“Think twice about whose money you take”: 21 tips for aspiring unicorns

Lior Handelsman took part in turning SolarEdge into a $15 billion company and offers some advice for ambitious entrepreneurs

Sophie Shulman 14:5819.03.21
For 14 years, Lior Handelsman kept a low profile. Ever since he founded SolarEdge Technologies, Inc. together with Guy Sella and three other graduates of the elite Intelligence Unit 81 of the Israeli military - he allowed Sella to take center stage. Sella, a celebrated figure in the unit who also served as its commander and was awarded the prestigious Israel Defense Prize, was at the front, both during his military service and in his professional career.


“During one of the long nights of my military service, sometime in 2002, the idea of SolarEdge was born,” recalls Handelsman, “we had a bit of time and Guy told me ‘if you and Yoav (Galin, Handelsman’s friend from high school and one of the company’s founders, along with Meir Adest and Amir Fishelov) decide to leave the military, we should do something together.’ In 2006, we decided to quit the army. We didn’t have any ideas, but we called up Guy and he said ‘if you guys are leaving the unit, then I’m coming too.’”


Lior Handelsman of Grove Ventures. Photo: Amit Shaal Lior Handelsman of Grove Ventures. Photo: Amit Shaal


Handelsman didn’t plan on becoming an entrepreneur. He was a straight-laced kid from Tel Aviv who earned an academic degree in electrical engineering, and ahead of completing his studies in 1995, landed in the unit that then went under the generic name of ‘the intelligence corp’s technological unit. “I’m from the generation who still cringes when the explicit name ‘unit 81’ is said out loud,” he said.


SolarEdge’s journey took place over a decade and a half, and Handelsman describes a rare experience that not many entrepreneurs get to have: building and managing a company from scratch, all the way until it becomes one of the world’s most powerful solar energy converter companies, generating annual revenues of over a $1 billion with stable profitability. During the pandemic year, SolarEdge became the largest Israeli company in terms of market capitalization, soaring to a record $18 billion valuation. Even today at, when it’s valued at a more modest $15 billion, it competes daily with other large successful Israeli companies on the market such as Wix, Nice Systems Ltd., and Check Point Software Technologies.


But Handelsman’s journey at SolarEdge ended two summers ago. In 2019, former SolarEdge CEO Sella died after a battle with cancer, “and I didn’t even attempt to compete for his job,” he said. “In a way, my departure from the company was related to Guy’s death. We worked together for nearly 20 years, and after his death, it just wasn’t the same anymore. Even prior to that, I started to feel like I wanted to do something else, something entirely new after my amazing experience at SolarEdge, where I served in seven or eight positions, even though my title of VP of Product, Marketing, and Sales Manager didn’t change.”


Handelsman, 47, chose to move to the so-called “House of Lords” - Israeli entrepreneur Dov Moran’s venture capital firm, Grove Ventures, Moran himself one of Israel’s leading entrepreneurs. In 2006, when Handelsman founded SolarEdge, Moran had already sold M-Systems Ltd. to SanDisk for $1.5 billion. “It turned Grove Ventures into one of the lone investment firms in Israel with two of its founders having built billion-dollar companies,” he said.


Grove has already exhausted its first $110 million fund and is now investing from its second $120 million fund, which specializes in early-stage deep tech startups. “I felt that I was managing it all from high above, without being hands-on. I wanted to be part of something smaller that I could insert myself into,” Handelsman said.


Now, with the perspective of an entrepreneur that has completed the arduous route from startup to global powerhouse, and also of a venture capitalist who has invested in several companies, and can provide entrepreneurs with real advice based on his life experience and the vast knowledge he acquired.


1. Aim big


“In 2006, I decided to leave the military, and enter the civilian sector. We didn’t have any ideas and looked into everything: hardware, software, different markets, but in most cases, we realized that either our idea was stupid or someone else had already come up with it. Solar energy was either number 13 or 14 on the list of ideas, which I threw out there since I had worked with satellites in the army. When Guy saw the list he said that if it was possible to do something in the solar energy field, we should forget about anything else and seriously focus on that, because that’s where the future lies. Today, none of us even remember what was number one or two on that list, and the rest is history.”


