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Eric Benhamou, the venture investor who ran 3Com and Palm before they were sold to Hewlett-Packard, is eyeing opportunities in China and the end of the “unicorn bubble” as he closes his third investment fund at Palo Alto-based Benhamou Global Ventures.

This TechFlash Q&A came shortly after a Menlo Park e-commerce company he was involved in, Grid Dynamics, was sold to China-based Teamsum. It has been edited for length and clarity.

In addition to being on the board at Grid Dynamics and investing through his firm, Benhamou is on the board at Cypress Semiconductor, Silicon Valley Bank and Finjan Holdings.

You’ve been involved — both operationally and as an investor — for four decades. You’ve seen the ups and downs of the cycles that we’ve gone through for several decades. Lately, the description that I keep hearing is that in the last three to five quarters, the startup world has seen a return to normal. Would you agree?

Yes, I would. But with the caveat our firm has never really deviated from the normal. There was a short period of time in which valuations seemed to become unreasonable.

Most of that phenomenon tended to pertain to consumer-facing businesses and it was labeled appropriately as “unicorn hunting.” We never played in that environment. We focus on the different parts of the markets where we never really deviated much from normal. As an example, our average valuation today for Series A companies today is basically the same as it was three years ago.

So you have been staying the course and watching the unicorn hunters go by?

That’s right. Some of them crashed and burned and others have continued. That’s OK. It’s a different sector of the industry that we focus on. We believe that the trend that we’re riding has long legs.The digitalization of industry that we’re witnessing right now is still in the first couple of innings and it’s affecting all the sectors of the industry. So we’re not as exposed to fad or to consumer tastes, one way or the other.

Basically we’re focused on technologies which help enterprises be more productive and more customer-centric and more resilient.

You were involved with Grid Dynamics, a Menlo Park e-commerce company that was recently bought by a Chinese company. Tell us more about them.

Grid did extremely well in terms of its business trajectory. It had major U.S. customers — large enterprise customers mostly — in the retail and financial sector, particularly over the last few months. That attracted the attention of many suitors.

I was on their board and I was very actively engaged with the management team, Leonard and Victoria Livschitz, who are cofounders. I worked very closely with them, particularly in the process leading up to the sale to Teamsum.

Eventually we decided that, rather than being opportunistic, we should follow a structured process with an adviser. I helped Leonard work through this process and we eventually narrowed down the groups of qualified suitors to a very small number.

Teamsum became the most attractive one for a number of reasons. One is that they happened to be one of our investors in Fund III. We had a preexisting relationship with them and we knew that it would be an extremely good fit strategically. There was basically a foundation of trust since we knew each other. So that actually went quite well.

It looked like they hadn’t raised all that much money over the years. Is that right?

Yes. Grid Dynamics is an engineering services company as opposed to a product company. So it is less capital intensive than some other investments we make. There was only one other firm that was invested in them, called DTV.

Grid did not go through multiple rounds of financing because their base of customers provided sufficient cash flow to help the company finance itself. There was no need to go through growth investments. That was fine because we’re able to maintain our position through that.

What do you think of the concerns that are being raised about China becoming so prominent a player in U.S. technology company M&A and investments?

China has a very strong economy and they weigh in a lot more in the global scene than they did just a decade ago. So it’s inevitable that we’re going to have more and more M&A transactions that are cross-border. There may be some M&A transactions that are more sensitive than others and require a close look by regulatory authorities like the Committee on Foreign Investment in the United States CFIUA. But in the case of a company like Grid Dynamics that does not really sell a product, it sells services, the concern would not be really well-focused.

Keep in mind that Grid, while being a U.S. company, has about 600 engineers in Eastern Europe. That is a great source of its service talents — excellent engineers with great math backgrounds. So there was really not much that was worthy of a deep consideration or concerns when it comes to U.S. assets. That is actually why it went quite smoothly.

Are any of the investments that you’ve made in some of the more sensitive areas? I know you’re on the board at Cypress Semiconductor and that is one of the areas people have been looking at. Another that it seems everybody is involved these days is artificial intelligence — or at least they say they are. Where do you think the line should be drawn?

