Global Catalyst Partners: Not afraid of fire

Global Catalyst Partners general partner Kamran Elahian is not afraid of fire. Considered one of Silicon Valley’s most brilliant entrepreneurs, Elahian landed in Israel straight from the refugee camps in Tanzania, also not a very pastoral scene these days. If ever there were a time he believes it important to visit Israel or similar blissful places, it is precisely when shots are fired on Gilo and Bet J’ala, Molotov cocktails are thrown and shots fired at the territories intersection. “We’re continuing to invest massively in Israel, despite the situation,” he declares.

Elahian set up a $50 million fund here almost two years ago named Global Catalyst Partners (there are now three funds in the country incorporating the name “Catalyst”). One major partner in the venture is Israeli Eliezer Manor. The fund invests worldwide, but mostly in exotic places, particularly in Israel (half of the fund’s portfolio companies to date originated in Israel). Investors in the fund include Elahian‘s battalion of respected connections from his superlative entrepreneurial past, mostly in the semiconductor sector.

These include NEC, Mitsubishi, the Singapore government’s NSTB, the Walden and Sevin Rosen funds and the Dow Chemical concern. Global Catalyst Partners’ main investment areas are Internet, data and voice communications (why the latter two still have separate definitions is beyond me, particularly as they are usually followed by a lecture on the latest trend, convergence - EJB).

It is quite difficult to elicit a direct answer from Elahian. Like a seasoned politician, the man chosen more than once as the Silicon Valley man of the year chooses to talk about peace and brotherhood. Try speaking to him about his portfolio companies and he’ll tell in detail about the support program he founded in backward schools. “Online Schools” is a program that brought together funds to pay for Internet access for educational institutions around the world. Even his business answers are laced with sugar, which sounds somewhat demagogic to our cynical ears.

”Globes”: What are you doing here? Everyone else has canceled visits.

Elahian: “This is the time to come to Israel. Everything is simplified. Everyone loves one another. If you care about people, you need to try to do something and make the effort to come at this time.”

Weren’t you afraid, like many Valley investors, that Israeli portfolio company personnel would be taken for (military) reserve duty?

”It’s part of the risks. However, if you’re a professional, you think logically and take steps to optimize the possibilities. You need to look at the overall picture. Life isn’t only a question of making money. You need to think about how peace can be achieved, through high tech, for example. We deepen ties on both sides of the political fight and people then realize that this is more worthwhile than a war situation. People do crazy things when their backs are to the wall and have no hope.”

What do you tell people who are skeptical about your sincerity?

”I’ve already been accused of many things. What I’m doing speaks for itself. I’m going to the West Bank and refugee camps in Gaza to show that we care. 95% of the people on both sides are wonderful human being.”

Did being born in Iran help you to understand what is happening here?

”In Iran, we were taught that we’re better than the Arabs and the Pakistanis. When I met an Arab in the US for the first time, I saw that he was both better-looking and cleverer than I, which isn’t very hard. Once you understand this point, you first of all start to behave like a human being.”

The fund’s investments are not large – an average $1-1.5 million, although it has already invested $2 million in Cahoots. The fund invests in the seed stage, although an exception is RadWin. However, Elahian’s power lies elsewhere: assisting portfolio companies in raising money from other, well-known sources. Nevertheless, quite a few investments are somewhat puzzling, mainly in light of Elahian’s background in semiconductors. Take, for example, Cahoots.com, which mostly does instant messaging. They say it is better-connected and organized, but still with sturdy dot.com roots. Despite the market situation, Elahian managed to raise $25 million for the company two months ago, at a company value of $100 million, after money, from a Kleiner Perkins subsidiary fund, among others.

It was recently reported that you will cease investing in the Internet.

”The Internet has a great deal of potential, but we never invested in dot.coms. My problem with them was that they were never based on technology, but on some marketing or technology gimmick.

I thought Cahoots is an ICQ-type dot.com.

”ICQ is a serious technological invention. When I say dot.com I mean the 200 companies selling dog food or movie tickets.”

Many people say that ICQ was a technological gimmick which anyone could do in several days.

“At the time, it was a technological invention and they had good marketing. Every technology looks simple a year or two after it is launched.”

When you invested in it, Cahoots looked just like at least seven other messaging companies in the Israeli market alone.

”I have a good answer to that. We recently completed a $25 million financing round there. They have good technology and great potential. Sometimes a technology is so wonderful that six or seven companies get involved in it. The Internet enabled knowledge to be disseminated throughout the world and it is difficult nowadays to find an idea that nobody has thought of. It’s a natural evolution of the human brain and people normally will independently think of the same idea. You always hear about the first inventor, not the one with the same idea a week later.”

Published by Israel's Business Arena on 19 December, 2000