Sramana Mitra: What is the geographical distribution of these six companies that you have exited? Mark Hasebroock: They’re all in the Midwest – from Texas to Kansas City and between the mountains. Sramana Mitra: Have you sold anything from Omaha? Mark Hasebroock: No, we haven’t. Sramana Mitra: It’s interesting. I’ve known for a long time
Sramana Mitra: The question that I’m constantly intrigued by as I talk to many investors is that how can so many investors find unicorns. It’s just not mathematically viable if you’re obsessed with just investing in companies that have the potential of being unicorns. There aren’t that many of those. Alan Chiu: That’s very true.
Sramana Mitra: What trends do you see? If you look back on the 2017 calendar year, what have you seen in your deal flow that you can synthesize as key trends? Rami Elkhatib: I’ll answer this in two parts. As we are focused on enterprise software, we look at trends that have been persistent for
Sramana Mitra: At what stage did you encounter AddStructure and how did you encounter them? Mark Hasebroock: We have an office in Chicago and I have a partner there. David is very plugged into what’s happening in Chicago. He heard about this at an event that he was at. He realized that it was something
Sramana Mitra: You’re seeing more capital-efficient executions, which is good. In our philosophy, we strongly recommend that people bootstrap and be as capital-efficient as possible as long as possible before raising money. Even when they raise money, we prefer that they don’t raise huge amounts of capital, which is completely counter to the unicorn mania
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
Sramana Mitra: That philosophy of “operators do not make good investors” does not exist in Silicon Valley. In Silicon Valley, operators are highly-valued. Mark Hasebroock: It’s really interesting. I hear it a lot. What you have is a mindset in the Midwest because of insurance, private equity, and hedge funds. They have a quantitative analysis
Sramana Mitra: Talk a bit about your current portfolio. This is your second fund. How much was the first fund? Alan Chiu: The first fund was $50 million and it was invested across FinTech and software. Sramana Mitra: How many companies did you invest in from the first fund? Alan Chiu: I wasn’t with XSeed