The Little Fund That Became Israel’s Pre-Seed Default

Two 8200 officers slept on friends’ couches for a year and a half and heard “no” from 200 investors. Eight years later they’ve written the first check into a $300M exit, a $200M exit, and an $800M company.

That’s not a pitch deck slide. It’s Guy Katsovich’s own founding story, and he tells it often enough that it’s practically Fusion’s origin myth at this point. But myths need receipts, and for most of Fusion’s life, it didn’t have any. It had volume — a lot of $150,000 checks into a lot of first-time founders — and a reputation, fair or not, as a content machine that moved fast and posted often. The kind of fund you’d nod politely about at a Tel Aviv rooftop event and forget by the next round of drinks.

That read is dead now. It died in filings, not in press releases.

In the space of thirty months, three companies where Fusion wrote the first check produced outcomes big enough to end the argument on their own. Innplay Labs sold to Playtika for up to $300 million. DigitalOwl was acquired by Datavant for an estimated $200 million. And ScaleOps, a Kubernetes infrastructure company Fusion introduced to its own seed investors, just raised at a valuation north of $800 million. None of that is Fusion’s marketing talking. One is an SEC filing. One is a completed acquisition. One is a funding round covered by TechCrunch. You can’t spin your way into an 8-K.

So here’s the real question, the one worth an actual investigation: how did a fund with $20 million and two guys who couldn’t get a meeting eight years ago become the most active pre-seed investor in Israel, three years running?

The Check: $150K, No Board Seat, Wired Before You’ve Incorporated

Start with the mechanics, because they explain everything else.

Fusion writes a standard $150,000 check for 7.5% equity, structured as a uniform SAFE modeled loosely on Y Combinator’s format.¹ The money moves as soon as a founder is accepted — often before the company even exists on paper. If you haven’t incorporated, Fusion helps you do it. Katsovich has been blunt about what this is meant to replace: “We want to replace the ‘friends and family’ round, and be the first to give startups a check with the incorporation.”²

There’s no board seat attached. “My partners and I don’t sit on boards and give advice,” Katsovich told Israeli outlet N12 in January 2024.³ No governance, no strings — just capital and a program.

The program is the other half of the product: a twice-yearly, 10-week bootcamp that runs about two months in Tel Aviv, then a three-week roadshow through Silicon Valley, New York and Los Angeles. Founders sit through 150-plus sessions with mentors and investors, then get walked, physically, through the US market most Israeli founders have never set foot in.

The selectivity is real. Fusion says it gets over 1,200 applications a year for fewer than 20 slots — an acceptance rate under 2%.⁴ And the follow-on numbers back up that the filter works: more than 70% of companies raise a subsequent round after the program, averaging $2.5 million.⁵

None of this is new. Fusion has run this exact playbook, with small tweaks, since 2023. What’s new is the proof.

The Pain Behind the Product

Here’s the part that gets lost in the LinkedIn version of the story: Fusion’s entire pitch — first-time founders in unfashionable sectors deserve a shot — is something its own founders lived through first.

Katsovich served roughly six years in Unit 8200, got out in 2011, and did what he’d always wanted to do: journalism. He landed at Globes, Israel’s business daily, and spent about three years as a reporter and editor. Then he quit. “I left because I felt unfulfilled,” he told N12. “I felt I didn’t want to be on the sidelines — I wanted to get further into the business world. To be inside the same organizations we write about.”⁶ A separate Calcalist profile is less diplomatic about it: journalism, he said, was pulling out the sides of him he liked least — cynicism, criticism — and he was tired of watching from the press box.⁷

He moved into a marketing agency job, founded a social initiative called 8200 Impact on the side, and that led to running 8200 EISP — the accelerator built for Unit 8200 alumni. That’s where he learned the venture business from the inside, and where the Fusion thesis started forming.

Yair Vardi is the other half. He met Katsovich in Unit 8200 — they’ve known each other around 15 years. He studied math at UCLA, then worked as Director of Academic Affairs and Advisor for Innovation at the Consulate General of Israel in Los Angeles, running US-Israel tech partnerships before Fusion existed. Forbes put him on its Israel “30 Under 30” list in 2018.

