1Mby1M Virtual Accelerator Investor Forum: With Evangelos Simoudis of Synapse Partners (Part 4)

Sramana Mitra: How did the acquisition come about? I’ll give you a bit of context about where I’m going with this question. It sounds like you and your syndicate partners are open to relatively early acquisitions. You’re not trying to go for this unicorn kinds of companies.

I happen to believe that that’s great because there are many more opportunities out there that are mid-sized opportunities of building very interesting companies solving very interesting problems. They don’t necessarily have multi-billion dollar TAMs to build these unicorn types of ventures. One thing that I’ve heard from a number of 

investors who are following this strategy of not necessarily chasing unicorns but are okay with early exits is that they try to develop deep corporate relationships.

They have some window into what they’re doing and who might be interested in acquiring those companies. I guess that’s where my question comes from. You seem to have very deep corporate relationships. You seem to have an interest in relatively early acquisitions. How do these acquisitions come about? What relationships do you have with these acquirers?

Evangelos Simoudis: First of all, I would say that having sold a couple of startups myself as well as having been an investor for 20 years, that builds certain know-how, which influences the decisions. To invest in early stage companies, particularly if these companies are going after relatively new markets, you do not know whether the market will materialize in the way that every VC is hoping for, or whether it’s something more modest.

Early stage investing requires agility that other types of investing do not. We have always been looking at when does a company have the potential to go and become big and exit properly. When does a company, whether because of its execution or because of the market it’s operating in, not reach the potential that we initially thought it would reach? That also means that the management team and the founding team need to be in sync with investors.

We start looking at a company around the IP that they’re developing and the problem they’re solving. Certainly before we invest, we vet the founding team and the broader management team quite well. We need to understand how flexible they are. We’ve met companies who want to be unicorns without really understanding whether they can be a unicorn.

Sramana Mitra: We see that too.

Evangelos Simoudis: Once we feel happy with our understanding of the management team, we do the same thing with the syndicate. We need to make sure that the investors that we work with are really of the same mind set. They must demonstrate flexibility and agility. There’s a lot of science and art that goes on into selecting the right management team and investment partners before you go into this.

The last one is, while we do have these deep relationships with our corporate partners, the exit did not happen for one of our corporate partners. That’s important. Every good VC needs to have a multitude of relationships that they bring to bear into their portfolio. We have a portfolio company called Renovo. It’s also an automotive technology.

They have developed an operating system that uses AI to predict. There are hundreds of sensors on an autonomous vehicle. They have received investments from two of our corporate partners – Verizon and Samsung. They have developed working relations with those corporations. We always try to do that matching. Because of the deep understanding that we have of the problems that our corporate partners are trying to address, we are not only able to make new investments, but more importantly, we’re also able to materially help the portfolio companies in their mission.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Evangelos Simoudis of Synapse Partners
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