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Posted Nov 1, 2022

Private Fund Feature: Mindset Ventures

Emily Sanders

Welcome to the Juniper Square Private Fund Feature, your monthly interview series with new and established funds in the close-ended space. In this edition, we are excited to interview Daniel Ibri, Co-founder and Managing Partner of Mindset Ventures, an early-stage VC focused on B2B technology startups.

Mindset Ventures Private Fund Feature Blog 2x
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Daniel, can you share when you first became interested in the venture capital space and what sparked that interest?

Absolutely, I got into the ecosystem of tech and entrepreneurship back in 2009. I was working in Management Consulting in Brazil and began mentoring startups out of the blue. I fell in love with being able to help an entrepreneur who has a spark in their eye, has big ambitions, and wants to build something new and change the world. As an advisor to these startups, change happened so quickly. Any advice I would provide to them was implemented immediately. We could track if things were working in a matter of days, which was a stark contrast compared to management consulting where change is tracked over months and years. This was all very exciting to me.

From there, I started doing some angel investing and at the end of 2011, I decided to reshift my career. I left the consulting world to start my first venture capital fund in Brazil, Grid Investments. One of our first investments was in Pagar.Me, a Brazilian fintech company. Years later, their founders would start Brex in the US (a well-known fintech unicorn).

Following the success of my first fund, I was invited by Microsoft in 2015 to run their corporate fund in Brazil. We built a multi-corporate fund between Microsoft, Qualcomm, Monsanto, and other relevant Brazilian companies and banks to invest in Brazilian and Latin American startups. In the middle of 2016, I spun out of that to build Mindset with the idea of being the first Latin American VC to form a bridge between entrepreneurs in the US, Israel, and the Latin American markets.

This is Fund IV for Mindset, what excites you most about the journey you are about to embark on?

We’ve raised and deployed three funds, raising fund IV now, and are about to publicly announce our first close.

Fund IV will be the same strategy but what really excites me is to fulfill the potential of our team and all the processes, disciplines, and governance that we’ve built over the years. As you grow, you learn how to build the right processes, how to make the right decisions, how to evaluate startups, and how to build a team with the right people on the front lines—and I feel that we are now fully mature on that side.

Fund IV will be our largest fund and the first full-scale fund where we will implement the full strategy. It's the same strategy but with the right people, the right processes, the right focus, and the right tools, which is pretty exciting. Of course, bigger funds mean bigger check sizes, more participation and ownership, and exposure to companies, etc. which is also pretty cool.

How do you rank the importance of your relationship with your LPs in the current environment?

It's extremely important to us and we try to be very communicative and transparent with our LPs. Since venture capital is a very illiquid asset and it takes a long time to know if you have truly succeeded or not, investors are not only trying to get returns but also want to get some knowledge and transparency and learn what is happening in the ecosystem. As this is very far off from their day-to-day, we strive to be very transparent and bring them as close as possible to what is going on.

At Mindset, we do two bi-annual update calls, and every quarter we send a report with market research. Lastly, we organize two field trips a year to Israel and Silicon Valley where we bring LPs with us to see the companies and meet the founders and the ecosystems we operate in. The relationship we’ve developed with our LPs is great and I think that is why they continue to re-invest in our funds. Many of them have been partners since Fund I.

What are the biggest opportunities and challenges for Limited Partners investing in early-stage technology?

As far as opportunities, I think if you join the right companies at the right stage/time, the returns can be amazing. Of course, it is challenging because there are so many companies and lots of investors, which is exciting but also can be a challenge. You have to know how to segregate, how to really choose, and how to make a decision.

And, VC is really exciting but it is really important to get out of the excitement and use more processed criteria in decision-making governance so that you can be flexible and agile but also take some of the excitement out of the equation. You see this happen all the time—someone will go and invest in a company that everyone is hyped about and thinks it will be a unicorn, and then you do whatever you can to write a check when you didn't even look at the company, and then it blows away two years later. We aim to avoid this at all costs and be more rational in the decision making.

If you can find access to the right opportunities and know how to analyze them, then there is a big opportunity for LPs.

As far as investing in early-stage companies, just look at the current markets. They are a bit crazy, valuations are falling, and stock markets are falling—but if you look at early-stage deals, the impact is minimal. In early-stage technology, there is so much time to be proven right, and so much upside to be generated that the impact goes back to the quality of the founders, the team, the technology, the market they are addressing, etc. We believe that the opportunity for LPs investing in early-stage companies, especially in this environment, is really attractive vs in pre-IPO which has struggled a lot over the past 6 months.

Are there any insights you would like to share on the new macro-environment we have experienced this year?

The current environment we are in is going to affect everyone. It will affect some more than others, but everyone is impacted. There are always ups and downs, there will always be highs and lows and it is just part of the job. Nothing really unusual on that side.

It’s important to pay attention every time there is a correction or shift in the markets because if you look at recent valuations and all of the metrics surrounding them, they were completely crazy. Everyone knew valuations were crazy but kept doing the same stuff. It is critical that sometimes the market breaks and says no, this is crazy, let's correct and push back a bit. Let’s go back to thinking about margins and generating cash flows and then we can start hyping again. I am sure it will go back to how it was at some point—I am just not sure how long it will take.

The most important takeaways are:

1) Don’t be afraid. It is part of the game and over a ten-year period, things will happen.

2) Know when to enter and when to exit. People usually do what is counterintuitive. When everyone is hyped and everyone is investing you want to invest as well. But actually, that is the worst time because everything is expensive. When things are falling everybody is afraid but those are the best times because you can buy lower, you can buy cheaper, there is less competition, and you still have 5-6 years to realize and sell, and there is still a lot of time for the market to recover.

What is your outlook for the VC space for the second half of 2022 and beyond, and why should LPs be excited about investing in early-stage technology in 2022?

In terms of the outlook on the market, this year is done and I don’t see any big changes happening this year. I think it will be very slow the remainder of the year and the pace of deals and the valuations will be much lower than last year and that's ok.

I do see a positive outlook for next year and onwards. After Christmas and after the holidays when things are a bit more established, I think people will move past the initial fear of the surprise that the world has blown up. Ukraine will still be at war, COVID will still be there but it won’t be imploding the world and people will start to get refocused. With some help from the central banks and the interest rates, I think we can put the world economy back on track. I am very positive for the second half of next year onwards, I think we will be able to grow again.

For LPs, they can use the current environment to invest both in funds and direct investments in companies that need capital to weather this storm. As far as types of opportunities, there is a whole new world that was built post-COVID where remote work is the new norm, where you need tools to engage people and to facilitate that relationship completely remotely. That fostered a whole new boom of companies from streaming to gaming to delivery and you can see a trend of everything web3-related. Looking at the distributed world and how it behaves in the coming years with technology is very interesting to us. Not only crypto but how blockchain, the metaverse, and all of these things work together to build a new world for younger generations.

What was important to you when selecting your service providers?

There are two types of service providers: there are those that interact with LPs and those that interact with us.

For those that interact with LPs, we are really concerned about the kind of services that they can provide to LPs and how they will be delivered. At the end of the day, it is our image with our LPs so the type of service we provide is very important, and picking the right partners is vital. It’s also important to us to choose partners that know the VC space well because it is a very niche space. Especially, if you are talking about fund admin, audit, or bookkeeping—you can’t work with just anyone because you will lose credibility.

What led us to JSQ was that we had great interactions with you and the teams, you showed credibility, understood the language, and worked with similar funds. You also offered a unique and integrated process that was valuable to us on the management/GP side but also to our LPs on both the ongoing relationship and onboarding side. It is really beneficial for our LPs to see everything online and in one place.