An article about venture capital fund Mangrove Capital Partners in Expert

The latest issue of Expert magazine published an interesting article about the venture capital fund Mangrove Capital Partners, the one that funded Skype and invested in Quintura. It was especially interesting to learn how startups are eliminated and selected.

“The method of sorting out companies in Mangrove has been put on stream. In total there are four phases of screening. The fund invests only in companies that are engaged in the Internet, programming or media business. David Varokvir specifies: “media” does not mean that the fund can invest in a purely content project - “some code must always be present”. Thus, 1,500 software and Internet companies arrive at the entrance.

“The first phase,” explains Toulouse, “is for us to read the summary of the project.” Executive summary is a short general description, on one or several pages, where all key facts are stated. We no longer read. Typically, 70 percent of projects on this and fly. For a project to be interested in a foundation, it is necessary that one of the partners select it from the general heap.

In total, Mangrove has seven partners. If the project has a sponsor in the person of one of them, the second phase of screening is an internal discussion. A partner who has decided that the idea outlined in the summary deserves support should “sell” his enthusiasm to another partner. After internal discussions, the dropout rate rises to 90% - two out of three companies fly by after convincing a sponsor partner after discussing.
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If several partners agree that the company is worth the attention, it is invited to an in-person presentation. Partners can visit the company, meet with the entrepreneur, inquire about him, about the product and the market primary information, but the final decision on this phase is made collectively. The company arrives in Luxembourg, at the headquarters of Mangrove, and speaks to all seven partners. Investment decisions are made only unanimously. If all seven agree, the company receives the coveted protocol sheet in which the fund sets out its terms for the investment transaction. The dropout rate at this point is 99%, only 15 companies out of 1,500 receive therm-shit.

It is considered that to receive a therm-book is to receive money, but in practice this means that the fund only intends to make a serious investment, but did not undertake. The company signs an agreement on exclusivity with the fund, refusing from other negotiations with investors for two months. During this period, the fund's specialists meticulously research the company by all means (this process is called due diligence). If during this study Mangrove’s initial expectations are confirmed, the transaction will take place. But in two out of three cases this does not happen, and thus successful negotiations with the foundation are only a third of a chance.

At the exit, investments receive 0.3% of all companies, or five per year. One of them for several years is thus Skype, which everyone knows, and pulls the entire portfolio. Thus, the venture business is a very specific statistic.

In Russia, Mangrove and ABRT are also building a similar system, adjusted for the situation.

“We will build our brand in Russia,” says David Varokwir. “Therefore, every few months we will have a“ start-up day ”: bring together several young companies and work with them purposefully.

“The idea of ​​a start-up day,” explains Ratmir Timashev, is a proactive search for companies. Companies themselves must come to the fund, and we must look for them. We select about 15 companies, invite to Moscow, here they communicate with us and make presentations for us. From this amount, we select two or three, and they are already going to the presentation in Luxembourg. "

Full article here