Hero House Glendale Accelerator Program Opens New Opportunity For Startups in Europe

Interview with Ashot Arzumanyan, Co-founder and Partner with SmartGateVC

Startups / Venture Capitals / Funding / Europe / Armenian Founders

Episode #5

SmartGate VC, a Silicon Valley pre-seed venture capital fund has launched a new Acceleration Program Hero House Glendale to help startups in Eastern Europe to get into the U.S. market. Through 12 week program, startups will have the opportunity to set up their sales and growth hackings in the United States. 

In this Episode, Co-founder and Partner with SmartGateVC Ashot Arzumanyan joined me to talk about the Hero House Glendale, some of the benefit startups in the Eastern Europe can take advantage of it, and ways to overcome challenges to get into the United States market. 

With Ashot, we also discussed the role of the Armenian tech community in Silicon Valley in the expansion of the Armenian tech and innovation ecosystem, as well as the ways to attract more entrepreneurs and investors from Diaspora to come to Armenia and start their business. 

Guest

Bio: Ashot Arzumanyan is the co-founder and partner with SmartGateVC, a Silicon Valley pre-seed venture capital fund. He holds a Ph.D. degree in Economics from Yerevan State University. He teaches venture capital management for MBA students at the American University of Armenia. The SmartGateVC team stands behind initiatives like Yerevan Machine Learning Excellence Center, Gate42 Quantum Computing Research Lab, and Armenia.

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Startup Monday: Latest tech trends & news happening in the global startup ecosystem (Issue 57- April 16) HYE TECH MINDS

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Interview Highlights

Narine: Hello, Ashot. Thank you so much for finding time from your busy schedule to join me today. How are you doing?

Ashot: Hi, Narine. Thank you for inviting, having me at your podcast. I’m are fine. How are you?

Narine: I’m doing well. Thank you. I’m trying to stay positive and hoping we can get out of this pandemic pretty soon. And we can have a better year 2021.

Ashot: Yeah.

Narine: I am really excited to have you on my show. Not many probably know that you are one of the powerhouses behind the startup movement that is happening in Armenia in recent years. I talked a little bit about your background, but I think you can do that much better. Before jumping to our conversation. Can you tell us who are you and what do you do?

Ashot: Yeah, sure. So I’m an investment advisor and finance person by my profession. I used to be in management consulting and investment advisory for seven years. I got into the tech and VC space while being an associate in one of the first Armenian VC firms. And I teach in American University of Armenia, I have a PhD in economics from Yerevan State University. I I love startups, and I love contributing to making companies successful businesses across Armenia and United States.

Narine: You are the one of the co founders and partners at SmartGateVC, which is a Silicon Valley pre-seed venture capital firm. Is this an Armenian founded, or you have other members from other parts of the world?

Ashot: There are three of us Vazgen, Hambardzum and myself. So three of us are Armenians. But it is backed by investors who are not only Armenians.

Narine: Are there any specific industries that is SmartGateVC particularly focusing on?

Ashot: Yeah, sure. Our sweet spot is everything which is focused on computation which is AI related. We at SmartGateVc generally like anything that is deep tech and related to science. So, this is where we particularly look for companies, incubate companies and work with founders.

Narine: Can you a little bit unpack what you mean when you say deep tech? What type of startups are you looking for?

Ashot: Sure. So let me talk about companies that are already in our portfolio and who are having a pretty successful progress so far. So for instance, Krisp, it’s world’s best background noise cancellation technology and an amazing product that is developed based on it that is serving customers across the world right now. Superannotate is the world’s fastest image annotation technology, and an amazing product that is built on this technology or around this technology. And again, it’s serving customers all over the world in computer vision, space that needs annotation services. We have a company that is helping AI researchers in building their AI infrastructure, we have companies that develop a very unique memory centric design for processing computer tasks. And so in general, when we talk deep tech, we talk about a company that has some very significant IP in its core, and succeeds in building a product around or based on that IP.

Narine: I have been talking to many founders both in Armenia and in the United States. One of the common concerns that I talked to has a concern about the COVID impact on fundraising rates. Has this pandemic in any way impacted SmartGateVC projects?

Ashot: Talking about COVID, I can say it has the kind of two-fold effect. Some of the companies really benefited from COVID because their industry is kind of forward looking in terms of when there is more tech adoption, then there is more demand for what for what they do. Same Krisp which benefited probably the most from the situation among our portfolio companies, from the situation just because so many people went on remote communication. And what they actually do is just very useful product for these conditions. So some companies benefited some others had some tough days. But the good news is that because they are early stage, companies, they usually can adapt their business model. They can adapt to the conditions and survive, but I agree, overall, the mood in the world is slower right now. And all of us are waiting for the recovery.

