Meet the investor: Michael Jackson, Mangrove Capital Partners

Interview as featured in Startups (http://startups.co.uk/) – 25/10/2016

Michael Jackson
Partner, Mangrove Capital Partners

Where are you based?

Mangrove’s office is in Luxembourg and I am fortunate to live just a few hundred metres from the office. As a team we spend most of our time outside of the office either meeting with our portfolio companies or searching for other transformational businesses across Europe and beyond – but we have a full team meeting for two days once a fortnight, with no excuses for not attending.

I’m the only British partner in the firm so London naturally falls under my remit and I visit the city every other week or so, except in the summer months when you’re more likely to find me working from my place in Cannes.

What kind of investor are you?

We take the view that the venture capital firm (VC) should be a company’s biggest cheerleader.

We ensure our founders have the support, encouragement and experience they need to build disruptive, global companies. We empower them and encourage them to think big, take risks and go for “hyper growth”.

We invest in companies because we believe in the individuals behind them and our founders know that we will support them through good times and through bad.

I’m pretty sure that you can pick up the phone to the founders of any company that Mangrove has invested in and they will give a positive recommendation – even if the company didn’t work out.

Our own behaviour in bad times is every bit as important as in good. Perhaps more so.

What kind of deals do you finance?

We take big risks at the earliest stages of innovation, with the aim of being the first institutional investor.

The firm has co-created projects and regularly injects funds prior to product launch but we’ll follow on with successive rounds of financing for the companies showing promise.

Our early success with Skype – which was sold to eBay for $4.1bn in 2005 – created a culture of risk-taking within Mangrove. It also gave us the confidence we need to convince entrepreneurs that they can conquer the world.

Rather than following the herd, we typically take a contrarian approach to investing and like to back unusual, unproven or unfavoured technologies. We’ve so far avoided fintech for example – partly because fintech valuations are high but also because we remain unconvinced by many of the business models.

That said, we do believe there will be some great fintech businesses to come and we haven’t given up looking for them.

What kind of person do you invest in?

We like to invest in passionate founders that can articulate their business in a simple and comprehensible way. We also like companies with an unbridled focus on product with a commitment to bringing one customer experience to market.

And finally, we like to invest in entrepreneurs that display humility because innovating is hard, lonely and fraught with traps. We like founders that understand this and look for advice from a variety of sources.

How do you source prospects?

Skype was one of Mangrove’s first investments so we’ve never had much of a problem sourcing prospects.

We receive a large number of incoming opportunities directly from founders but we also like to find opportunities through our network. Our team has a presence across Europe and our portfolio includes some of the most respected founders in key hubs such as Berlin and Tel Aviv.

We look at around 2,000 companies each year and invest in perhaps six of them.

What is your ideal investment?

Our ideal is a seed investment in a weird but compelling idea with an impressive team. We typically invest up to $1m in the first stage for 20-30% of the company.

What are your USPs?

Unlike any other early-stage VCs, we have played pivotal roles in the success of billion dollar technology companies – that’s companies that have actually exited with over a billion dollar returns to investors in real cash, not internet money.

We are no longer looking to prove ourselves, instead we want our companies to be successful. Skype is our best-known success story but we were also early investors in Wix.com, the largest tech IPO to come out of Tel Aviv.

We bring this experience to each of our portfolio companies and can save them considerable time and resource. We also have huge follow on firepower so for our portfolio companies that perform well, future fundraising will be much less of a distraction.

We’re also experienced operators rather than finance guys. I trained as an engineer and launched the first MVNOs in Europe before joining the founding team at Skype and taking on responsibility for turning an innovative idea into a well managed global business. Skype was a long time ago now but it remains the playbook for success and I was fortunate to have benefited from some very unique experiences, such us changing the regulatory framework for telecoms in Europe.

Importantly, we also have an entrepreneur-centric approach and are proud of the relationships we build with our founders. Many founders would rather stay clear of their investors, yet Wix.com asked our CEO Mark Tluszcz to be chairman after it listed on Nasdaq. In the VC world, that kind of thing doesn’t happen very often.

What are the hot sectors?

We’re focused on solving some of the major societal problems and finding opportunity in macro trends.

For example, we see the high levels of unemployment across Europe as a serious issue and backed Job Today. We also think that new technology is needed to address the ageing population.

We generally avoid the ‘hot’ sectors although we recently invested in a fascinating AI business in London. Echobox is helping publishers compete with digital disruptors by increasing traffic from social platforms – the new lifeblood of media distribution. Apester is another company helping publishers which we backed.

From a personal perspective I’m fascinating by bitcoin, partly because of my work with decentralised networks at Skype. I haven’t made any investments yet in this space but I’m very active in the bitcoin community and am on the board of blockchain.info.

Three things a company should be able to offer an investor?

Money doesn’t come from nowhere. We invest money that is entrusted to us by pension funds and so on, money that belongs to ordinary people. We have a responsibility to find companies that will be successful, but also a deal structure that makes sense for everyone.
The journey will be long, so we need to work with companies and products that we can stand behind. In many many cases, we do not invest because we do not feel comfortable with the founders. This is very personal, and extremely difficult to predict.
Finally, we like the company and the founders to able to express their product clearly and simply. They will be telling a story every single day. It needs to be a story that customers, partners, employees, family and investors can understand.
What is the cardinal sin when looking for investment?

Lying and hiding things. Not telling the truth about deal status, deal interest, offers from others and so on. For us, this is a deal breaker.

What continuing involvement do you like in an investment?

The company is run by the founders, never the investors. If I wanted to run a business, I would start one. We are not short of ideas!

I like to be a trusted partner of the founding team, somewhere they can go for impartial advice – even as personal matters affect their day to day work. This is key. As we said before, it’s tough at the top.

What has been your best performing investment to date?

Skype was the best performer – we turned $1m into $200m. However we made far more from Wix.com.

Mangrove’s portfolio includes success stories such as Skype, Wix, Nimbuzz and the latest trend setters Job Today and Outfittery.