Two years ago, venture capitalist Chris Pacitti founded AVX Partners to invest in software companies that have released products and signed customers, but need outside investment to accelerate their growth.
Rather than raising a venture fund, AVX Partners invests on a deal-by-deal basis, using dollars from Pacitti’s network of tech executives.
The model has worked, and now Pacitti is launching Elsewhere Partners to invest in companies outside of the traditional venture capital hubs of Silicon Valley and New York.
Pacitti, who spent nearly two decades at Austin Ventures prior to AVX, founded Elsewhere with Austin Ventures general partner John Thornton and former Bain consultant Sam Kentor.
Elsewhere will target companies that have significant customer traction and revenue growth but have taken little in outside investment.
“We see a tremendous opportunity to invest in software companies that don’t fit the traditional model -- these ‘outliers’ are located beyond the boundaries of the major VC hubs and have proven their business models without standard Series A or B rounds,” Pacitti said.
Elsewhere will continue to do deals in Austin, but will also look at regions where venture capital hasn’t traditionally flowed. That includes cities such as Atlanta, Nashville, Salt Lake City, Charlotte and Denver.
“Every city’s a little different but we look for strong entrepreneurial tech hubs that don’t have large amounts of expansion capital,” Pacitti said.
Elsewhere will continue to raise money on a deal by deal basis, but Pacitti said the firm eventually plans to raise a fund. The firm expects to do five to eight deals a year, with an initial investment of $6 million to $8 million.
Pacitti said Elsewhere will be looking for companies like Austin-based Vyopta, which provides video conferencing services and received a $5 million investment from AVX last year.
The Vyopta team “figured out how to bootstrap their way to 75 customers and several million in revenue without ever raising any outside money,” Pacitti said. “This created an investment profile with very low downside risk. And when the risk capital loss is low, it opens up a much wider range of successful exit options.”
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