Earlier in 2009, Gemini announced the official end of the Lightspeed Gemini Internet lab. After 3 years, and an amazing partnership (I would call it friendship by now), we ended our formal ties with Lightspeed, as each fund decided to implement its Israeli strategy in a different way.

As we head out into 2010, I want to try lay out some of our plans regarding Internet investing for the foreseeable future. As I present that, I would like to share some of our key assumptions:

• Consumer Internet (and its related areas: advertising, digital media, etc.) will continue to create exciting opportunities for venture returns.
• Israel has an opportunity to take a larger piece of this market, as a lot of internet deals rely on global markets and on the growth of the mobile. Some of the “Israeli dominance” was shown at the last Techcrunch conference, with Israeli entrepreneurs winning ALL the top awards.
• The financial requirements for developing and launching a product are minimal. This means that the barrier to enter a market is low, but the barriers to scale are quite high.
• Most internet companies go through 4 key stages: development --> traffic acquisition --> revenue generation --> scaling.

With those assumptions in mind, Gemini will continue to spend real time and money in this space, while trying to invest in companies that show early signs of potential/growth. More specifically: 

• Stage: We will continue to invest in seed companies (sub $1M investments), but will also look at more advanced deals that require larger investments. In other words, we will be interested in any company that is in the traffic acquisition/revenue/scale positions. We will try and stay away from companies that are really early and have nothing developed. From our perspective, the initial development phase should be financed through bootstrap or by angels. A great example is ekoloko. We invested after the angels, when the company had already launched a service in Israel.
• Sub-Vertical:  We are open to any sub vertical in the space. I should say that we have done a relatively large number of advertising-related deals, and although we have a good experience in that area, we will be happy to invest in companies in other sub verticals. Examples could include gaming, e-commerce, mobile internet and even content.
   
• Geographies:  Many of our companies (vast majority) are targeting the US market. We believe there is a lot of opportunity in the global internet. We are seeing that through some of our current portfolio, like Massive Impact (China, Taiwan, and Thailand), ekoloko (France), and Wikio (Europe). Most of Gemini’s investments would still be in companies that are targeting the North American market, but we will be interested in seeing more companies that their go to market strategy approaches other geographies.
• Talent:  We are big believers in the local talent. There are a growing number of successful internet entrepreneurs here in Israel, and some interesting talent emerging in companies like Google and Microsoft, but also Eyeblaster and 888. Gemini is a (proud) sponsor of TechAviv, and through that community we are seeing the growing number of internet ideas and entrepreneurs.

Bottom line, we believe in the potential of Internet in the new decade. Hopefully the potential will convert to great returns.