Alchemist Accelerator has closed a $2.5 million fund for very early-stage investments in tech startups serving large organizations in an era when robotics, artificial intelligence and the Internet of Things are fundamentally changing the way they operate. Limited partners in Alchemists’ second fund included Johnson Controls, Ericsson and Analog Garage, a VC arm of Analog Devices.
According to Alchemist founder and Managing Director Ravi Belani, since it started in 2013, the accelerator has seen 138 companies through its six-month program, with 75 of them attaining significant follow-on funding rounds of at least $500,000 each within six months of graduation. Fourteen Alchemist alumni have also been acquired, Belani said. In 2016, for example, GE acquired Wise.IO for machine learning expertise, Etsy acquired Blackbird to bring image recognition and natural language processing to search on its marketplace and Cisco acquired Synata, whose products allow users to search cloud-based and on-premise repositories at once.
Belani said the accelerator has been working with a greater number of startups per class as it grows. But it’s also seeing a sea change in what enterprise tech investors are willing to back. He said, “We’re still very bullish on enterprise software. But things are shifting. We’re working with more software-enabled hardware, robotics and industrial IoT companies these days. There is a mesh between bits and atoms.” The program now admits 17 startups per class, and invests about $36,000 in early-stage funding in each.
In the past, so-called deep tech or hardware companies had a hard time attracting venture capital because they were seen as too capital intensive. The attitude has changed as things like heads up displays, self-driving vehicles, drones and robotics look less like sci-fi and more like an eventuality at work. On the software side, Belani said, enterprise investments are focusing more on the network than the server or client side of things, in large part because of AI advances that are helping businesses make predictions across a large enterprise network.
Alchemist has also appointed Ash Rust as a partner with the closing of its new fund. Rust, who was formerly the CEO of SendHub and a mentor at Alchemist, is also an entrepreneur-in-residence with Trinity Ventures, one of the earliest players in venture capital finance, with a long history of deal making in enterprise and B2B. The newest class of Alchemist Accelerator will hold its Demo Day on January 19th in Santa Clara, Calif. at the Citrix office.