Index's Martin Mignot on Sourcing Rocketship Companies, Evaluating Founders and His Attitude Towards Risk At The Early Stage

In this episode of the "20 minutes VC," host Harry Stebings interviews Martin Mino, an early-stage investor at Index Ventures in London, who has been involved in transactions with companies like Deliveroo, Algolia, and Swiftkey. Mino shares his journey from co-founding a beauty subscription business to becoming a venture capitalist, emphasizing the value of understanding the entrepreneurial experience and the importance of empathy for founders. He discusses his deal-sourcing strategies, focusing on building local networks and maintaining relationships with founders to identify potential investments. Mino also touches on the European tech ecosystem's growth, the role of previous founders reinvesting in the community, and the challenges of the exit market in Europe. Despite these challenges, he remains optimistic about the European market, citing numerous successful exits and the increasing number of large-scale companies.

• Martin Mino is an early-stage investor at Index Ventures in London.
• His focus areas include SaaS, marketplaces, and mobile.
• Martin has been involved in many of Index's investments, such as Deliveroo, Algolia, Blah Blah Car, and Swiftkey.
• He has worked on over 50 transactions, including Soundcloud, Just Eat, Code Academy, and Flipboard.
• Prior to Index Ventures, Martin worked at UBS Investment Bank and co-founded Boudoir Preve, later acquired by Birchbox.
• Special acknowledgments were given to John Henderson at Whitestar and Matamark for their contributions to the interview.

"And joining us today is Martin Mino, early stage investor at Index Ventures in London, where he focuses on SaaS marketplaces and mobile. Martin handles many of index's investments, including the likes of Deliveroo, Algolia, Blah blah, Car, Swiftkey and many more incredible companies."

This quote introduces Martin Mino as a significant figure in venture capital, highlighting his investment focus and notable companies he has been involved with.

• Martin comes from an entrepreneurial family, with his father being an entrepreneur in customer support and call centers.
• His mother is a doctor with a more cultured and intellectual approach, reading extensively.
• Martin sees venture capital as a blend of his parents' traits—action-oriented and reflective thinking.
• During university, he launched a web radio and followed the startup culture of Silicon Valley.
• Martin views venture capital as an exciting field that sits between the thinking and acting parts of the industry.
• He gained practical experience by co-founding an e-commerce business with his girlfriend, which they sold after a year.

"So I guess everyone is a bit of a mix of both parents and I think I'm no exception to the rule."

Martin attributes his interest in venture capital to the blend of his parents' entrepreneurial and intellectual characteristics, which he sees as reflective of the VC role.

• Martin believes that practical experience in entrepreneurship is valuable for understanding the challenges faced by entrepreneurs.
• Setting up and running a business provides insight into legal, accounting, and team-building aspects.
• He emphasizes the importance of empathy for entrepreneurs, having experienced the stress and risks firsthand.
• Martin's e-commerce venture gave him a "crash course in entrepreneurship," which he considers highly influential in his development as a venture capitalist.

"I think the most important thing is really that you get to know and see the world through the eyes of an entrepreneur, being on the other side of the table."

This quote underscores the significance of understanding the entrepreneur's perspective and the value of experiencing the pressures and risks they face, which is crucial for a venture capitalist.

• Martin disagrees with Guy Kawasaki's view that venture capital should be an end-game career after 30 years.
• He points out that many successful senior VCs, such as Fred Wilson, started their careers in VC without operational experience.
• At Index Ventures, it is more common to start a career in VC without prior operational experience, although having it is not detrimental.

"I don't really agree with his view and I think the evidence kind of proves the contrary."

Martin challenges the traditional view of venture capital as a late-career move, suggesting that many successful VCs have proven that starting early in venture capital can lead to success.## Angel Investing vs. Venture Capital

• Angel investing and venture capital (VC) are distinct in terms of the role and involvement they require.
• An angel investor typically gets involved during the early stages, often helping a company from inception to Series A funding.
• Angel investors may become advisors but their active role often diminishes after Series A.
• VC involvement extends over a longer period and includes a broader range of activities beyond just funding and advising.
• VCs are involved in sourcing, analyzing, making deals, exiting companies, and raising funds.

