Hedge fund meets AI

Embryo Ventures
6 min readFeb 15, 2021

Tel Aviv is a world-leading startup ecosystem. With consistent and insistent growth and an urge to innovate, it’s a region characterised by more and more unicorns. Robbie Dayan, COO at impressive Tel Aviv “hedge fund meets AI” startup Crowdsense.ai, discusses with me the inventive spirit running through this region, the atmosphere of support and rapid development, as well as what can go wrong in an environment of unstoppable fast-paced market change.

Mary Letey: What’s your entrepreneurial background and experience?

Robbie Dayan: My background is finance and capital markets and I used to be an equity trader and financial risk manager. I was always tech-savvy and loved innovation, so being in a bank was too conservative for me: I needed to do something more creative. I fell in love with Bitcoin and blockchain technology and shifted from traditional finance to fintech. I joined the First Digital Asset Group, which was a crypto management group. We established five startups simultaneously; these startups were designed as complementary and comprehensive solution for the digital asset economy. In total, we successfully raised $22 million for these projects. In the long run, however, the adoption rate didn’t increase as expected and regulations didn’t behave as expected after the crypto boom.

ML: What was the next move for you?

RD: I aimed to solve a real issue within the cryptocurrency market, so I started another project with a colleague called Achieved. Initial Coin Offerings (ICOs) were very common, and rampant fraud and mismanagement were causing investors to lose an enormous amount of money. ICOs raised 8.5 billion dollars in 2017 and 2018 and I’d bet the money lost through fraud and badly-executed startups is more than 60–70% of this amount. Using a smart contract and installation system, we designed a secure and easy-to-use system to minimise the risk of scams and low-quality offerings. For example, if an investor decides to invest $100K worth of ETH in a crypto startup, they can move the ETH to a secure smart contract and grant access to $20K at a time by verification of the project roadmap. If things come to the worst, then they’ve only lost $20K rather than $100K.

RD: The cases of fraud were damaging to the image of the cryptocurrency world, and we had an innovative idea with a practical solution to a real problem. Unfortunately, this was a good lesson for me to do proper market research. By the time we finalised the solution, the market was no longer there. Had we spent time doing a proper product discovery process, we would have identified the signs of ICO decline. Today the market is practically non-existent, decreasing from $8.5 billion to $300million.

ML: Walk me through your product discovery approach after this experience.

RD: I’d like to contrast this experience with my next project, where we attempted to rebrand this solution for the international property development market and their investors. We were interested in selling this solution directly to property developers, who could use it to reassure global investors. This would increase communication between developer and investors. However, after doing due diligence, market research and speaking in-depth with the people in this industry, we came to the conclusion that is product was “moderately helpful” but a necessity. You must diligently focus on changes, however subtle, in the market you’re entering. What is the problem you are solving? Are you innovating or are you improving an existing process? What metrics should be used to gauge success? These are fundamental questions as well.

ML: How does working in such a bustling startup ecosystem such as Tel Aviv affect the market research and startup development process?

RD: There are so many meetups about every industry and every development, where you meet entrepreneurs and others in the industries with whom you can brainstorm. It’s relatively easy for me to pick of the phone and be able to reach anyone in the industry through my connections. There are lots of communities here in the tech scene: when you’re starting a project or developing a project, it’s very common to use friends and other entrepreneurs to brainstorm and connect.

RD: In addition, there is a wide net of accelerators and a known network of angel investors and VC investors throughout this ecosystem, to the point where the ecosystem feeds itself. The entrepreneurs and the investors and the accelerators are all in a small location and everyone shares ideas.

ML: What kickstarted this free-flow of innovation?

RD: This magic starts in the Israeli army. Because we are unfortunately in a constant war situation, the Israeli military constantly pushing innovation and ideas to the limit. There are elite units in the Israeli army focusing on development. It’s amazing to see many young people leaving the army and beginning startups right away and powering the Israeli ecosystem.

ML: Outside of the military impetus, what role does government and grant funding have in maintaining the ecosystem?

RD: In the 90s, the government established a legendary fund called “Yozma” (Hebrew for “initiative”) to incentivise people to open startups, where the government essentially funded some part of your project at almost no stake. Since the 2000s, most funding is private.

ML: Describe the funding environment in Israel.

RD: Prior to corona there was more money than startups needed and the gross amount of money being invested in startups is always increasing. I like to joke, “if you have a good idea and a good powerpoint, you can raise a million dollars.” It’s not far from the truth: I regularly see VCs fighting for projects. VCs competing to win projects amongst each other is what drives them to improve. It’s no longer enough to simply be a VC and provide funds for the project; you also have to prove to me, the entrepreneur, why I should take your money and not their money. This has led to VC specialisation and expert knowledge, which only benefits the startups and entrepreneurs.

ML: What are your guidelines for selecting accelerator programs?

RD: Accelerators need to be both efficient enablers and psychologists. I will explain. They must give entrepreneurs the tools they need to succeed without interfering with them. The entrepreneurs need to invest their own time into building their projects; the accelerators should not over-interfere and provide the right tools to enable success. Secondly, being a psychologist means to be able to listen and advise objectively. In this environment, everyone has different interests. Investors, customers, regulators, design partners, suppliers; each have different timeframes and interests. The accelerator must be truly objective; understand the big picture and advise for the best interest of the project itself. The right accelerator can give you the correct push towards growth by listening to you and then give you advice without a conflict of interest.

ML: What do you see as the future of the Israeli startup ecosystem?

RD: The number of startups and companies is continuing to grow within an ecosystem that’s been successful for 20 years now, and I think it’s here to stay. Even Corona hasn’t slowed it down at all. There’s a huge shift that’s moving resources and human capital from traditional industries to high-tech. We are also bringing in a lot of foreign capital and VCs from Asia, Europe and US. The influx of innovation and experienced human capital from the army will continue. The academy is strong and is here to stay. And the people here, the human capital, have a unique advantage for creating this ecosystem: We have a culture of sharing and brutal honesty. This is vital for efficient innovation and development.

— Written by Mary Letey

Embryo Ventures is an innovation and venture partner to visionary entrepreneurs and organisations. We are passionate about backing ventures that are destined to make their impact on the world.