One of the greatest challenges in raising capital for an early-stage venture capital fund, regardless of the theme, is the mindset that venture capital is one big roll of the dice.

Synonymous with a spray-and-pray strategy, some terrible historical data sets like – “nine out of 10 startups fail” and “the average return on every US$1 invested in venture capital globally is 90 cents” – have suppressed appetite and allocations. 

Of course, the conventional venture capital model is fraught with risks, but in order to be successful as a VC fund manager, it is crucial that de-risking remains at the heart of investment decisions.

So, how have we, as a venture capital fund manager, disrupted the historical strategies and delivered a more de-risked investment opportunity for our Limited Partners (LPs)? 

Build a focused portfolio

At Mandalay, we focus on deploying capital into three to four investments per year. Over our five-year capital deployment time horizon, this may equate to 15-20 portfolio companies, which is very compact in the overall scheme of things.

Also Read: Why venture capital is going big with cloud mining

Concentrating on quality over quantity, and never accepting failure as a by-product of venture capital, are two hugely important mindsets. People often ask me how many of my portfolio companies I expect to fail, and my answer to them is, quite simply…zero.

Buy well

I love this strategy that my friend, Ainsley Lee, Head of Investments for NRMA and an LP in Mandalay, has used to build a hugely successful career. Venture capital investing requires rigour and discipline, avoiding investing in companies with overly aggressive multiples (especially on revenue) and not getting caught up in hype or emotions, as they have a tendency to cloud judgements. And needless to say, in early-stage startups, you are never short on hype and emotions.

My points in relation to building a focused portfolio and buying well may seem relatively obvious or generic, but I assure you, in the world of VC funds, they are not. That said, the next two strategies are very much Mandalay’s “sizzle” in the marketplace, and this is how we have found ourselves managing money on behalf of some world-class names.

Founded by founders for founders

I believe that founders and entrepreneurs with business and financial acumen make exceptional early-stage VC portfolios and fund managers.

They have been through a personal founder and startup journey, giving them a unique lens on what it takes to succeed. They can pick up on qualitative markers that other investors miss. Moreover, they speak the same language and relate to the founding team on a personal level, building rapport and mutual respect. 

Mandalay was the brainchild of its four founding partners: Mark Gustowski, Philippe Ceulen, Timothy Hui, and myself, Al Fullerton. Coming from diverse educational and career backgrounds, we each bring specific skills and expertise when it comes to company growth, ensuring all aspects of the business are strategically managed by the partners.

As Managing Director, Gustowski boasts a long history of working at the C-suite executive level. He has partnered with and advised many fast-growth companies over the last 20 years. He also brings tech expertise, having previously worked with the Australian government to develop regional innovation programmes to support farm tech.

Ceulen is the Head of Strategy and leads our Innovation Platform, which encompasses programming, venture building, and community engagement globally, each of which is within Mandalay’s portfolio and across the entrepreneurial ecosystem. He also brings a great deal of experience in community and ecosystem building. 

Huiis the Head of Operations and focuses on growing startups, as well as leading fund operations and governance, and managing all areas of financial and legislative compliance.

And then, finally, there’s me. As managing partner, I have vast experience across agrifood technologies, renewable energy, and sustainability venture capital. I lead investor relations, global technology scouting, and portfolio distribution.

Also Read: The right way of interpreting the corporate venture capital road

Mandalay was founded by founders for founders, and our founder DNA is the ultimate in our risk mitigation and alpha generation tool, which we call “sleeves-up capital”.

Sleeves-up capital

Sleeves up capital mean rolling your sleeves up and helping drive the growth of your portfolio companies, providing so much more than just capital.

At Mandalay, we know what it takes to truly build a venture from the ground up, as we have personally gone through this journey as founders. What we can do now is impart our wisdom and learnings, not in a macro whiteboard quarterly catch-up type of way, but by really jumping into the trenches with the founders and helping accelerate the growth profile of the company, smoothing out that non-linear startup journey curve.

And by buying well and having a focused portfolio, the scalability of this model across the portfolio and the ability to truly add value to each individual investee company is well and truly there.

Venture Capital plays a critical role in the startup ecosystem. Without VC, the companies you and I take for granted each day – innovations that save lives or tech that feeds the masses – quite simply would not exist.

At Mandalay, we drive returns on investment through our sleeves-up capital approach, generating alpha while simultaneously mitigating early-stage risk for our investors. And we do this, all the while helping to ease the burden and smoothing out the daily challenges for investee companies and their founders.

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