Well, it is really up to government officials to spell out the policy on what rises to the level of a significant concern and what doesn’t. I can tell you that the M&A momentum flows in both directions. So, for example, at the same time as we were negotiating the sale of Grid to Teamsum, we were also negotiating a Series C investment into one of our portfolio companies by some Chinese investors and some U.S. investors. It’s a Palo Alto company called IndentityMind Global and the expectation is that it will expand into China. It is a cybersecurity company that focuses on fraud detection on electronic transactions.

We’re dealing not only with companies like Teamsum who are expanding their operations into the U.S. but also with the exact opposite — U.S. companies going into China. We have been developing important relationships in China to help secure partnerships for our U.S. portfolio companies as they expand there.

People talk about great opportunity in China but they also talk about a lot of copycat type of businesses that show up there, sometimes before they can even get there. How do you weigh the opportunity versus the risk in deciding when is the right time to go there and what founders should be thinking about?

The opportunity is now. That’s because China has an economy that is vastly expanding. From an IT perspective, it is not saddled with earlier generations of products and infrastructures. They have an opportunity to basically skip a generation or two and really advance.

We focus on enterprise IT exclusively. There are a number of large enterprise companies there who need to buy IT products and services. And they need that today. They may not find suitable Chinese manufacturers for these products and services and therefore they will turn elsewhere. We want to make sure that we’re there for these opportunities.

Give me an update on your funds. When we last spoke, you had raised just part of the money that you intended to and you were also talking of perhaps doing a growth fund. Any news on either of those fronts?

Our Fund III is at the very tail end of its fundraising process. In fact, we’re no longer soliciting interest from any limited partners. We’re just finishing the legal negotiation with the last batch of LPs who wanted to come in. We expect to complete this in a matter of a few weeks. Fund III is basically done. We fully expect to continue to raise some capital and be active in the market for a slightly different orientation for the next fund.

Both Fund II and Fund III were early-stage oriented. We would expect our next fund to have a broader scope and be suitable for larger opportunities and for more mature opportunities. You could call this growth, but sometimes growth is a bit of misnomer because it covers too broad of a spectrum of opportunities. It may be easier to think in terms of an equity series.

Typically, Fund II and III would invest in seed and Series A and B. Beyond that, the investment opportunity would typically be considered out of scope. We want to have a fund that enable us to continue to plow capital into really strong companies as they get to the next stage. And fund IV will meet that requirement.

That’s the current thinking. We’re not actively marketing fund IV right now. This is just the current thoughts of the partners on this, but we will be in active marketing mode on it as soon as Fund III reaches final closing in the next two to four weeks.



Grid Dynamics, backed by the former CEO of 3com and Palm, was acquired on Friday by Teamsun, China’s leading IT service provider.

The terms of the deal were not disclosed. Grid Dynamics had raised only $1.8 million since its founding in 2006, growing the business without needing more.

Palo Alto-based Benhamou Global Ventures, led by former 3com and Palm CEO Eric Benhamou, was the only investor disclosed. Financial details of the acquisition were not announced.

Grid Dynamics is now wholly owned by Teamsun subsidiary Automated Systems Holdings Limited. Grid Dynamics will continue to operate independently under its own name.

CEO Leonard Livschitz heads up the Menlo Park-based Grid Dynamics, which provides e-commerce technology to customers in the retail, finance, media and technology sectors.

“This acquisition is a tremendous milestone” Livschitz said in a press release. “As a part of the ASL/Teamsun family, we gain access to new markets — such as China, Hong Kong and other Asia Pacific countries, as well as Europe.”

Livschitz also hopes to pursue emerging opportunities, such as connected cars and IoT in the manufacturing and automotive sectors.

ASL is a Hong Kong-based IT service and leader in system integration, hardware, software and support services. ASL is a subsidiary of Beijing-based Teamsun, which maintains more than 5,000 employees and more than 20 IT service holding subsidiaries in various verticals.

“Customers trust Grid Dynamics to develop their digital future,” ASL CEO Leon Wang said in a press release. “We are excited to join forces to go after more customers in more regions and industries.”



