking to invest in startup companies at attractive prices. The investors get investment access to the hottest startups in the market at valuations that were set in the past.
Upon a liquidity event, the employees take part in the success of the company they helped build, while sharing the gains with the investors who supported them.
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?
A few years ago a private startup company I worked with decided to do a 1:10 share split: converting every share to 10 shares, and adjusting the value appropriately. This way every shareholder will own 10 times more shares, while each share will be valued at 10% of the original price. Actually, the total value of each shareholder will remain exactly the same. Not understanding why they are doing this, I asked the CEO for the logic that led to this decision. The answer was, “During the negotiation process while hiring new employees and offering them stock options, many of them mention having opportunities with other companies offering five times the amount of stock options, without discussing the actual value. Instead of explaining over and over again that only the actual value of the stock options matters, and the specific number of stock options is irrelevant, we have decided to implement a share split to avoid explaining further and lure more candidates”.
This simple incident helped me understand how many educated and smart people still lack proper financial knowledge which causes them to make wrong and irrational financial decisions. I am hopeful that as part of our mission at EquityBee, we will help educate employees of startups on the value and importance of equity.
Are you working on any exciting new projects now? How do you think that will help people?
Without a doubt EquityBee is the most exciting, mission driven project I have ever been a part of. Participating in exit events can be a life changing event for both employees and investors. Our solution makes it possible for both.
I see us as enablers and educators for startup builders, the employees. Millions of startup employees have “bank accounts”, in a form of equity, that they are unaware of and don’t have access to. EquityBee’s mission is to empower startup builders and help them participate in the success of the companies they have helped build by unlocking this value. We help with that by leveraging our great investor community, providing both parties with great opportunities.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I am very grateful to my parents, and for their constant reminder of how important education is. They have always provided me with the confidence that I can achieve whatever I dream of. It began when they supported me using my bar mitzvah money to start my first business at the age of 13, and continued by pushing me to achieve my dreams. They made me believe in myself, and I couldn’t do what I do today without the confidence they instilled in me.
Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?
Change can be a very scary thing, especially when it’s happening so fast. The ongoing worldwide COVID-19 crisis accelerated the rapid shift and adoption of technological solutions into all industries. Those coming from the tech industry, including ourselves, should assist our friends, neighbors and community members in old industries by helping them adopt new solutions that will help them cope with the impact of this crisis.
This recent trend has made me even more bullish and optimistic regarding the future of tech companies as well as investments into tech companies who are currently providing the best solutions to handle this crisis.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing 500 dollars every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?
I’m more optimistic than ever about the potential of investing in tech companies. Most startup companies generate their value while they are still private and today startups are staying private longer. During the early 2000’s, the average time from startup inception to an IPO was about 4 years. Currently, the average is more than 12 years. Most of these companies generate a vast amount of their value while they are still private. While investing in high growth private startups is considered a high risk investment, sophisticated investors with broad and diversified portfolios, should allocate some of their capital to private, high growth startup companies.
EquityBee provides investors with unique investment opportunities in private startup companies, based on valuations made in the past.
Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?
Back in 2011, Marc Andreessen coined the term “software is eating the world.” Due to COVID-19, since March, we have been experiencing a very aggressive acceleration of this trend. Paradigm shifts that were believed to take years happened within a few months.
The tech sector’s growth is accelerating rapidly. We are witnessing these trends in the public markets, where big tech companies are soaring, and in the private market where investor demand in EquityBee’s Investor Community has grown by more than 600% over the past two quarters.
From recent polls within our investor community, we have seen a significant increase in demand for enterprise software companies, financial technologies and B2C tech companies. We have also seen a significant decrease in demand for travel tech companies, with certain anomalies, such as AirBnB, which has had a consistent strong demand, even throughout the COVID-19 crisis.
Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?
I am a huge fan of the tech sector. In the past couple of years I have witnessed the acceleration of technology emerging in all types of businesses. I have seen this especially in old-school industries, such as insurance and finance. COVID has rushed the process, and I believe that the pace will continue to accelerate in the near future.
Are there alternative investments that you think more people should look more deeply at?
As I’m a big believer in the future of tech and tech investment in particular, I’m even more interested in private tech startup investments. While the tech industry isn’t as easily accessible as the stock market, there are great investment opportunities.
Being more specific, I would recommend investors to research specific verticals that make sense for them. They should ask themselves what they know or believe in that most people don’t. Follow that logic and look for investment opportunities in private tech startups that exhibit that logic.
If a person in their thirties and forties came to you today and said that they have 10,000 dollars that they want to put away today for a long term investment what would you advise them to do with it?
As one knows, “it’s hard to make predictions, especially about the future”. Yet, investing is about making predictions about the future.
A good investment portfolio is a diversified portfolio that fits the investor risk profile. Sophisticated investors should allocate some or at least a small part of their investment portfolio to private tech startups. Unlike public investments, investors should take into account that usually these investments aren’t liquid and bear a more significant risk. I would recommend such investors to develop their own investment thesis, and maintain their discipline by ensuring their private investment portfolio is diversified as well.
Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing what would you say? Can you please give a story or an example for each?
- Always invest in yourself first. Acquiring great knowledge by education or experience is priceless.
- You aren’t going to get rich by selling your time. You need to invest your capital and time to own equity or shares in a company or business.
- Understand the power of compounded interest — Albert Einstein said, “Compound interest is the eighth wonder of the world.” You should understand it and leverage it.
- Following number 3 — Start as early as possible.
- Everybody fails — endurance wins in the long run.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
I would like to repeat Albert Einstein’s quote from the previous question “Compound interest is the eighth wonder of the world”. Most people don’t grasp the power of compound interest and owning equity. Owning equity is an important step on the path to financial freedom. As a startup employee, you may have the opportunity to own a piece of equity in the company you helped build, equity that most other investors don’t have access to. You should evaluate this opportunity and make sure you get the most of it.
You built it, own it.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂
If I could, I would provide better and greater financial and technical education starting at a young age. Every industry is adopting and changing by way of technology and those who understand financial investments coupled with technological education have an unfair advantage over those who don’t — almost like a super power. Starting that education at a young age, will add the multiplier of compounded interest.
Thank you for the interview. We wish you only continued success!