Dallas’s Aristos Aims to Micro-Size Investment for Tech Startups

Felipe Mendoza’s first experience at a startup, Monterrey Networks, ended up with a sale to computing giant Cisco Systems.

Exhilarated by success, Mendoza says he threw himself into another startup, one that “was not bought by Cisco.” Though the second startup was a bust, Mendoza says both experiences hooked him to entrepreneurship and the challenges of building a company from scratch.

“My thought has always been there’s no downside to joining a startup,” Mendoza says. “A lot of people say it’s risky. But job security, that doesn’t exist anymore. You gotta make your own.”

In 2006, Mendoza switched from founder to funder. After six years backing tech startups with Silver Creek Ventures, he saw an opportunity in what he calls micro-venture capital investing. He founded Aristos Ventures in 2012 with a fund of about $10 million to target technology companies that need about $1 million in early stage funding.

Aristos has invested in five companies, including Nimbix, which specializes in “high-performance” cloud computing; ZenCash, which makes cloud-based accounts receivables software; and JamKazam, a live music platform and social network for musicians.

He sat down with Xconomy to talk about his transition from founder to investor, the opportunities for micro-investing, and strengths of the North Texas technology ecosystem. The following has been edited for clarity.

Xconomy: Tell me about Aristos.

Felipe Mendoza: I was with Silver Creek for six years. It was great, very much like a startup. You have a lot on your plate and every day was different. Toward the end of my tenure, there weren’t as many active VC funds and the dollar amounts that companies needed started to go down. You have the tools. Entrepreneurs don’t need to buy infrastructure. There is Amazon Web Services or Dropbox now. Startups are outsourcing a lot of the capex. A majority of the exits are sub $100 million; a lot are sub $50 million. It’s hard to get that $400 million exit. Most of the funds in Texas are not set up to work on that [smaller] end of the scale. They’re bigger funds.

I started Aristos as a micro VC fund to invest into those highly capital-efficient companies that only a need couple million. The deal flow is not lacking. Before ’95, the average venture capital fund was $30 million and the average investment was $2 million.

My investors are high net worth individuals, family offices that like to be in the tech arena but don’t have the time. My investment committee has literally made billions for their institutional investors: Jon Bayless and John Jagger, of Sevin Rosen, Alan Pierce of the Wright Family Office in Dallas.

X: What sorts of investments do you focus on? I see recently cloud computing and online jam-session software. Seems eclectic.

F.M.: It’s good having … Next Page »

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