2. Missions must be completed


“We didn’t think that SolarEdge would become what it is today, but along the way, it became clear that we wanted to do something big. And like we told in Unit 81: you must complete the mission, you don’t leave in the middle.”


“Pretty early on, a major multi-billion-dollar company came along and decided to hit up SolarEdge, speaking about a multi-million dollar acquisition deal, a price that seemed fantastical relative to what we had on hand at the time. We attended a few courtship meetings, but the moment the question ‘so what do you think about an acquisition?’ came up directly, Guy immediately fired back that ‘unfortunately, we’re not large enough to acquire you at this stage.’”


3. Don’t gamble


“Don’t gamble on the market. You can’t bring your product to a market which you aren’t sure exists. You need to have enough people in the market tell you: it will happen.”


4. Get feedback from the market as early as possible


“Once you choose a direction, you must receive market feedback at the earliest stages. Many make a mistake saying they’ll only reveal their technology to customers when it’s mature enough because entrepreneurs feel like they know the market well. But today there is more awareness around adapting a product to a market. At SolarEdge we realized that we didn’t understand the solar market because Israel didn’t have one back then. It solved basic dilemmas we had, such as what the various standards are or what installation tools exist.”


5. Excite, but don’t mislead


“You need to approach a customer when you don’t have anything yet, and the skill lies in getting them excited about something futuristic. But there is a difference between misleading and creating expectation. It’s okay to say ‘I only have a presentation but I can make this work,’ and ask the client what they think. You have to tell them ‘help me bring the product to market, and I'll give you something in return.’”


“At SolarEdge, before we even expected to raise any money, I approached large companies and said: ‘This is what we’re going to do, this is how our product will change the industry, sign with us, promise to check out our technology and in return, we’ll give you the best price, forever.’ In the end, none of those companies became our customers, because they saw us at our weakest point, but it did help us raise capital since industry giants had been willing to test out our product. We received highly valuable feedback. Today, I encourage startups to work according to this model.”


6. Be patient


SolarEdge went public on the New York Stock Exchange in 2015, nine years after it was founded, at a $600 million valuation. At that stage, it was already profitable with over $100 million in annual revenues.


“Today, it’s clear that startups don’t need to be profitable in order to go public, and it’s much easier to sell investors a dream. It works for many companies who claim to have a big and varied market, mainly for software companies. We were a hardware company, and back in those days, no one wanted to see companies that operated on a loss. Many banks told us that despite the fact that we doubled our revenues annually, it’s impossible to go public without showing a profit. In today’s special purpose acquisition company deals (SPACs) we would have gotten a multi-billion-dollar valuation.”


“And still, even today, anyone who manages to build a $1 billion company deserves to be congratulated. You shouldn’t discredit that, even if today’s $1 billion is yesterday’s $100 million, and it’ll be $10 billion tomorrow. That doesn’t mean that investors who acquire shares in these companies shouldn’t be wary. SPAC offerings are here to stay, and it doesn’t diminish the achievements of good companies that go down that route, but SPACs will also enable undeserving companies to enter the stock market.”


7. To obtain a high valuation, you must create competition


“When we founded SolarEdge, there were a little over 10 investment firms we turned to. Today, every entrepreneur has hundreds of entities they can raise funds from. Valuations aren’t decided on based on business indices, only due to competition. What matters is generating demand from as many investors as possible in your funding round. In the end, that’s what dictates a company’s valuation.”


“If there is only a single entity that wants to invest in your current round, or take you public via a SPAC, an entrepreneur’s ability to negotiate is limited. Maybe you’ll get a high valuation, but you won’t be the one who determines it.”


“Good entrepreneurs, therefore are constantly talking to funds and telling them ‘we’re thinking of raising another round in a few months.’ The fund then says to itself, ‘wait a second, it would make more sense to invest now before the company obtains a higher valuation, and while there is less competition.’”