"So what's important to him as an angel is very different from what's important as a VC."

This quote highlights the different priorities between angel investors and venture capitalists, emphasizing their distinct roles and the scope of their involvement in a company's growth.

"But I think as a VC you have to take a much longer view."

The quote emphasizes the long-term commitment and broader perspective required in venture capital as opposed to the more focused and short-term involvement of an angel investor.

• Deal sourcing is a critical aspect of venture capital.
• A VC's approach to sourcing deals can be categorized by stage (seed, venture, growth), theme (fintech, ad tech), or geography.
• Index Ventures combines thematic and geographical approaches, especially in the fragmented European ecosystem.
• Local networks and on-the-ground presence in key cities are important for early-stage deal sourcing.
• Growth-stage deal sourcing relies on building strong relationships with companies that are more established and have already raised Series A or B.
• The goal is to become the first point of contact when these companies are ready to raise additional funds.

"At index we have both a thematic and a geographical approach, especially in Europe, because the european ecosystem is still quite fragmented."

This quote explains Index Ventures' dual strategy in deal sourcing, which is tailored to the unique characteristics of the European startup ecosystem.

"So when they felt ready to raise a gross round, then we're kind of a natural partner for them."

The quote illustrates the importance of maintaining relationships with growth-stage companies to become their preferred partner for future funding rounds.

• Evaluating the investability of founders is subjective and varies among VCs.
• Some VCs, like Fred Destin, employ unconventional methods like the six-hour drive test to assess compatibility with founders.
• Index Ventures does not have a formal test but considers compatibility and the "life's too short" rule when dealing with difficult entrepreneurs.
• The key factor in evaluating founders is observing their relationships with their team and their behavior in various circumstances, including negotiations.

"I think there is a compatibility part. I think we sometimes some of us here have a rule of what we call the life's too short category."

This quote reflects the informal approach at Index Ventures to assessing founders, where personal compatibility and the potential for a positive working relationship are considered.

"In general, I think the thing you really want to look for is how is not really your relationship with them necessarily. It's more their relationship with their team and with the people they work."

The quote suggests that a founder's ability to maintain healthy relationships with their team is a more crucial factor for investment consideration than the founder's relationship with the VC.## CEO's Role in Talent Acquisition

• CEOs spend a significant amount of time hiring the best people, which is a crucial aspect of their job.
• Being strategic, smart, and articulate is important for CEOs, but the ability to hire and manage people is paramount.
• A CEO can have a divisive personality, yet if they are able to build a strong team that is loyal and fascinated by them, it can be sufficient for success.

"At the end of the day, it's just being able to hire the very best people. That's what CEOs spend a lot of time doing."

This quote emphasizes the primary responsibility of CEOs to recruit top talent, highlighting the importance of this task in their overall role.

• The suitability of a founder to lead a company throughout its lifecycle is a case-by-case situation.
• It's common for founders or co-founders to leave after working on a project for several years, without it being a cause for alarm.
• Founders often prefer solving problems and building products, but may not be interested in or adept at scaling, bug tracking, and managing large tech teams.

"I think there are many examples and counterexamples of that. So I don't think you can have a hard feel."

Martin Mino suggests that whether founders should remain at the helm throughout a company's lifecycle cannot be generalized and depends on individual circumstances.

• When investing in companies, the downside is limited to the investment amount, while the upside is unlimited.
• In the face of a "rocket ship" company, high valuations can still offer a good risk-reward ratio.
• While no company has infinite value, early-stage investments shouldn't be passed up due to high valuations alone.
• Investors often regret not investing in early stages due to valuation concerns, as the potential returns can far outweigh the initial investment.

"Your downside is always limited to the amount you're investing, while your upside is unlimited by definition."

Martin Mino explains the asymmetry between risk and reward in venture capital, indicating that the potential for high returns justifies taking risks on high valuations at early stages.

• Fear of missing out (FOMO) is common in venture capital and can be considered a healthy motivator.
• The desire to be part of a promising company's journey and contribute to its success drives venture capitalists.
• FOMO arises from the scarcity of truly exceptional investment opportunities.

"That's the FOMO, and there are so few of them. When you find one, you're just like, you want to be part of that journey."