Everyone else building an Israel-to-US bridge was flying to Sand Hill Road. Vardi bet on Los Angeles instead, and he said so out loud in 2020: “We’re betting on Silicon Beach to be the next big hub for Israeli entrepreneurs.”⁸ There’s a line from that same interview that’s aged into a good detail: “We rent apartments in Santa Monica, so we can ride Bird scooters to the office just like we do in Tel Aviv.”⁹

Fusion launched in 2017 as “Fusion LA,” funded by a $5 million commitment from the Legziel family — a real estate and diamonds family office — with Simon Legziel joining as a venture partner. The first cohort: six companies picked from 200 applicants, including a logistics-tracking startup called Hoopo that’s still in Fusion’s portfolio today.

Then came the grind. For a year and a half, Katsovich and Vardi drew no salaries. “For a year and a half we slept on friends’ couches and didn’t draw salaries,” Katsovich has said.¹⁰ Between 2017 and 2019, the checks were tiny — $20,000 apiece into roughly 30 companies, barely more than an experiment. And along the way, more than 200 investors passed on Fusion itself. Katsovich tells that number often, and it’s clearly the load-bearing detail of the whole story: “two partners who kept believing in their vision even after more than 200 investors said ’no’ to them.”¹¹

The structural point writes itself. Fusion’s whole business model is a bet that first-time founders in categories nobody wants to fund can still be right. Katsovich and Vardi were first-time fund managers running a pre-seed micro-fund out of, of all places, Los Angeles. They got told no 200 times. The product is the scar tissue.

Fusion’s check size climbed from there — $110,000 through a 2020 partnership with Menlo Park’s GoAhead Ventures, then to the current $150K standard once Fund I closed at $20 million in June 2023, anchored by Insight Partners alongside more than 70 angels including Gigi Levy-Weiss, Liad Agmon and Ofer Ben-Noon.

Three months after that close, Innplay sold to Playtika.

The Intern Who Became the Fund’s Engine

If Katsovich and Vardi are the thesis, Amit Shechter is what happens when you apply it inside your own building.

Shechter joined Fusion in late 2022 as a student intern, no venture background at all. He worked his way up — analyst, associate, and in November 2025, Principal.¹² Along the way he led investment processes in more than 30 Israeli startups and personally sourced roughly 20% of everything the fund has done. Three companies he led — Quack, NewLight and SingIt — have collectively raised over $50 million.¹³ In his new role, he’s expected to lead 25 to 30 pre-seed deals a year on his own.

His background is worth a beat: he served in the Israeli Navy’s submarine unit, Shayetet 7, one of the most selective forces in the IDF, and holds a double major in computer science and entrepreneurship from Reichman University. He also co-founded the 28 Community, a private network of elite combat-unit veterans working in Israeli tech.

There’s a genuine irony here, and it’s worth sitting with for a second: a guy from an elite unit, running a network of elite-unit veterans, is now the operating engine of a fund whose entire public argument is that Israeli VC over-indexes on exactly that profile. Shechter doesn’t dodge it — he just reframes what the fund is actually solving for. “The problem is not a lack of new Israeli startups; it’s access to initial capital for non-obvious teams and sectors,” he said on his promotion. “I’m proud to take part in bridging that gap by backing Israeli founders across all industries who aspire to solve meaningful problems and create real impact.”¹⁴

Katsovich, on the same announcement, framed Shechter as proof of concept for the whole fund: “Amit joined us as an intern during his studies and proved that even without prior experience or a background in venture, with perseverance, hard work, a constant pursuit of excellence, and humility — it’s possible to start from scratch, learn, and truly excel. For us, that’s the DNA of Fusion.”¹⁵

How a $50M Fund Became the Market’s Benchmark-Setter

Shechter’s most valuable asset isn’t a deal. It’s a spreadsheet.

He’s the lead author of Fusion’s annual “State of Israeli Pre-Seed” report, which has become — by default, because nobody else does it — the only recurring dataset on how Israeli pre-seed actually works. The 2025 edition pulled data from 70 of the most active pre-seed angels and VCs, plus roughly 1,200 teams Fusion personally engaged with that year. The prior edition was downloaded more than 10,000 times.¹⁶

The numbers are genuinely useful, which is exactly why founders and investors keep citing them. Average post-money valuation caps hit $7.25 million in 2025, up 14% from $6.45 million the year before. Typical round sizes moved from $825K–$1.5M to $1.1M–$1.75M. Sixty-four percent of VCs now invest exclusively via SAFE, up from 51%. The gap between pre-seed and seed compressed from 12–18 months to 6–12 months. And the bar for what counts as fundable has clearly risen — fewer than 20% of the teams Fusion met in 2025 had paying customers, down from 31% the year before.