“With the amount of capital in the market today, which is only seeking where to be channeled, even half-baked easily get funded. In later stage rounds, funding is far more competitive. The entrepreneur approaches between five or six funds and gathers offers, which is how those large billion-dollar valuations we hear about are formed.”


“Today, as a venture capitalist, I really need to fight the urge to invest. Some entrepreneurs ask me ‘why should we take your money and not that of another fund?’ I need to convince them of the value that I bring to their startups.”


8. Be aware of high valuations


“Of course, it’s okay to take a high valuation, but you always have to think about what will happen at the next funding round. Down rounds (in which a company’s valuation drops between rounds) is a violent and unpleasant round, and everyone gets painfully diluted. Once you raise a lot of money, you’ll have a better chance of achieving your goals, but you should remember that if the market cools down a bit and in a year from now you won’t be able to justify your current valuation, that is a problem for you as an entrepreneur.”


9. Work as partners, but separately


“At the start of a startup’s life, everybody works on development. It’s the easy and convenient thing to do. But at a certain stage, someone needs to talk to the customer, and for techies, that isn’t easy. What’s the difference between an introverted engineer and an extroverted one? The introverted one looks at his shoes, and the extroverted one looks at your shoes. On my team, I was the extrovert and was given the task of bringing in potential clients. In addition, every one of our founders received a position, CEO, VP of Development, Systems Manager, etc. Everyone got a position, so no one would step on each others’ toes.”


SolarEdge's co-founders during better times. Photo: Amit Shaal SolarEdge's co-founders during better times. Photo: Amit Shaal


10. How many partners is too many


“Lately, I read a report that said that many successful companies have two or three founders. To be a sole founder is very difficult, but having more than three people in charge is too many egos to contain. At SolarEdge we were lucky since we were all friends before and had gone through difficult stressful experiences together. That doesn’t mean they didn’t drive me crazy. They did. I drove them crazy too. But to this day I can pick up the phone and call any one of them. Maybe that’s because there weren’t any discrepancies over holdings and seniority.”


“Having too many founders can create another problem when during funding rounds their holdings get diluted rapidly and you arrive at a situation where they don’t have enough shares.”


11. Beware of money-poisoning


“You need discipline not to get carried away and raise a lot of money before you even know what you’re going to do with it. When there’s a lot of money lying around, you feel like you must use it but then instead of understanding what you need to do with the product, you disperse those funds in development. You recruit a lot of employees, and if you somehow manage to bring along a customer, you are then obligated to them. That’s why you have to practice restraint.”


“When you found a company, you first need to create its DNA and forge it like steel. If you have too many people early on, it won’t become cohesive. You can’t bring 30 people onboard, throw them off the deep end, and expect them to swim. That’s why having too much money can actually lead companies to confusion.”


12. Know who to take money from


“I prefer those entrepreneurs who don’t actually chase after the highest valuations but settle for a lower one in order to get the right person, who adds value to their board of directors. Naturally, when the valuation gaps are high, there’s no question, if one fund offers you a $1 billion valuation, and the other offers $800 million, a good entrepreneur needs to consider which offer will benefit the company more in the long run.”


13. Being stingy isn’t a bad thing


“It’s important to draw the line between pathological and reasonable stinginess. When money is pouring in, you might not know how to manage things when times get tough. On the other hand, the competition today over quality manpower is enormous, especially in Israel, and it’s difficult to attract people to startups. You have to remember that money has meaning, but it mainly influences the employee’s decisions to leave, not whether to stay at your company. That’s why there must be an opportunity for professional fulfillment too.”


14. Having a personal sense of accomplishment

“High tech workers need to feel that their work isn’t too easy and that they are exhausting all their capabilities. Even an employee who makes a lot of money doesn’t necessarily want to be cog number 7,205 in the system or to work months on a project that could be shut down without explanation. I once hired someone at SolarEdge who had worked at a large multinational company, where he had developed a cute feature that was extremely popular among teenagers, but the man, who had a Ph.D., told me he was embarrassed to tell his family what he actually did at work.”


