Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Ken Elefant was recorded in December 2017.
Ken Elefant, Managing Director at Sorenson Capital, discusses at length the investment thesis of his firm.
Sramana Mitra: So tell us about Sorenson capital. What is the focus of the firm? How big is the fund? What size investments do you make? Let’s get to know the footprint of Sorenson Capital.
Ken Elefant: As you probably know, Sorenson Capital was founded in 2002. We have a little bit over a billion dollars under management. At Sorenson Ventures, I’m a Managing Director. We do both early stage and growth equity investments. In early stage investments, we are focused on software and security investments.
We do mostly series A, some seed investments, and some early B rounds. Sorenson Capital is a private equity fund which does lower mid-market private equity deals and they also do growth equity for later stage deals.
Sramana Mitra: What is the size of early stage commitment?
Ken Elefant: We invest initially $2 million to $5 million dollars in startup companies. We’ve done a couple of investments that are smaller than that and a couple of investments that are larger than that. On the growth equity side, they typically write $20 million to $40 million checks.
Sramana Mitra: Let’s keep our focus on the early stage activity of your fund, because that’s really where we play and that’s where our community is. The other question I have on the early stage activity of your fund is, what is the size of the fund that is committed to early stage activity?
Ken Elefant: We’re in the process of deploying a $100 million fund for early stage investments.
Sramana Mitra: You said software security. Can you double-click on that for us and tell us a bit more? It sounds like you only do B2B and not B2C.
Ken Elefant: Correct. We don’t do any consumer investments. We only do enterprise investments. What we’re seeing in the enterprise space is that there’s been a movement over the last 15 years going from client-server to Internet-enabled enterprises. Now enterprises are going cloud native, so you’ve probably heard of Docker and Kubernetes.
This movement to cloud is a real movement that enterprises are undertaking right now. What that means is that the entire software stack is changing. That means if you’re using virtualized servers from VMWare, you’re probably thinking, “What am I going to do with my stack as it moves to cloud?” Obviously VMWare has a play there as has Cisco, but this is a real opportunity for startups as well.
In the software space, there’re opportunities around orchestration. There’re opportunities around systems management, devops, analytics, and in storage. Stack is changing and that also relates to security. Microservices is a new attack vector for the bad guys that are out there. We are looking at any company that’s related to this movement, whether it’s software or security.
Sramana Mitra: Are you doing mid-market B2B startups as well?
Ken Elefant: We have done several mid-market startups. I’m an investor in AlienVault, which has a complete package. It started with security and information event management, but now it has IPS functionality and asset management functionality all built into one, for small and mid-sized enterprises as well. They sell through managed security service providers, which are also targeting the mid-size enterprises.