Narine: As someone who understands the business what would be your suggestion to founders, who are struggling with fundraising during those difficult times, how to build a better relationship with investors in COVID era?

Ashot: While COVID is really an issue, it’s also an opportunity. Let’s think of it the following way. Before COVID if you want to raise money you usually need to have personal meetings to discuss with different investors and drive from one city to another, for instance, if you’re in the Bay Area. So you have to go from one office to another, do one meeting after another. It’s very time consuming. Now, all these borders are wiped away. So, the challenge is to find a good way to access those investors via Zoom. And if you find this way, then you can successfully raise your round just remotely and much more efficiently. That’s an easy thing to do if you have a good track record, good numbers to demonstrate. We have companies that raised the seed or series A just remotely. But it’s much more difficult task when we talk about pre-seed companies that just start or have little traction to demonstrate to the investors. And in this case, being close to investors, kind of relationship building is very important. For this kind of companies, this is really a challenge. So probably a better way would be to involve in some programs and in some schemes where this support and a connection to investors is secured in some institutional way. These can be acceleration programs, startup support programs, some mentorship programs. So anything that can work. Just the founders need to be proactive.

Narine: So talking about programs, I’m glad you brought it up. So SmartGateVC is behind several successful programs and initiatives that are implemented in Armenia currently, such as Yerevan Machine Learning Excellence Center, Armenia, startup Academy Pre-Acceleration program. Today, I want us to talk about one of your biggest ongoing initiatives, Hero House Glendale, but at first, can you unpack what is Hero House?

Ashot: Yeah, sure. So Hero House is a tech hub, where we converge and merge entrepreneurship, tech, and capital. So it’s a first of all, it’s a physical place. And eventually, in this COVID days, it’s also a remote community.

Narine: Is it located in Armenia, Yerevan?

Ashot: The first one was initiated in Yerevan, Armenia. And right now we are launching the second one in California in Glendale. So this is the place to unite these three essential pillars for deep tech and entrepreneurship. Like I said, (1) science and technology, (2) capital and (3)entrepreneurship. And we do a lot of programs around the Hero House, different startup programs, conferences, other initiatives that support and nurture companies and entrepreneurs. And, as you mentioned, the program in Glendale that we launched, is going to serve as a bridge between the two continents, and take advantage of each continent to leverage for the success of the businesses. So look, in this part of the world, I mean, Eastern Europe and Armenia included there, there is a very sophisticated tech talent. And at the same time, this part of the world is somewhat away from the market, which is usually the United States or Western Europe. And they are somewhat away from the market context. And it’s sometimes difficult to do customer and business development from Eastern Europe. Now, on the contrary to this, California is the place with a lot of business talent. It’s the heart for market entry to the US. The corporations, big companies and generally potential customers are much more friendly to new technologies there to become first customers, pilot customers, etc. So this is an ideal place to expand to the US market. And on the other side, if we take tech development over there, it’s very costly. So with $300,000 in Eastern Europe, you can buy as much time in terms of development, and traction as 1 million in Silicon Valley. So that means you can achieve much more with less funding, if you have collaboration with this part of the world. So what Hero House Glendale is going to do is, on the one hand help business founders from California to find tech teams here and build R&D here and on the other side, help tech founders here to expand to the US market, make the sales, do the business development and fundraising from venture capital.

Narine: So talking about expansion to the United States market. I think United States continue to be one of the hot markets for many founders and startups. What are the some of the challenges that many startups from emerging markets, including Armenia, are facing while they’re trying to get into the United States market?

Ashot: Two things. First of all, you have to be a bit of part of a better the United States. You can patiently talk to people from U.S., and you need to have a network. It’s difficult to there should be some starting point, right? And luckily, Armenians have a very good starting point there, thanks to tech Diaspora, that is very actively engaged in supporting Armenian founders. So usually, what we see as a challenge is preparing founders and entrepreneurs here to talk to these mentors, so they don’t waste each other’s time and be more prepared to understand to better the context and use the potential advisors time, in a wise way. So this is something very important. And we see Armenia Startup Academy and other initiatives over here play an important role in this space.

Narine: So going back to Hero House Glendale. I want a little bit dive deep to the application process. What is this program about and how many startups are you anticipating to include in this program?

Ashot: So we look for 10 to 15 startups. The program will start remotely. We hope that after 12 weeks of remote programming, we will have also better conditions on the COVID side and we can have the continuation with eight weeks of on site program, which will be in Hero House – a very nicely decorated place in Glendale with very convenient amenities and everything and also with very good access to local companies. You know, entertainment and other industries that operate around Los Angeles area. As for the application process, the applications are open, any founder who wants to check this out, can visit Herohouse.io and apply for the program and read more about it or just contact us for any questions they might have. We’re also running a number of info sessions throughout these days. So all the dates and tickets can be taken from our social media channels on LinkedIn, and others.