Anik Bose General Partner at BGV shares his perspective on “going back to the basics” to create successful innovation in corporations in this second part of a two-part blog (please click here to access the first part, where I discussed the increase in number of tools for sourcing corporate innovation in recent days – During my tenure at 3Com, we made several investments through 3Com Ventures that delivered solid financial returns as well as product and technology partnerships with key business units. However, the real innovative transformation of 3Com took the form of a JV in China with Huawei, which burgeoned to become a $1B revenue enterprise networking business unit within 3Com in 2006. It was the primary value creation driver. The opportunity was predicated on a few key assumptions: a) The market potential for China to become one of the largest greenfield enterprise networking markets; b) The ability to establish a world class R&D platform for switching and routing in China at a fraction of the cost of Silicon Valley; c) Being able to find the optimal partner in China – one with an aligned vision around the opportunity and complementary competencies around high quality engineering and in country go to market capabilities. Our insights for this opportunity in 2001 were based around pattern recognition derived from interactions with start-up and established company business models that were having early market success in China as well as my own understanding of the fundamental changes occurring within the enterprise networking industry at that time. I believe that the lessons learned at 3Com around the challenges for fueling innovation in a large multi billion-dollar enterprise with multiple business units are still relevant for Chief Innovation Officers today. These include:
  • Resource Constraints – The CINO charter is often ambitious to drive innovation across business units, functions and regions. The typical CINO function is often a staff function with a small team (2-3 people) and limited budget. Ensuring that innovation delivers business results is a tall order with such a set up. Fostering idea generation and rapid experimentation requires a reasonable operating or balance sheet budget that can be used to test ideas with rapid experimentation often requiring technical and multi disciplinary resources. At 3Com I was fortunate to have a multi-disciplinary team of nine team members along with access to the 3Com balance sheet for 3Com Venture investments.
  • Incentive Misalignment – Lines of business are often consumed by optimizing the near and mid term potential of their businesses since this is how they are measured and incentivized. Convincing them to embrace and address disruptive market opportunities that cannibalize their existing business is an uphill task. Driving innovation beyond the enterprises core business requires overcoming this large moment of inertia. Even if the CINO is successful in defining specific new opportunities and validating the technology, the challenge is go-forward scaling – should it be transferred to a business unit, set up as an adhoc business etc. The answer depends on the situation. At 3Com as my role evolved I had to take on the responsibility and ownership for the China JV initiative, as it was not one that could be transferred to a Business Unit with low risk.
  • Organizational Disconnect with Strategy – To be successful innovation intelligence has to be tightly integrated with the company’s strategic plans and long term vision but the CINO function often does not own the strategic planning process that may lie with another executive or be delegated to business unit leaders. At 3Com, I was also responsible for strategy formulation – this was critical for being able to not only formulate innovation options but also to integrate them as part of the overall go forward value creation strategy.
  • Rare skill set – The ideal CINO skill set is diverse and seldom found in a single person. They must have a good business understanding to balance long term strategic planning with tactical business operations. They need to have a certain level of technology understanding to enable new products and services. They must possess exceptional communication skills to successfully navigate the Executive C- Suite and be able to create alignment amongst their peers on key innovation initiatives. They also need to be empowered by the CEO to take bold risks. Finally they must be able to integrate the voice of the customer into experimental initiatives and build the eco-system relationships with both start-ups and large companies. Ultimately the CINO needs to find the balance between being an “outsider” and an “insider”. Being too much of an outsider will lead to the organization rejecting your ideas. Having too much of an “insider” approach results in too many ideas that do not represent meaningful change to customers. At 3Com, I built a world class team with both “insiders” and “outsiders” who were able to complement me in driving the innovation strategy be it through the Corporate Venture function or through partnerships or JV’s. Last but not least I was fortunate to have both 3Com CEO and Chairman as strong advocates.
The Digital transformation of the enterprise makes the role of the CINO even more important today than it was in the late 1990’s. Our advice to CINO’s is to avoid getting lost in the “hype” around innovation tools and buzz words. Instead we suggest that CINO’s focus on “back to the basics” critical success factors required to establish a successful innovation program. These include:
  • Building the right foundation – Define the role with the company specific situation in mind and then recruit the right leader with the appropriate skills
  • Ensuring organizational and incentive alignment to drive culture change
  • Funding and resourcing the function appropriately with the innovation goals in mind
  • Selecting the optimal innovation vehicles and tools that are consistent with the specific situation and goals
  • Partnering early with the appropriate eco-system partners – VC firms, accelerators etc.

