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BGV Founder Eric Benhamou will speak at the SuperReturn US West conference in San Francisco, February 12-14 2018. Panels hosted are “Raise and repeat: common challenges of raising the second and third fund” (February 12th, 2:15pm)  and “Succession planning in private equity” (February 14th, 12pm). Eric Benhamou will also discuss opportunity funds at SuperReturn West’s “Opportunity funds in the spotlight” fireside chat (February 13th, 3:45pm). Register to attend SuperReturn US West 2018 to hear Eric Benhamou and other industry leaders share their insights. Event details located here.

BGV Founder and General Partner Eric Benhamou delivered the keynote address at the Axis Cap Digital Paris conference on June 8th, 2017.  The conference defines itself as the following: ‘The annual event Axis Cap Digital Paris is a unique forum for French and European startups to pitch their innovative technologies to high caliber active investors and industry leaders from around the world.’ (Axis website)   As the keynote speaker, Eric Benhamou addressed the following:
  • 150+ attendees
  • 22 European startups selected among 120 applications
  • 40+ international investors
  • 50%+ international attendance
  • 17 countries
  Read more about the Paris conference and Axis’ upcoming conference in New York here.

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.”



Benhamou Global Ventures (“BGV”) is an early-stage venture capital firm with deep Silicon Valley roots and an exclusive focus on enterprise information technology opportunities in global markets. BGV currently has 20 active investments across its fund II and fund III portfolios. With offices in Palo Alto, California and Tel Aviv, Israel, the BGV team has been able to successfully build and implement a successful, cross-border venture investing model. The fund was founded by Eric Benhamou, former chairman and CEO of 3Com, Palm and co-founder of Bridge Communications. BGV often comes in as the first institutional investor in a company, and their network of technical and functional experts actively engage with their portfolio companies. BGV’s Investment Thesis: They are investing in tech companies at the intersection of enterprise digital transformation, early stage and cross border innovation. Digital transformation is changing the way enterprises buy, rent, build, optimize and secure IT infrastructure and applications. This is creating a new generation of technology companies in cloud ($125B market), mobility/IIOT (expected to reach $10T within 15 years) and cyber security ($75B market). An increasing proportion of such technology innovation is occurring outside the U.S. (i.e., Israel, Europe, India, China etc) fueled by the emergence of regional technology hubs.  Many of these startups seek to build cross-border companies by establishing U.S. presence and headquarters that leverage their offshore R&D.   Reflecting this trend, VC investments outside the U.S. have grown from $1.3Bn to $57Bn from 2005 to 2015 BGV applies a value-disciplined and active approach to make seed and series A investments in enterprise startups at the intersection of the above trends.  They focus on companies that contribute to very critical business outcomes – business resiliency, productivity, agility and customer centricity. The team is seeking out startups that are capital efficient, deliver quick value to customers and are focused on unleashing enterprise productivity.  Post-investment BGV plays an active role in utilizing their 100+ years of collective operating experience in building enterprise IT companies and assists its portfolio companies as they “cross the chasm” and identify strategic partnership opportunities with larger industry players. A third of BGV’s portfolio is comprised of cross-border startups and they play an active role in helping them set up a US presence and connect to the Silicon Valley ecosystem. How Does BGV’s Portfolio Fit In? BGV invests in 3 types of deals that leverage the above trends including highly disruptive new category creators, superior fast followers and special situations (i.e., spin outs, pivots and or recaps). Totango is an enterprise customer success management technology company with HQ in Silicon Valley and R&D in Israel.  The company addresses a white space within enterprises.  It focuses on the fast growing market opportunity of SaaS companies whose continued success depends heavily upon their ability to manage customer retention, churn, upsell and lifetime value. The Customer Success function has become a large part of enterprise sales today. It aims to streamline the onboarding process, maximize user engagement, minimize churn and increase the upsell success rate of a subscription business.  BGV led and syndicated the most recent equity round, and also assisted in key hires and strengthening the board with industry experts. Bayshore Networks is an IIOT cyber security startup addressing a key pain point in an old sector undergoing digital transformation.  The company enables the operational technology (OT) part of the industrial enterprises to connect to the internet securely while protecting their manufacturing assets from cyber-based threats. Bayshore enables asset intensive industries that are seeking operational efficiencies by bridging their IT and OT environments securely, collecting the big data and applying the analytics required to unlock the value of these assets. BGV participated in the Series A syndicate and has introduced the company to a number of scale-up strategic partners. Blue Cedar Networks is a spinout from Mocana.  The company secures data at rest and data in motion being accessed by mobile devices.  In today’s era of perimeter-less organizations, the app has become the endpoint for establishing the security controls that protect critical organizational apps and data.  The company’s disruptive non-client centric architecture enables enterprises to protect their assets and empower their users across the Extended Enterprise—employees, partners, consumers, re-sellers, distributors and all other non-employees who need access to enterprise data. BGV led the spinout and Series A financing and subsequently played an active role in shaping the company’s strategy, introducing the company to several strategic partners and hiring key executives. Thank you to Eric Benhamou, Anik Bose and the BGV team for assisting us with this post.     Source:

