1Mby1M Virtual Accelerator Investor Forum: With Amir Banifatemi of K5 Ventures (Part 2)

Sramana Mitra: Well, I think what you’re seeing around the world is a lot of concept arbitrage; concepts that have been tried in different places are being applied to different markets. 

Then you have big categories like cyber security that have been very active fund draws for a very long time, so there’re a very large number of cyber security companies out there. AI is the new attraction area for investors. So now, there aren’t that many wide open opportunities, so there are several niche opportunities. I’m very much in favor of niche opportunities. You can build very nice businesses for small amounts of capital around these niche opportunities, and I think those are very interesting opportunities.

How do you view these niche opportunities? I imagine there are companies that can be built for $1 million or $2 million and can be sold for $10-$15 million, or companies that can be built for $250,000 to $500,000 to a point, then sold to a larger company for $5 million to $10 million. 

These kinds of companies then don’t build the full channel. They go through somebody else’s channel. but they build the product, get the early validation, the customer feedback, customer input, and build a good product that then somebody else who acquired the company actually takes it to market. How do you invest in such opportunities?

Amir Banifatemi: As I was saying before, we focus on niche problems and problems that are immediately helping people. Unfortunately, the current trend is that to raise venture capital, you have to have a billion dollar exit or have valuations that could bring 10, 20, 30 times back to investors.

The initial parties that we talked about could actually bring such multiples to very early investors. But usually if a company goes to a VC or through one or two rounds of VC, it basically provides a lot of pressure to early investors and those numbers might not be achievable. But as an angel investor and as a seed-stage fund, I think our interest and happiness comes from seeing people being self-actualized.

To me, a success is a success. Even building a company and raising money and spending a $2 million is success as long as it keeps things moving and as long as you tackle interesting problems. I think for the world to be distributed, there is not enough unicorn possibilities.

Sramana Mitra: No. Unicorn opportunities are far few and far between. Those are rare opportunities. If you expect that everybody’s going to be a unicorn, that is going to be a complete disaster.

Amir Banifatemi: Yes, exactly. I think the reality hits and the reality is that there are point problems that need to be solved. Unfortunately, many companies that fix these are either in despair or are aquihires. Since they’re doing amazing things, they’re going to be scooped out by large corporations in need for the talent pool or for the technology.

Probably the third category, which is people planning to build companies to solve the problem, could be interesting. I’m involved in artificial intelligence myself cause I’m advising and leading the artificial intelligence initiative for the XPRIZE Foundation.

For those involved with the UN to talk about the impact of the AI for good, we actually have a summit in June in Geneva with more than 20 UN agencies. All the large labs from Stanford, Cambridge, MIT, and Shanghai are there. The common thread was that how can we use artificial intelligence for the real good. You also have the sustainable development goals published by the UN that has to be used by all the agencies.

If you look at those 17 agencies or any way to slice and dice the world’s problems today, there are numerous opportunities to solve very simple issues anywhere in the world and not only to create value and wealth, but also to help others participate in that innovation of process.

I was in Tanzania where I saw people building small drones tele-guided by simple telephones to distribute blood with the same people using satellite mapping to produce crops. They are probably going to be acquired with a small amount of money or some subsidies. Those problems should be should be tackled first and we should encourage probably more and more entrepreneurs to tackle problems and not think about the output and the exit. Money always comes when good problems are being solved.

So I agree with you, I think we should push and promote. We are doing it. We’re not looking at the exit necessarily. We’re looking at the team capability, the analysis of the problem, the timeliness of the problem, the ecosystem in which the problem can be solved, and how much the ecosystem will support that and how many people could benefit from it.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Amir Banifatemi of K5 Ventures
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