17:47 | 12.07.22 | Articles | exclusive 18467

SmartGateVC’s DNA: Connecting Science with Entrepreneurship

SmartGateVC is a venture capital firm co-founded in 2017 by the joined forces of three friends: Ashot Arzumanyan, Vazgen Hakobjanyan, and Hambardzum Kaghketsyan.

Ashot Arzumanyan talked about the firm with iTel.am.

The Creation

In 2017, my two friends and I got together and founded SmartGateVC. At that time, it was the pre-seed period of Armenian startups, there was a lack of knowledge and experience, but there were many opportunities for development. Seeing all this, we thought that it was necessary to buildan institutional solution, to create a system that would help with advice, connections, and capital.

Ashot Arzumanyan Ashot Arzumanyan
photo © Mediamax

Even at the pre-seed stage, when I was working with the founders, it was obvious that before making an investment, there was room for a lot of work–we had to lay a strong foundation for entrepreneurship and help them master key principles. At this time, we founded Armenia Startup Academy, which prepares founders to attract investments. Shortly afterHero House was created, expanding to the United States in 2021. Therefore, we can say that a self-sufficient ecosystem has been developed, which also gives birth to our investments. We have implemented all of this in successful cooperation with the European Union and we continue our collaboration today.

The First Investment and Portfolio

We made the first investment in January 2018 in Krisp. So far, we have invested in 23 startups. Krisp, SuperAnnotate, Podcastle, Britive, Expper Technologies, Grovf are our portfolio's most popular companies.

photo © Mediamax

The follow-on investment rounds are usually a good indicator of success of the portfolio. We have invested in the pre-seed stage so far. With the new fund, we will make both pre-seed and seed investments.

The Model and Investment Direction

Since the inception of SmartGateVC the mission of connecting science with entrepreneurship was in our DNA. We always give preference to companies that use artificial intelligence. In exceptional cases, we may consider other directions.

Over time we are getting more involved with deep tech AI. We place special emphasis on the intersection of biotech, healthcare, and artificial intelligence. There are already some investments in those focus areas and we are working very intensively on that direction.

photo © Mediamax

We also want our investments be connected to Armenia, and for that to happen, there is a need for more capacity building in the local ecosystem.

Our investors are mainly from the USA; therefore, the fund is registered there. We invest in companies registered in the USA, which may have subsidiaries in Armenia.

We target companies that are focused on the U.S. This is due to the fact that we have U.S. market expertise, and hence that is where we can provide real help to our portfolio companies.

photo © Mediamax

After all, our companies have to close the next investment rounds in the US, which is impossible if they are in a different jurisdiction. We have a large Hero House in Glendale, California as well. We are trying to make it as easy as possible for our companies to expand to the U.S.

Two Funds

Currently, we have two funds. We launched the second one this year, with which we can invest up to $1-1.5M. With the first one, we could invest only up to $100K. Both funds work on the same principle; the difference is that the second one is larger, so we can make stronger investments. We invest in the pre-seed stage. With the new fund, we will also participate in seed rounds. We have about 50 investors in total.

The Criteria

The first criterion is the characteristics of the team members, whether we enjoy working with them or not. Then we look at more objective factors–how the team’s ability to grow manifests itself over time.

We invest in a promise, and it remains to be seen if a promise converts into a company that changes how industries operate and people live.

photo © Mediamax

Our pre-investment phase can last from several weeks to several years. There was a case where there was not even a team. We have talked regularly with the founder for years, he then focused on building a business, we helped to find a co-founder, and as a result, we made a new investment.

We often invest our time much earlier than when a company is formed. We support the companies with everything, starting from shaping their strategies to raising follow-on rounds. Simply writing a check is the easiest thing to do. That way, we couldinvest in hundreds of top companies, but the question is if we can be a value-add investor.

Ashot Arzumanyan Ashot Arzumanyan
photo © Mediamax

When making an investment, we as general partners always look at the startup from different perspectives. We come to a final decision together, but we are slow decision-makers.

We can act quickly, but we are never in a hurry. If there is a push for an urgent action, we take a step back. Rushing means that the conversation is more about money than our partnership.

Nune Grigoryan