Narine: So overall, how long this program is going to last?

Ashot: So it’s 12 weeks plus eight weeks.

Narine: What is the deadline for application?

Ashot: It’s December 18th.

Narine: Most of the accelerator programs include training, mentorship and those type of activities. What exactly uniquely Hero House Glendale brings to the table they can attract more startups to apply to?

Ashot: Typically, an Accelerator offers space, mentorship, funding and access to customers. We offer all of this, but in a specific way. So, like I said, first of all, it’s very much customized to the audience from Eastern Europe, and those founders in the United States that can leverage the technical talent in Eastern Europe. So that is the ideal and best fit. So the program will be specifically tailored for this kind of companies. On the funding side, we don’t guarantee any funding upon accepting a company at SmartGateVC, our goal is to invest in the best companies. So this program will be our way of mutual due diligence. So we work with founders and founders work with us, we know each other better, and it’s kind of an ideal way to know each other and eventually make the investment decision.

Narine: Are there any specific industries from which you are particularly looking for startups to take part in this program?

Ashot: So, like I said, our primary focus is everything that has computation or AI in it. But Today AI is pretty much in everything. It’s very difficult to draw some limits to think of a company that we wouldn’t accept, because there can be a company that already has some very interesting technology and has the challenge to productize it and to go to the market, and on the other side, there can be a company that has some very interesting market potential, and can be reinforced and strengthened with AI and we can help in both cases. Therefore, both cases our target audience for us.

Narine: So you are in this business for many years, and I’m sure this is not your first accelerator program that you are initiating. What are some of the criteria you are looking for in ideal candidates?

Ashot: Let me say the motto of our fund: fund for superhero teams, capable, unstoppable and unbreakable. And when we say this, we mean this. And we really look for founder teams that are capable, so they know what they build, they have expertize in their area. They are not going to stop when they meet difficulties and they will commit themselves to what they do. And this is basically very important criteria – commitment and going to the to the end, not giving up. And this is what we look for. It’s very difficult to identify these companies just by interview or references. We have some experience investing in 20 of them and working with almost 100 teams throughout last two – three years. We hope to make the right choices. But this is what any investor at this early stage looks at. Next thing that we look at is the market opportunity when we can see that on the team side, everything is clear, next thing to look at is the market opportunity whether it’s a growing market or it’s a big market.

Narine: So if you are a startup founder, you are listening to this conversation you kind of thinking, Okay, if I participate in this acceleration program, and at the end, I didn’t get any type of funding, what’s going to be next for the startups?

Ashot: We have like, in house VCs market – SmartGateVC which is looking to invest. We have a partner HyeRise investments, that is also a Hero House investing entity and is looking to invest in startups. We have a big network around us that is looking to invest in companies. We are going to arrange a very big Demo Day and invite investors throughout California and US. I can say there will be a lot of opportunities to raise funds, thanks to the program. But even if this doesn’t happen, another thing that we do throughout the program is help the companies to set up their sales and set up their growth hackings and set up their initial presence in the United States. So if they gain the traction, and if they leverage this opportunities in the best way, they will definitely succeed if not immediately during or immediately after the program, by very soon after the completion of the program. so very much depends also on the founding team. All of our team will be next to them will support them. any way we can, but it’s also go get them culture that we want to see in founders, so they should they should work on it and they should get it themselves.

Narine: They need hustle.

Ashot: Yeah, exactly.

Narine: Is there any specific reason why you choose the name Glendale? Or the location Glendale? Is it connecting to the fact that we have a lot of huge Armenian American community in Glendale?

Ashot: Yes, definitely. Because it’s not it’s not just about community but also specifically tech community that is emerging in Glendale. It’s also a very beneficial location. So it’s right in the middle of Caltech, USC, UCLA, these leading universities. It’s home for Disney. It’s home for Service Titan, Disqo, and other very promising companies.

Glendale is an emerging star.

And there is one more thing to add, the context of the Californian tech scene. More and more companies move away from Silicon Valley. And not only companies but also investors. In a way, South California gradually becomes an extension and very solid extension to Silicon Valley, and sometimes a very good alternative. So more and more founders, more and more talent moves to this area. And this is, this is a new wave, this is a new opportunity. This is something that we want to be part of and in some way also drive this.

Narine: Expanding this conversation about Armenian American tech community. Tech Community in Silicon Valley plays critical role in establishment of Armenian tech and innovation ecosystem. And you have personally a lot of close ties to Silicon Valley. You are back and forth between Silicon Valley and Yerevan. What do you think how Armenian startup founders can build better relationships with entrepreneurs and investors in Silicon Valley and not only Silicon Valley because we have growing tech communities in Boston in New York.

