Mark Tluszsz is the CEO of Mangrove Capital Partners, the Luxembourg-based investment fund that has made more than one startup founder’s dreams come true. His wall of fame includes Skype, Wix – where he is chairman of the board – WalkMe, Red Points and, more recently, Job Today. We met up with him at his office to learn more about how he and his team decide whether or not to invest in a startup.
by: Charles-Louis Machuron
photo: Serge Deuces / Silicon Luxembourg
featured: Mark Tluszcz
Change the day to day
What interests us initially when we look to finance a startup is a person or team that wants to change the day to day. Take Skype, for example. Everyone was tired of paying a lot to make a phone call. Now it is virtually free, and people do not even realize that 10-15 years ago it was overpriced. The same is true with Wix. Whether you are the founder of a startup or a butcher who wants to create a website, an advertising agency will charge you €20,000 to do so. That’s why we decided to create Wix. We love people with unrestrained ambitions. Why? Because the life of a startup is not a long, peaceful river. It is quite the opposite. You start with nothing – only an idea – and then you have to take ownership of your project. To do this, you need ambition.
“You have five minutes. What are you going to tell me? Get me excited. Awaken my curiosity.”
Share your ambition
That leads us to our second and main requirement: ambition.
To tell you the truth, I prefer to spend my time with ambitious people.
As an entrepreneur, are you able to articulate this ambition? Developing a startup is all about telling a story. It takes a beginning, a middle and an end. You have to captivate investors like us right from the start. We regularly receive entrepreneurs in our offices. When they come here, they have 10 minutes to convince us. It’s the same thing when you watch a movie. You pretty much decide if you’re going to watch the whole movie after 10 minutes. If it sucks, you turn it off! These entrepreneurs, these men and women, must have the ability to engage us right away.
We live in a hyperactive, noisy world where there is plenty to do. We see 2,000 proposals per year and make between five and seven investments. Entrepreneurs do not always take enough time to tell their stories. I always say, “You have five minutes. What are you going to tell me? Get me excited. Awaken my curiosity.” Unfortunately, not everyone is good at that. There are people who are naturally gifted, who speak well, who know how to articulate ideas quite easily. But 80 percent of people do not know how to do it, and I always wonder why they do not train more. It’s ultimately quite simple: You write your speech, you stand in front of your mirror and you train for hours and hours. For some founders, particularly engineers, all of this is secondary. They focus too much on the product. The cemetery is full of good products. Out of 2,000 cases there are countless great products, so you have to know how to market and sell yours.
“Entrepreneurs sabotage themselves by not admitting their ambitions. Do not be overly conservative with us. Make us dream. Our company slogan says it all: Dare to dream.”
Companies like Skype or Facebook that do not need to do marketing are rare. At Skype we never invested $1 in advertising. Why not? Because in order for the service to work, you have to invite friends to download it. Facebook is the same. There are a handful of companies that have this ability to grow without marketing. For 99 percent of companies this is not the case. You need a good product, but you also have to be able to sell it well and tell the story. Wix is the perfect example. The product is absolutely fantastic but does not sell without help. If I want to make a website, I do a search on Google and I have to come across the Wix link. Why am I going to be attracted to Wix? Because Wix manages to articulate its story…and spends $150 million on marketing!
We always recommend entrepreneurs to prep well when they come to see us, because they will only have one chance. It is a harsh reality, but it is very important to be aware of it. At Wix we now have 100 million users. Ten years ago we had zero. I believed in the founders of Wix when they told me that one day we would have 10 million users. Entrepreneurs sabotage themselves by not admitting their ambitions. Do not be overly conservative with us. Make us dream. Our company slogan says it all: Dare to dream.
Change the world
Is the entrepreneur able to carry out his project? If he has enough ambition then yes. I’m not interested in financial forecasts at all. I think it’s only a consequence. Money is never a consequence and is not the ultimate goal. Many investors get caught up in financial forecasts and spreadsheets. Not me. Not us.
“There are ups and downs on the entrepreneurial adventure. If at the first ‘down’ you lower your arms and want to go back to work as an employee, you are not invested enough. We need people who are trying to solve something.”
We need a vision to get excited about. If you do not manage to give us that, you will leave disappointed, and we will be disappointed for you because we want all entrepreneurs to succeed. When we say that your project does not have enough ambition and to come back to us in three months, six months, one year, often what we see is that these entrepreneurs did not dream big enough and just created a startup because it seemed like a cool thing to do.
Ask yourself what problem you are trying to solve. What are you really trying to change? Want to sell cheaper clothes? Okay, it already exists and it works rather well. You will have a market to sell cheap t-shirts, so why not. If high turnover is your ambition, great. But if so, then I don’t think you are solving a serious problem. You need to be so excited by your own project that you are willing to do anything to succeed. There are ups and downs on the entrepreneurial adventure. If at the first ‘down’ you lower your arms and want to go back to work as an employee, you are not invested enough. We need people who are trying to solve something.
“Entrepreneurs should be so excited and motivated by what they do that the ups and downs don’t matter. They need that constant desire to solve a problem.”