Anik Bose, BGV General Partner shares his perspective on VC value-add in early stage start-ups. Venture Capital firms invest significant effort to convince tech founders to accept their financing deals, often citing the active role they will play in helping the founder build the company (i.e. beyond money/smart money). Vineet Jain, CEO and co-founder of cloud storage firm Egnyte believes many VC firms overpromise. Andreessen Horowitz organizes executive briefings, where portfolio CEO’s meet senior executives at potential customers and have a large talent function to hire for their companies. Google Ventures has teams that help portfolio companies with design, engineering, recruiting, marketing and partnerships. While these are only a few data points, what is the truth? The answer to this question varies with the VC firm. VC firms with Partners who have deep operating and company building expertise tend to bring more value add to their portfolio companies with a more active investment style than say VC firms with partners who have more of a financial background and passive investment styles. Playing an active role in portfolio companies consumes a lot of bandwidth of the partners. In order to do so efficiently, BGV believes that one of the best ways to add operational value is by having a laser sharp focus on sector and stage – for us this is Early stage Enterprise IT around the areas of cloud, cyber security and mobility. This focus allows us to offer relevant advice and insights and leverage our domain specific eco-system relationships. As one can imagine the operational challenges, the market opportunities and the expertise gaps vary widely with stage and sectors of focus. In addition, at BGV we believe in the power of team, where the diverse experience of the partners can augment the founding team in multiple functional areas, than just making introductions to potential customers and partners. At BGV we tend to be the first and most active institutional investor in our early stage portfolio companies for three simple reasons: a) We enjoy the work of building companies given our operating DNA; b) by it’s very nature early stage investing tends to be bandwidth intensive, as such we like working a few select companies where we can give our complete attention, and c;) we want to help entrepreneurs learn from our collective experiences instead of repeating the same mistakes in their entrepreneurial journey. At BGV we help build value along several dimensions including:
  • Improved Governance – At BGV we work closely with the founder CEO to identify key value creation objectives needed to successfully secure the next round of financing and install key performance indicators to align the organization and measure progress along the way. We play an active role in mentoring and coaching first time CEO’s and finally we help recruit independent “industry expert” Board members from our network to assist the company with continued value creation.
  • Scaling Operations – We make introductions to early adopter customers (based on our CIO and CISO network) and also to strategic alliance partners (based on our corporate affiliate network). Strategic partners range from larger technology vendors to Systems Integrators to MSSP’s. We work closely with the founders to apply a strategic filter to prioritize and select the most appropriate scaling relationships. For cross-border portfolio companies we play a critical role in establishing US HQ and operations. Sometimes we also play a role in facilitating Founder CEO transitions in the event that the Founder CEO is unable to scale with the company.
  • Recruiting Key Executives – We work closely with the Founder CEO to assess team capabilities and identify skill gaps.   We then help to fill gaps on the management team with key executives and or advisors from within our network as well as working with our preferred recruiters.
  • Refining Go To Market Strategy – Start-up Founders tend to have a strong vision and solid core technology skills but often lack the marketing savvy to optimize the company’s market positioning or develop the optimal GTM plan. We leverage our Sales & Marketing Advisory committee comprised of experienced S&M executives to provide feedback to our portfolio companies on positioning, pricing and channel strategies.
At BGV we believe that successful VC value-add is defined by the old adage “sticking to their knitting” (i.e. continue to do what a firm know a lot about based on the team’s experience instead of trying to do something they know very little about). We are a firm believer that while markets change the basics of company and team building remain the same.

