1Mby1M Virtual Accelerator Investor Forum: With Ken Elefant, Partner and Co-Founder at Sorenson Ventures 2021 (Part 5)

Sramana Mitra: When you back these seed-stage companies, what are you looking for? It’s not inexpensive to build like this, so are you writing checks on a concept based on the background and domain expertise of the entrepreneurs? 

Ken Elefant: Most of our investments in Sorenson Ventures are pre-revenue. It could just be an entrepreneur with two or three folks with them. We are carte blanched to invest up to $5 million in ARR, so sometimes our investments have a little bit more. We are typically lead or co-lead in all of our investments.

What we look for is a person who has an amazing experience from his or her past and if they do partner with somebody that is a serial entrepreneur then that is even better. The biggest problem for seed-stage companies is getting across that Series A gap. Sometimes a serial entrepreneur knows how to navigate that a little better.

Once we invest, we augment the team and help them navigate the gap. The team is number one in what we look for. The second is the market. We ask ourselves, “Is this a small but rapidly growing market?” By definition, if you are going after a large market, then there are already large competitors out there.

Using Airgap as an example, anti-ransomware is a huge market, but no one has invented this ransomware kill switch. The third thing we determine is the company’s differentiation. Sometimes it could be technical differentiation or channel differentiation. For example, we are investors in BambooHR, which is an HR software as a service play. They mastered the channel strategy early on. 

Sramana Mitra: What is the channel strategy of BambooHR?

Ken Elefant: What BambooHR does is they set up your entire HR system including benefits and payroll. They go out to all these resellers that are trying to get companies up and running and get their HR systems set up.

I’ll give you another example of a channel. We are an investor in a company called Botkeeper which uses machine learning and AI for automated bookkeeping. They would go into a company as a bookkeeper extremely efficiently or they could take that workflow off of their hands altogether.

Originally, we thought that there was a risk with the channel because you have these accounting firms doing bookkeeping services and tax services. It turns out that channels love Botkeeper because their lowest margin business is the bookkeeping side. Where they make a lot of money is by providing strategic advice on taxes. 

Sramana Mitra: What about geography?

Ken Elefant: Since we focus on security and enterprise software, the vast majority of our investments are in the United States. About 60% of our investment is in Silicon Valley. The headquarters of Sorenson Ventures is in Silicon Valley. We have a couple of our staff in Utah. About 20% of our investment is in the Utah mountain region.

We were investors in Cradlepoint in Idaho. We’ve seen a lot of startups in Israel as well because of our focus on security. We also have a lot of startups in the machine learning space in Canada.

Sramana Mitra: Thank you for your time.

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Ken Elefant, Partner and Co-Founder at Sorenson Ventures 2021
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