1Mby1M Virtual Accelerator Investor Forum: With Rami Elkhatib of Acero Capital (Part 3)

Sramana Mitra: What about geography? You are based in the Bay Area, right?

Rami Elkhatib: Yes, our office is in Menlo Park. The example I just gave you started out as an East Coast investment. The new CEO that we recruited is in the Bay Area. Then, the CEO built the management team around him in the Bay Area. The headquarters is in the Bay Area. I gave you Contrast by way of an example of how we are typically trying to find deep IP.

Another aspect of that is geography. If I were to pick another example from our portfolio where we’ve done that, there’s a company called Swrve in the mobile user engagement. That started as an Irish company. When I met the team, they had very deep and interesting real-time streaming analytics technology, but they were using it in a very narrow space.

They were focused only on user engagements within mobile games. They were focused primarily on the European market. It was a company run by its Irish technical founder. It was $6 million. We actually redomiciled the company in the US. We don’t have a requirement that our companies have to be in the US but for this company, it really made sense.

It was all about taking that awesome technology but applying it in a much broader way. Much broader way meant not just the mobile gaming market. You go after the enterprise mobile apps and then from a geography perspective, you base it in the Valley and you go after the markets globally.

Sramana Mitra: So you’re comfortable with teams everywhere, but you eventually create some sort of a bridge with Silicon Valley so that your companies can tap into the ecosystem of Silicon Valley’s management teams and infrastructure.

Rami Elkhatib: Absolutely. That’s how it has worked out so far. It’s not a hard and fast requirement. I can imagine a situation where we look at a company in the UK where it was not necessarily going to move its headquarters to the Valley. We’re open-minded about it. If we’re looking to add a lot of value and if we’re working with an international company, part of the value that we can add is help them tap into the US market in the Silicon Valley ecosystem.

Sramana Mitra: Because of our mission of this being a global virtual accelerator, we see an enormous number of international companies. Our read is that it’s great to be able to do a lot of the development and validation work in another place because it’s very difficult to bootstrap here in the Silicon Valley.

In terms of market entry and building the go-to market team, the US is still the best place to set up that operation. Silicon Valley is definitely one of the considerations, partly also because most exits happen in the US. If you have a structure where you’re in some Timbuktu place, the probability of a company wanting to acquire that company is much lower.

Rami Elkhatib: I fully agree with that certainly in terms of the propensity of the percentage of exits that happen in the US. When we do these types of opportunities that start out globally, a lot of times we’re really looking for the engineering team to remain where they start.

Sramana Mitra: Exactly. There are very good engineering teams abroad right now.

Rami Elkhatib: Absolutely. You can do this interesting overlay at that point with Silicon Valley technical resources where you can also have technical leadership in the Valley but it would be more focused on very specific challenges.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Rami Elkhatib of Acero Capital
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