Martin Mino describes FOMO as a driving force in venture capital that motivates him to invest in companies he believes have extraordinary potential.

• The European tech ecosystem is growing, with successful companies emerging from both traditional hubs and peripheral countries.
• The trend is in line with the initial thesis at Index Ventures, indicating a healthy and expanding ecosystem.
• The emergence of a new generation of founders who have successfully exited is reshaping the European tech landscape.

"We see a lot of really good companies and we see them coming from everywhere, which was kind of initial thesis at index and which is really happening now."

Martin Mino acknowledges the growth and diversity of the European tech ecosystem, with promising companies arising from various locations, not just the main hubs.## French Tech Ecosystem Growth

• Xavier Niel and other entrepreneurs like Pierkoscus Morisse are heavily investing in the French tech ecosystem.
• Successful exits in the past decade are leading to reinvestment by founders into new ventures.
• The new generation of entrepreneurs benefits from the experience of predecessors, accelerating their growth.
• Comparison of Exalid and Allegoria highlights the shift towards a global approach from French startups.

You got people like Xavier Niel who are investing massive amounts into the ecosystem.

This quote emphasizes the significant investment by prominent figures like Xavier Niel into the French tech ecosystem, indicating strong growth and support for startups.

So there are a bunch of exits that happened in the past, in the past five to ten years, and those folks are reinvesting a lot, their time and their money.

The quote points out the trend of successful entrepreneurs reinvesting their capital and expertise back into the ecosystem, which is fostering a new wave of growth and innovation.

Exalid was a really strong tech product, but stayed pretty much very French and a bit academic, while Allegoria was kind of in the same space, went straight away to YC and had set up an office in San Francisco.

This comparison between Exalid and Allegoria illustrates the evolution of French startups from local, academic-focused ventures to global players with a presence in key tech hubs like Silicon Valley.

• Martin Mino discusses the prevalence of billion-plus exits in Europe, indicating a healthy exit environment.
• The lack of European acquirers and a weaker IPO market are seen as areas of concern.
• The European market has fewer tech acquisitions, especially in the mid-range, which is crucial for reinvesting in the ecosystem.
• The IPO market in Europe is growing but still lags due to a lack of tech culture in financial markets.

We've had a lot, right? If you think about just it, Skype, Criteo, Zendesk King, all of the ones that are coming in the Spotify von Privy showroom, preve the Zalando.

Martin Mino is highlighting the numerous successful billion-dollar exits in Europe, suggesting that the exit ecosystem is robust for large-scale startups.

I think the IPO market in Europe is not extremely strong because there is a lack of culture around tech in those places.

Here, Martin Mino points out the weakness of the European IPO market for tech companies, attributing it to a cultural gap in understanding and valuing technology within financial markets.

• Martin Mino shares his favorite book, "I Have America Surrounded," about Tim Leary, which he admires for its portrayal of disruption and rule-breaking.
• Fred Wilson is the investor Martin respects the most due to his smart investment strategies, consistent quality of thinking, and personal and brand development.
• Martin enjoys reading Benedict Evans' weekly newsletter on mobile for insights relevant to his investments.
• His most recent, unannounced investment is in a decentralized platform with network effects, chosen for the team's scrappiness and early potential.

I love the book I read recently about the life of Tim Leary called I have America surrounded.

Martin Mino expresses his fascination with Tim Leary's life story, which he finds incredibly disruptive and a source of inspiration for entrepreneurs.

And admire, there are quite a few, but I think the one that's been shaping mine and probably a lot of people's investment theories is obviously Fred Wilson.

He acknowledges Fred Wilson's influence on his own and others' investment philosophies, highlighting Wilson's intelligence, dedication, and consistency in the venture capital industry.

I like Benedict even's weekly newsletter on mobile. I read that a lot.

Mino finds value in Benedict Evans' mobile-focused insights, which aid him in making informed decisions for tech investments.

It's a space we love. It's got all of the kind of network effects and platform characteristics that we really like.

This quote reveals Martin Mino's investment criteria, which include network effects and platform characteristics, as well as his appreciation for teams that can achieve early milestones with limited resources.