Eric Benhamou Founder and General Partner of BGV shares his perspective.  In her recent HBR post “Venture Capitalists Get Paid Well to Lose Money”, Diane Mulcahy offers a stinging indictment of the VC industry. In not so many words, she charges venture capitalists with the cardinal sins of gluttony by gulping fat fixed fees for a decade, and of sloth for delivering performance that fails to even match that of most public equity indices. While she does allow for the fact that a few firms demonstrate superior sustained performance, commensurate with the risks associated with the asset class, and while she does concede that the industry tends to churn out the weak players over time, her prognosis is ominous and tantamount to saying: “as it stands today, the VC industry does not deserve to exist!”. While I largely agree with Diane’s criticisms, my outlook is far more upbeat. I will start by a general observation from the very same report that Diane quotes from (2013 annual industry performance data from Cambridge Associates). It is true that the VC industry performance has been lackluster over the past 5 years as compared with public equities. But if we take any 10-­‐year period (approximately two full business cycles) starting from the inception of the venture capital industry, VC performance has outstripped public equity indices – in some cases by a factor of 2X to 3X. The crisis that started with the explosion of the dot com bubble in 2001 has taken a long time to recover from. This is somewhat understandable when one deals with entities that have a time constant of 10 years (the median life term of a VC fund). But the venture industry of today has little to do with the venture industry of 2001. While the numbers clearly support this fact as Diane correctly points out, the transformations do not stop with the raw numbers of VC funds, firms or professionals. To begin with, let us remember that many well-­‐known funds, which have always charged a 2% annual management fee, have also delivered spectacular results to their LPs, and these LPs did not mind one bit paying them. Others have used a transparent budget based approach to clearly explain the nature and magnitude of their operating expenses. But in an effort to be more specific and direct, let me offer my own venture fund BGV as an example, and take her four key arguments one at a time and explain how we deal with each. VCs aren’t paid to generate great returns. At BGV, our financial model is called NFSOP (a.k.a. No Fees, Share Of Proceeds). Correct, we do not charge any management fees to our investors. There is no way for us to make money unless our LP s make money. There is no way for us to coast, or get fat. We pay for our office, our computers, our administrative salaries, our travels, our conferences, our industry reports, etc.. ourselves. Because these expenses are out of our own pockets, we manage them tightly, much in the same way as the entrepreneurs of our portfolio companies manage their own expense budget. It would be hard for us to tell our entrepreneurs to pay themselves $100K per year until they are profitable (as apparently some VCs have done) unless we paid ourselves … $0K per year. Of course, we want to make money too. But we are comfortable waiting until our LP’s make money, and taking a quarter of their proceeds when they get realized.
VCs are paid very well when they underperform. At BGV, if we underperform, we have no fee income to rest upon. If our exits are long in coming, our cash flow suffers. We feel what our LP s feel. There is no buffer. VCs barely invest in their own funds. It is true that the common practice is for VCs to personally invest 1% into their funds. At BGV, we invest 20%. This is more than what our largest LP invests. With a commitment of this magnitude, we can stand up and tell our investors: it is not just that we don’t make money on fees. We have more at stakes than you do in this fund. If you lose money, we lose more. There is no way to escape. The alignment of interest is complete. The VC industry has failed to innovate. If the various points above aren’t enough proof that our financial model is a radical innovation and departure from the financial model that prevailed in the “lost decade” (2000-­‐2010), let me describe another BGV innovation: over the past couple of years, we realized that most corporate development organizations of large corporations have become far more sophisticated about venture capital. Often, they have their own corporate venture capital arm. Almost always, they engage in direct investments and commonly partner with institutional venture capitalists or angel investors. At BGV, we allow our corporate partners to make direct investments along side us in portfolio companies of their choice. This enables them to target their capital on those that have strategic value to them without having to invest in the full portfolio. This “a la carte” approach overcomes the drawbacks of the blind pool and offers our corporate partners ultimate flexibility of choice in their investments, all the while without having to incur a dime in management fees. In conclusion, I fully support Diane’s diagnosis and indictment of many venture capitalists. But unlike her, I have full confidence that our industry will not remain inert and oblivious to these glaring shortcomings, but instead will rise to the occasion and transform itself, just like our portfolio companies succeed by transforming the strategies and business models of their predecessors.