Married for 8 to 10 years
Personally, selling clothes online does not interest me at all. Finding jobs for people – now that’s a project that hooked me. Eugene Mizin, cofounder and CEO of Job Today came to see me and told me he wanted to create his own startup. I told him, “Before you tell me why and what company you are going to create, be aware that I’m going to fund you because you’re a good guy and you have ambition.” When he explained his idea to me, we could see that he had passion, and that his focus was under-qualified people who cannot find jobs easily. He wanted to solve this problem. In 2016, 200,000 people have found jobs in Spain and in the United Kingdom thanks to Job Today. Compared to Facebook, 200,000 does not seem like much, but these are 200,000 important jobs that will feed families, not 200,000 ‘Likes.’ I have nothing against ‘Likes,’ but there are more worthwhile causes.
Entrepreneurs should be so excited and motivated by what they do that the ups and downs don’t matter. They need that constant desire to solve a problem. These are the projects that interest me. It was the same with Skype. It’s the same with Wix.
“You can have the best idea and the greatest passion in the world, but in the end you need a good team to make it happen.”
From time to time we have companies where the business seems interesting and the founders are talented, but they don’t excite me. I like when my associates tell me that a project looks promising and that we will make money, but in the end, what interests me is passion. I tell entrepreneurs, “If I invest in you, we’re looking at being married for 8-10 years.” On average, startups are sold after eight years. I want to be with passionate people during this period.
The Job Today team currently spends a lot of time recruiting because the startup is getting bigger and bosses strive to surround themselves with good people. You can have the best idea and the greatest passion in the world, but in the end you need a good team to make it happen. Initially, they did it all themselves, so one of the big challenges for these entrepreneurs is to take it up a notch. With ten employees or 50 your objectives are quite different.
Company creation at the core
At Mangrove we only invest in internet and software. These are two sectors that we know well, are interested in and in which we think we can have a disproportionate impact compared to our size. We believe we can create companies of global scale and with global ambition.
“We usually invest between €1 million and €10-15 million depending on how the company evolves. The starting point is €1 million, because you have to convince us further with your passion and vision.”
Do all investors have the ambition to set up businesses? No, we are interested in creation. If we ask ourselves how to make money, I am absolutely convinced that investing as soon as possible at a very early stage has a better financial return than investing later. To do this, you also have to be passionate yourself and be interested in investing at the beginning in order to find entrepreneurs like Eugene and Polina.
We do not have a particular market. We invest about 30 percent in Israel and 70 percent in Europe. We are looking for the best entrepreneurs.
We usually invest between €1 million and €10-15 million depending on how the company evolves. The starting point is €1 million, because you have to convince us further with your passion and vision. The entrepreneur will have to impress us within a year in order for us to reinvest. Entrepreneurs sometimes ask me for the criteria, but I know nothing about the criteria! Engineer entrepreneurs often ask us to give them their objectives. I tell them that these goals are theirs, and I won’t define them. I’m just an investor. For some companies, it means reaching a certain number of users, for others it means something else. If we were to give them very clear objectives, that would ultimately affect the direction of company, which is not our goal.
One-third of our 2,000 recommendations come to us because of Mangrove’s established reputation. Another third are recommendations from friends, incubators and partners. That last third falls within a particular sector in which we are interested. Today, one of the areas we are interested in is health. So it’s one-third, one-third, one-third.
The challenge is to go from 2,000 files to seven investments. It takes a mixture of art and science to achieve this, especially since everyone on the team is different. For example, I make decisions extremely quickly. The other extreme is my cofounder Hans-Jürgen, who takes a long time to make a decision. We have two different but equally effective approaches.
“Top players are great because they train all the time. It’s the same for the CEO of a startup. You must approach your startup as a pro approaches his career. It is not a nine-to-five job.”
Practice again & again
Every year we gather our top 10 CEOs and founders. We take them on a retreat for two days to exchange ideas and meet the most interesting external speakers. In 2016, one of the speakers explained how he had sold his company. Another, who was one of the most well-known golf coaches in the world working with the top-20 players, delivered the following message: “Top players are great because they train all the time.” It’s the same for the CEO of a startup. You must approach your startup as a pro approaches his career. It is not a nine-to-five job. Take the great golfer Phil Mickelson. He still trains eight hours a day to be the best. We also invited an actor who has made several films with Quentin Tarentino, and he gave us tips on how to tell a story. His goal is to make people understand that even though he is a recognized, award-winning actor, he would never stand in front of a group like this without having trained for hours. This a big thing that entrepreneurs can forget: Telling a story requires training. People are rarely born with this talent. Training is mandatory, even if you are an actor speaking at a small event like ours. With the internet we have the problem of speed. Everything goes faster. It is said that an internet year is like seven normal years. The startup must do in one year what a normal company has to do in seven. When an entrepreneur calls me and tells me he’s fed up, I always remind him that he has chosen this life. These startup founders have a time limit, physically and emotionally. When we meet with entrepreneurs, we pay close attention to all these signals.
Facts & Figures
- Year of creation: 2000
- Sectors of investment: Internet & software
- Business proposals received per year: 2,000
- Number of investments per year: 5 to 7
- Geographical areas: 30% Israel; 70% Europe
- Average investment: €1 to 15 million
- Staff: 10
- Assets under management: $750 million
- Number of funds: 5