Ashot: You mentioned the Diaspora and this is very important area to talk about. But before we talk about how entrepreneurs from Armenia could get there, I’d like also to address how Diaspora can involve with Armenia. That is very trendy and very demanded and very inspiring recently, especially in the light of the war that happened in Artsakh. So many people look for different ways to involve. Our friend and mentor Al Eisaian Co-Founder and CEO at IntelinAir would say,

if you want to involve the tech in Armenia, so probably you shouldn’t hesitate and take your ticket to Yerevan.

Go there and figure out what’s happening there. And, by the way, so many people followed this advice, and we met just this fall and early December, so many interesting people, notable people coming from Diaspora and exploring the scene here and how they can involve because not only it’s important and beneficial for Armenian entrepreneurs, from Armenia to get involved with Diaspora, but also there is a huge potential for Diaspora to involve in Armenia and building very mutually beneficial businesses and other relationships here. So, probably there are three ways this can be done. So 1) is mentorship, which is hands on involvement with entrepreneurs, from Armenia, helping them with their network business development with their value proposition in the United States. Basically helping them with their first steps on that market. 2) Investment and this can be done either as angel investors or through venture capital funds like ours. 3) third way to do so is to think of a joint R&D projects, finding an Armenia based co-founder or tech development, so, more deep integration of goals and activities with people from Armenia and this this will be very, very beneficial for both parts. And one more thing, and which is also evolving recently, repatriating to Armenia, come to Armenia, and work in the world’s coolest companies, be in your homeland. Now, as for founders or for entrepreneurs from Armenia, to get access to Diaspora, what is needed is basically being proactive. There are so many opportunities, there are so many ways, both institutional and non-institutional ways to get involved with Diaspora, get support from very notable people, there are successful people. By mere fact of being an Armenian. This is an amazing shortcut that should be leveraged, but also used very wisely because you can’t waste people’s time, you need to prepare very in your actions need to be very careful. And you act not only on behalf of yourself, but also on behalf of others that may approach that person after you. So you have to think of your reputation. You need to think about reputation of others around you. Probably ask for advice from others before reaching out to this or that person, so that you reach out in the best in the right way, and make the best use of each other’s time through this type of interactions.

Narine: So talking about attracting more investors and tech professionals from Diaspora. I ask this question to all my guests, this is sort of my own survey, I’m trying to understand what else we can do in Armenia, to nurture a relationship between tech communities in Armenia and overseas. What is this one thing, if we change in Armenia, you think can help to expand startup ecosystem and attract more investors to come to Armenia and start a business?

Ashot: I think what we should change is not in Armenia, specifically, it is in our mindset, as a nation. We need to feel the ownership for Armenia, regardless where we are, and what to do, there is no one else to do it for us. There’s no one else, government institution or nothing else in Diaspora or in Armenia, that can replace any given person.

I think what we should change is not in Armenia, specifically, it is in our mindset, as a nation. We need to feel the ownership for Armenia, regardless where we are, and what to do.

Narine: We should rely on ourselves.

Ashot: We should rely on ourselves in the sense of ownership for the country. And we, if that’s our mindset, we can always figure out how we can involve in a meaningful way. And that said, I don’t mean that someone should be very enthusiastic about Armenia in a pathetic way. It still should be very pragmatic involvement, and very pragmatic ownership of your country. So I think first of all, this is about shifting our mindsets, both in Armenia and outside Armenia. And the other thing that we need to change is probably more circulation. So more people from the Diaspora in Armenia, and more people from Armenia, let’s say in this case in the United States, more travel, more business travel, more relationship building.

Narine: I have a proposal, we need to have a direct flight to Boston, and I’m pretty sure this will make more Armenians from East Coast to fly to Armenia.

Ashot: So that’s a very good proposal, but the question is, who is “you” that has to open that. I agree that both you and me can be part of this, and be proactive on this direction, pursue this and eventually make it happen. There are similar conversation to have direct flight also to Los Angeles. This is something that we should have, because I know about some business decisions. In the tech world when some companies in Eastern Europe were acquired versus in Armenia just because of this lack of transportation connection. So this is important to work on. I totally agree with you. But coming back to my point, I like to cite my friend, Rouben Meschian. So, in a big corporation, there is someone who is responsible for any given task so if there is something on the floor, then there is someone who is responsible to come and pick it up and put it in the garbage. But in a start up, there is no one else. If you are the CEO, you see this you have to do yourself because there is no one else who will do this for you. Armenia and in a way the Armenian World as a one integrated entity is a start up and there is no one else who is going to do things for us. So we need to initiate we need and should do we need to be proactive in everything in all the initiatives and consolidate others around these ideas and work together to make this work.

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