Personal blog of Yzmir Ramirez

YL Ventures, the Israel-focused cybersecurity seed fund, today announced that it has sold its stake in cybersecurity asset management startup Axonius, which only a week ago announced a $100 million Series D funding round that now values it at around $1.2 billion.

ICONIQ Growth, Alkeon Capital Management, DTCP and Harmony Partners acquired YL Venture’s stake for $270 million. This marks YL’s first return from its third $75 million fund, which it raised in 2017, and the largest return in the firm’s history.

With this sale, the company’s third fund still has six portfolio companies remaining. It closed its fourth fund with $120 million in committed capital in the middle of 2019.

Unlike YL, which focuses on early-stage companies — though it also tends to participate in some later-stage rounds — the investors that are buying its stake specialize in later-stage companies that are often on an IPO path. ICONIQ Growth has invested in the likes of Adyen, CrowdStrike, Datadog and Zoom, for example, and has also regularly partnered with YL Ventures on its later-stage investments.

“The transition from early-stage to late-stage investors just makes sense as we drive toward IPO, and it allows each investor to focus on what they do best,” said Dean Sysman, co-founder and CEO of Axonius. “We appreciate the guidance and support the YL Ventures team has provided during the early stages of our company and we congratulate them on this successful journey.”

To put this sale into perspective for the Silicon Valley and Tel Aviv-based YL Ventures, it’s worth noting that it currently manages about $300 million. Its current portfolio includes the likes of Orca Security, Hunters and Cycode. This sale is a huge win for the firm.

Its most headline-grabbing exit so far was Twistlock, which was acquired by Palo Alto Networks for $410 million in 2019, but it has also seen exits of its portfolio companies to Microsoft, Proofpoint, CA Technologies and Walmart, among others. The fund participated in Axonius’ $4 million seed round in 2017 up to its $58 million Series C round a year ago.

It seems like YL Ventures is taking a very pragmatic approach here. It doesn’t specialize in late-stage firms — and until recently, Israeli startups always tended to sell long before they got to a late-stage round anyway. And it can generate a nice — and guaranteed — return for its own investors, too.

“This exit netted $270 million in cash directly to our third fund, which had $75 million total in capital commitments, and this fund still has six outstanding portfolio companies remaining,” Yoav Leitersdorf, YL Ventures’ founder and managing partner, told me. “Returning multiple times that fund now with a single exit, with the rest of the portfolio companies still there for the upside is the most responsible — yet highly profitable path — we could have taken for our fund at this time. And all this while diverting our energies and means more towards our seed-stage companies (where our help is more impactful), and at the same time supporting Axonius by enabling it to bring aboard such excellent late-stage investors as ICONIQ and Alkeon — a true win-win-win situation for everyone involved!”

He also noted that this sale achieved a top-decile return for the firm’s limited partners and allows it to focus its resources and attention toward the younger companies in its portfolio.

Last year Broadcom, a chipmaker, raised eyebrows when it acquired CA Technologies, an enterprise software company with a broad portfolio of products, including a sizable mainframe software tools business. It paid close to $19 billion for the privilege.

Then last week, the company opened up its wallet again and forked over $10.7 billion for Symantec’s enterprise security business. That’s almost $30 billion for two aging enterprise software companies. There has to be some sound strategy behind these purchases, right? Maybe.

Here’s the thing about older software companies. They may not out-innovate the competition anymore, but what they have going for them is a backlog of licensing revenue that appears to have value.

Broadcom, the massive semiconductor supplier you may remember from its failed attempt to acquire Qualcomm, today announced that it has reached a definitive agreement with CA Technologies, a major IT management software and solutions provider. The price of the acquisition is $18.9 billion in cash. CA’s shareholders will receive $44.50 per share, a 20 percent premium over the closing price of the company’s stock today.

It’s a bit of a surprise to see chip manufacturer Broadcom acquire a major software and services company. “This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies,” Broadcom CEO and president Hock Tan explains in today’s announcement. “With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses. We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions.”

This comment doesn’t exactly explain the rationale behind today’s acquisition, but Broadcom is clearly trying to diversify its offerings. Earlier this year, the company walked away from its proposed hostile takeover of Qualcomm after the Trump administration blocked it. At the time, Broadcom was willing to pay $117 billion for Qualcomm, which would have greatly extended the company’s semiconductor business. Today’s move sees Broadcom enter a completely new business.

The company expects the acquisition to close in the fourth quarter of 2018. It’s unlikely that Broadcom will face any major headwind from Washington this time around.