Shechter’s advice to founders, pulled from the same report, is blunt and specific in a way most VC content isn’t: “Raise $500K–$750K, stretch it for a 12-month runway, build a solid product, generate real revenue, and then raise a strong Seed round with 24-plus months of runway. That’s the new playbook.”¹⁷ Elsewhere: “Pre-Seed on a deck is nearly dead… If you’re raising a full round, and not just a small check to get things going — you’re expected to have something tangible. The bar has risen.”¹⁸

That’s a lot of power for a fund this size to hold. A $50 million micro-fund is effectively setting the benchmarks the rest of the market negotiates against — which raises an obvious question nobody in Israeli tech seems eager to ask out loud: should the party writing the checks also be the party defining what a fair check looks like?

The Uncomfortable Math

Here’s the tension Fusion doesn’t put in its own report, but should.

Fusion’s data says the average Israeli pre-seed round now prices at a $7.25 million post-money cap. Fusion’s own check — $150K for 7.5% — implies a post-money valuation of roughly $2 million. That’s not a rounding difference. It’s about a third of the benchmark the fund itself publishes.

The honest case for Fusion: those $7.25M rounds go to founders who can actually get them. Fusion’s stated customer is the founder who can’t — first-timers, unglamorous sectors, no warm intro to an Israeli VC partner. For that founder, the real alternative to Fusion’s $2M cap isn’t a better round. It’s nothing. Fusion is also, structurally, the first money in — often pre-incorporation, the riskiest slot on any cap table there is. And Vardi has made a real argument that pricing high early actively hurts founders later: “We don’t see the logic in pricing the round high from the outset, which could lead to difficulty raising the Seed later. We recommend founders raise capital gradually.”¹⁹

The honest counter: 7.5% is a real bite, taken before there’s a product to show for it. Techstars Tel Aviv’s standard deal is roughly $20K for 6% plus a $100K convertible note — smaller dilution for less cash. 8200 EISP takes zero equity, full stop. A founder with real optionality should be pricing Fusion’s network and roadshow against 7.5% of everything they might ever build, knowing full well the fund’s own data says the market clears three times higher.

Both things are true at once. That’s not a flaw in the story — it’s the story. It’s also worth remembering that not every founder takes this route at all — we’ve written before about Israeli founders who skip outside capital entirely and build solo, on their own terms. Fusion’s bet is that most founders can’t, or shouldn’t have to.

What Fusion Has That Techstars and 8200 EISP Don’t

The field of programs trying to get Israeli founders in front of US capital isn’t crowded, but it’s not empty either. Techstars Tel Aviv runs a 13-week program with global brand recognition and a demo-day model. 8200 EISP takes no equity at all, leaning entirely on its elite-unit alumni network — Katsovich used to run it, which tells you something about how directly Fusion’s model answers what he thought that one was missing. A handful of Israeli micro-funds — Fresh Fund, Remagine Ventures, Jibe Ventures — compete for similar deal flow at the seed stage.

Nobody else combines all three things Fusion does: writing the literal first check, at incorporation, at real volume — Fusion out-invested every Israeli VC in 2023 with 23 first investments, ahead of OurCrowd’s 16²⁰ — while physically walking founders through the US investor and customer landscape for three weeks. Techstars has the brand. 8200 EISP has the network and asks for nothing in return. Fusion has the check, the roadshow, and the volume, in one package, and it’s kept that combination for three straight years atop the IVC-GNY-KPMG most-active-pre-seed-investor ranking.²¹

The graduation path matters too. When a Fusion company is ready to raise a real Series A, it’s competing for the same capital as everyone else — the kind of round we tracked closely with WINN.AI’s $35M raise earlier this year. Fusion doesn’t touch that stage. It just tries to make sure its companies are still standing when they get there.