“Many employees dislike developing things that are meaningless or lack impact. When a venture capital firm examines a company, it examines its turnover rates closely. Funds know how to identify companies that can easily recruit employees, because their recruitment managers are good at what they do or because the CEO knows how to impress them, but if a company lacks a cohesive DNA that its employees can get behind, they won’t stay.”


15. Having a startup within a startup


“The method we adopted when building our international sales company was the opposite of what was customary. We decided not to recruit salespeople, support, or secretaries before we actually had any real activity. That’s why first we recruited a sales manager and told him to ‘go forth.’ In the beginning, he used to drag solar converters around in his car, and only started hiring more people once had begun to make headway. In that way, everyone feels as if they were a startup of their own, as if they were initiating and starting their own thing.”


16. Beware of spoiled employees


“Another problem that exists in the high tech sector, especially among those who sit pretty at companies that do really well, like at Apple, Facebook, or even at SolarEdge, is indulgence. Such employees - and there is quite a fair share of them - in addition to the shares and stock options that they own can earn up to $1 million a year. It’s difficult to attract those types of people to your startup. That’s why good entrepreneurs are those who don’t really care about the conditions. A good entrepreneur wants their company to succeed. They have a vision, drive, and direction. They understand that in order to accomplish something they have to make concessions, and sometimes that includes salary expectations.”


SolarEdge's innovative solar panels revolutionized the sector. Photo: Amit Shaal SolarEdge's innovative solar panels revolutionized the sector. Photo: Amit Shaal


17. People want to take the fast lane, not get stuck in traffic


“With all that said, it’s natural that companies with high valuations find it easier to recruit employees. It attracts people. People want to jump on the fast lane, not get stuck in traffic.”


18. You’ve got to offer secondary shares


“Entrepreneurs run marathons and may run out of oxygen. When you give them the option to receive part of the money in secondary shares (existing shares of common stock that are sold to investors in an offering), it buys them that air. It’s important from a tactical standpoint to reduce ‘technical pressure.’ You alleviate stress at home if you can afford a house cleaner or babysitter. You’ll fight less with your spouse when you spend a week overseas, and your partner is stuck with the children. Even the biggest entrepreneurs hear from their partners ‘why don’t you ever take out the trash?’ But you need to have boundaries. I don’t like seeing an entrepreneur with less than 10% in secondary shares, and that’s something you need to avoid.”


“Selling secondary shares also removes the pressure to rush toward an exit. Not long ago I decided to invest in a company, after getting a certain vibe from the founders that they would sell at the first opportunity they saw. They were indeed sold a few months later and each founder received tens of millions of shekels. For them, it was a dream come true, but the fund didn’t care. That’s why selling secondary shares creates an aligned interest with the fund, and when an offer to sell for $100 million comes along, it won’t seem that life-altering for the founders and the company will continue to build.”


19. You need professionals


“At a startup, only the founders can afford to not know what they’re doing. There are central management positions, especially operations, financial, and legal counsel where you really need to bring professionals in. That’s why at SolarEdge we brought in the best professionals we knew early on, in 2008 as soon as the sales started to pick up. They still serve as CEO, CFO, and in other key positions.”


20. Relocation should be the last option


“We decided not to relocate any of our Israeli employees, but rather to recruit local managers in every country we manage our business from. It’s mainly a culture-issue. For example, Israelis, write at the end of every email ASAP, and Americans are shocked because that is impolite. On the other hand, I never understood why every time I met American investors or potential customers, they always said to me at the end of a meeting “that’s very interesting,” and that’s the last time I ever heard from them, and they didn’t even bother answering my emails.”


21. Loneliness is a factor


“It doesn’t matter how many employees a company has, at the end of the day you’re by yourself. You make decisions without in conditions of high uncertainty, and constantly need to be ‘selling’ your startup — whether that be to your employees, your family, investors, customers — you’re the one that takes rejection to heart and as if that weren't enough, the work-life balance sucks. Aside from the fact that it’s much easier to raise money and reach a $1 billion market valuation these days, nothing else has changed. It’s a long, arduous, and lonely journey.