Anik Bose, General Partner at Benhamou Global Ventures (former SVP Corp Dev @ 3Com and Investor/Board Member of H3C) shares his perspective on building a global technology business in China. Building a successful Joint Venture in China requires one to recognize the opportunity but also to be able to mitigate the inherent risks.  This John F Kennedy quote captures the inherent tension eloquently – “The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.” Within 3 years of it’s inception, H3C (  a Joint Venture between 3Com and Huawei had captured 31% market share in China and developed a R&D platform of 2,000+ engineers at 1/6th the cost of competitors like Cisco, Foundry and Extreme.   Within 6 years of it’s inception H3C was operating at a revenue run rate of $1Bn+ with 20%+ operating margins and representing $2Bn+ in shareholder value for 3Com.  H3C is one of the most successful technology JV’s of its kind based on most metrics.  Established in late 2003 the JV’s strategic objectives were: a) TAM expansion – Capture a significant market share of the China enterprise switching and routing market; b) Establish a high quality low cost R&D platform for worldwide enterprise switching and routing products. The strategic reasons for building a Joint Venture (JV) in China for technology companies often range from TAM expansion in China, transforming their R&D and supply chain cost structure and or both.   But even with the best intentions the failure rates among cross border JV’s is high.  According to a report on JV’s and Alliances by the Tuck School in 2006 over 50% of JV’s fail. I have often been asked – “What was the secret ingredient behind H3C’s success?”  People often expect a simple answer.  In reality the answer is that the secret ingredients were a combination of : i) A carefully crafted formula that addressed several critical success factors; ii) An exceptional JV leader – Zheng Susheng (then H3C President and now close friend) and; iii) A tremendous amount of hard work by all the parties involved.  If it were easy then successful China JV’s would be the norm not the exception.   In this blog I will outline the key elements of the formula behind H3C’s success – see diagram and details below. 1.  Pre Deal – A big domestic market combined with the presence of local engineering competencies with the required skill set is a pre-requisite condition for success.  Next Partner selection must be based on a clear alignment of longer-term vision and goals, in addition both partners must bring complementary competencies required for the JV’s success.  Deal structure must be carefully crafted to address JV scope, align value expectations, minimize operational overhang of “minority investor protection rights”, establish an appropriate Board structure for governance and managing conflicts while providing a clear mechanism for exit.  All these tasks must be accomplished within the context of understanding the Chinese culture, a few examples: –        Local partners often tend to have global aspirations for the JV, often a source of conflict with multinational partners –        Furthermore legal contracts cannot be a substitute for relationships – strength of relationships are often the basis for conflict resolution not contracts alone –        Local business practices tend to be relatively opaque – limited business and financial transparency –        Board meetings tend to be primarily ceremonial with all the critical work occurring a few days prior to the board meetings. –        Finally the Chinese culture tends to be “operational excellence” and “customer intimacy” oriented NOT innovation – consequently “fast follower” JV product portfolio/roadmap have the best chances for success Once the above ingredients are in place then the next most important element is the selection of a JV leader, one who possesses the relevant industry knowledge/relationships as well as a proven leadership and execution track record.  A strong JV leader is the glue that builds the team, the business and can manage the conflicts between the JV parents – a rare skill set.  Multinational companies often tend to focus on the wrong skill sets when selecting JV leaders such as English language skills because they feel more comfortable with a bi-lingual executive but this should be a secondary criteria not the primary. 2.  Post Deal – An important execution task is to create goal alignment – this requires understanding parent core business cannibalization risks from the JV; investing time in building multi level senior relationships between both parents and aligning interests through the creation of a compelling operating plan, one that is tied to an aggressive JV incentive plan that rewards management and employees for exceptional performance.  A highly variable compensation structure creates an entrepreneurial culture that avoids the Multinational Corporation “salary inflation trap” while rewarding exceptional performance.  Maintaining goal alignment requires creating transparency through process linkages between the JV and the parents, building trusted relationships with JV executives and ensuring commensurate ongoing value contribution from both parents to the JV’s success.  Finally preparing for exit requires navigating through the landmines of valuation expectations, creating a compelling go forward vision and role for the JV team and creating a retention plan for the management team and employees. In summary, the potential for creating value from cross border investments can be significant but realizing the potential requires addressing both pre and post deal critical success factors.  Companies often fail to unlock this potential either because they fail to address critical pre-deal issues or they declare victory after signing the agreement and do not invest time on de-risking the important post deal issues.