The Bad Boy Thesis — And Whether the Portfolio Backs It

In 2025, Katsovich turned into one of the loudest public critics of Israeli venture capital — from inside the industry, which is a different kind of criticism than the usual outsider complaint. Across a run of LinkedIn posts and later on a Calcalist podcast, he argued Israeli VCs are conservative and boxed-in: they fund one type of founder — elite tech-unit veterans building cyber or enterprise software — and miss good companies everywhere else. Calcalist asked him the obvious follow-up: is the bluntness a strategy, a way of branding yourself as the industry’s bad boy to pull in deal flow other funds never see?²²

His answer, roughly: “There are founders who served in units with a certain background and can raise on an idea alone — cyber, AI, and so on. We argue that often, if you’re a founder who wasn’t lucky enough to be in the right unit, or you work in any field that isn’t one of the few super-hot ones — very few investors can combine that with the fact that these are first-time founders. We’re simply looking for the best teams.”²³

Does the portfolio actually back that up? Mostly, yes. Both completed exits are non-cyber — mobile gaming and insurtech, categories most Israeli VCs walk past. The wider portfolio reads deliberately unfashionable: proptech, construction AI, breast-cancer screening, online voting infrastructure, a cereal company. More than 20% of portfolio companies are led by women founders, well above the Israeli VC average.²⁴ And the fund’s own Principal 3 years ago was a just a student intern with zero venture background who now runs a third of the deal flow.

One caveat worth stating plainly: the fund’s biggest current mark-up, ScaleOps, was founded by a former Run:ai engineer building Kubernetes infrastructure — about as textbook an “obvious” Israeli deep-tech profile as you’ll find. The thesis isn’t a religion, and the biggest winner so far doesn’t perfectly fit it.

Fusion also kept investing straight through the war, loudly. Katsovich has said the fund made 17 new investments since October 7, on its way to nearly 30 for the year — while telling Calcalist in June 2023 that “at a time when investments in Israel have declined by 75% compared to last year, we believe it’s a great time to continue investing in Israeli companies and take risks where other angels and venture capital firms may hesitate or stall.”²⁵

There’s a Delaware angle worth flagging too, because it says something about where Israeli startups are actually headed. Katsovich has pointed to data showing that even before the recent downturn, roughly one in four startups founded by Israelis was registering in Delaware, with the Israeli entity holding just the IP.²⁶ Fusion isn’t a passive observer of that shift — it actively pushes its own portfolio companies to incorporate in the US from day one. It’s both documenting and accelerating a pattern we mapped out in Welcome Home, our own take on why Israeli tech is built the way it’s built: for a market it doesn’t sit inside of.

What’s Still Open

Fusion is reportedly raising a second fund. CTech reported in November 2025 that the fund “starts raising its second fund (Fusion II)” as part of the same story announcing Shechter’s promotion — but no size, close date or LP list has been made public as of this writing.²⁷ Fusion’s total assets under management have grown from roughly $30 million in 2024 to around $50 million today, which is consistent with a second fund closing, but it hasn’t been reported as one, and Fusion shouldn’t get credit for a raise it hasn’t confirmed.

Fusion also doesn’t talk about its losses. At 140-plus investments made at the earliest, riskiest stage a startup can be funded, the honest base rate is that most of those companies are dead or drifting. That’s true of every pre-seed portfolio on earth, but Fusion’s public numbers — the $3 billion combined portfolio valuation, the $500 million raised by portfolio companies — are self-reported and haven’t been independently audited.²⁸ Two real exits and one big mark-up are genuine, verifiable proof points. They are not the same thing as a fund-level return, and Fusion has never disclosed what its actual ownership looked like at exit, what its dilution was, or what its DPI or IRR come out to. Nobody outside the fund can do that math yet, so nobody should pretend to.

What can be said cleanly: a fund that couldn’t get a meeting eight years ago is now the first call for founders who can’t get one anywhere else. Two of its bets already paid out. A third might be the biggest one yet. For a fund this size, that’s not spray-and-pray. That’s a model that’s starting to look like it works.

Notes on the numbers:

Sherman was unable to secure an interview with Fusion’s founders or Amit Shechter for this piece before publication; all quotes are drawn from prior published interviews, cited above. We reached out and will update if that changes.

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