In this episode, Keith Herman is joined by Daniel Ibri, the Co-Founder & Managing Partner at Mindset Ventures. Mindset Ventures is an early-stage Venture Capital Firm with a Venture Capital investing focus. They are primarily in the United States and Israel. They invest in B2B startups with strong technology applied to Agriculture, Financial Services, Healthcare, Cybersecurity, Education, and Enterprise Software. Their firm supports the growth and development of groundbreaking companies. They help them connect with the Latin American market providing them access to advisors and potential clients in the region.
Intro
Daniel was born and raised in Brazil. However, through time spent traveling he was able to get to know other countries and experience many different places. Now as someone focused on international Venture Capital Investing he is passionate about connecting founders and funders across countries.
Creating Mindset Ventures for Venture Capital Investing
Daniel started his career in strategy consulting and began mentoring start-ups and doing angel investments in 2009. He quickly fell in love with mentoring entrepreneurs and became passionate about helping people build companies. Over time he realized that Latin America, specifically Brazil, had a wealth of opportunities and could be a place to start and grow world-class companies, but there was a lack of connection to the foreign ecosystem.
That led him to create Mindset Ventures in 2016 with the goal of being the first and only Latin American-born VC where he set out to connect the dots between countries. Brazil is a historically hard economy to get into if you are not a local and don’t speak the language and, when it makes sense, he loves to help foreign start-ups to expand to his home country.
Firm Organization
Mindset Venues is a firm of 12 people spread across Tel Aviv, the US, and São Paulo. They are divided into four teams: backend operations, value creation, investor-facing, and investments. The backend operations team makes sure everything internally runs smoothly. The value creation team is focused on things like finding new rounds and bringing on new hires. The investor-facing team is all about outside-facing aspects like investor relations, fundraising, reports, and growth strategy. Finally, the investment team, where Daniel is focused is all about speaking to the companies, doing the initial filtering, reviewing the pipeline, discussing deal flow, company analysis, and due diligence)
Funding History
Mindset Ventures is currently in Fund Four. They did Find One when they began in 2016. Then in 2017, they did Fund Two which was essentially a continuation of Fund One. At the end of 2019, they did Fund Three. Now they are about 20% completed with Fund Four. Over these past six-plus years, they have done Venture Capital Investing in over 60 companies and made 8 exits. However, Daniel takes more pride in the quality of investments rather than the quantity.
Many people in Venture Capital know it is almost impossible to predict exactly how the exit will go. Accordingly, Daniel says rather than predict the timing, they consider the likelihood of an exit by understanding the founder. For example, figuring out if they want to stick out the ups and downs. Or, is it a long-term build or do they want to be out in a year.
When the last fund ended, Mindset hit its goal of completing 20 deals in under 3 years. To reach that goal, they had to look at around 5,000 companies. Many of those got filtered out in the initial due diligence phase because they didn’t fit the criteria Mindset Ventures requires. They only do Venture Capital Investing in early-stage US and Israel-based companies that do B2B software. Mindset Ventures typically won’t lead the round. They prefer to be value -add partners coming in between seed rounds and series B by investing anywhere from 1.5 and 3 million initially with the expectation of typically doubling that over time.
Mindset and PayJoy
One company that fits all the criteria for Mindset is a recent investment of theirs called PayJoy. PayJoy is a San Francisco-based FinTech start-up that developed a program used to remotely lock smartphones. The main use case is enabling people to use their smartphones as collateral for credit. This is especially useful for poorer classes in developing countries where oftentimes the most expensive thing they own is their smartphone. For example, someone in Brazil may need to pay for their phone in 10 or 20 installments because they don’t have cash or credit cards with high enough limits. This leads to a “buy now and pay later” agreement.
With PayJoy, that person can use the phone itself as collateral by downloading the app and allowing the seller the ability to remotely lock the phone if the buyer doesn’t make their payment. As we know, smartphones are how people do just about everything these days so there is a big risk associated with having them disabled. This ensures the borrower will find a way to pay their debts. Daniel says PayJoy causes delinquency rates to drop by around 50%.
Mindset saw that PayJoy was a great company with great technology and great founders, but the real draw for them was their plan to expand into developing countries like Mexico, Africa, India, and of course Brazil. The founder of PayJoy saw Mindset as the entry point to the Brazilian market, and they were right. As of today, Daniel tells us PayJoy has about 10-20 people on the ground in Brazil and they are growing very fast
Initial Contact
Daniel was initially contacted by a representative from PayJoy responsible for international expansion who was trying to understand the Brazilian market and the challenge associated with it. By this time Daniel had developed a reputation as the guy to talk to about bringing US companies to Brazil. After exchanging emails and phone calls, they had their first in-person meeting in Sao Paulo about two weeks later and Daniel was interested right away. After making a few introductions and teaching the PayJoy representative about the Brazilian ecosystem, Daniel eventually asked him if there was an opportunity for Mindset Ventures to invest. Soon after, Daniel was connected to the PayJoy founders, Doug and Mark. After some phone conversations, in-person meetings, and all the due diligence required, Mindset Venues officially became an investor in PayJoy.
Guidance for Entering Brazilian Markets
Daniel tells us there were a few areas he initially needed to give them guidance. Specifically, entering Brazilian markets and international value-added partners. He recalls being excited by their international expansion. But he had to help them adjust expectations about the time and resources it would take to accomplish their goals. He also said it wasn’t clear at the time exactly how they would be using the technology they had developed. But he knew that strategy was a work in progress.
Oftentimes when there is a new technology with many different use cases it can be hard to find the sweet spot. With early-stage Venture Capital Investing, the plan isn’t always crystal clear. However, that is why it’s essential to have someone like Daniel and Mindset Ventures on your side. Daniel says one of the main things he looks for when prospecting new investments is how coachable is a founder. If he makes a suggestion to pivot, will they take it into consideration.
Deciding to Move Forward with Venture Capital Investing
Before making the final decision to invest with PayJoy, Daniel and his team spent about a month gathering all the information, doing the market assessments, speaking to PayJoys current and potential clients, and exploring the ways they could add value.
When all was said and done, it was about 60-75 days from the initial meeting to the money hitting the accounts. Overall it was quite an easy deal to close. Daniel said the main challenge with this deal, and any bridge round deal is that the valuation isn’t clearly defined. It is highly conditioned by the next round so investors have to be very sure about the potential. The mindset was so sure about the potential that they wanted to invest more but the round was oversubscribed and there was no more space.
If you are interested in learning more about Mindset Ventures, you can contact Daniel Ibri by email at daniel@mindset.ventures or on LinkedIn at https://www.linkedin.com/in/danielibri/