PV LP Q&A Interview with Mike Cegelski

Mike Cegelski is a Managing Partner at Panache Ventures. From successful entrepreneur to investor and mentor in the startup community, Mike gets involved when it counts and where he can bring value. As an entrepreneur, he was involved with Beltron from 1984 to 2000 and iBwave from 2003 to 2015. As an angel investor and mentor, he has worked with more than 50 companies over the past 15 years.

Mike is visibly involved in the startup investment community through Panache Ventures, Anges Québec, the National Angel Capital Organization, and many other initiatives. Nurturing entrepreneurship is his passion. In 2015, Mike was awarded NACO’s Angel of the Year.

Mike Cegelski

Managing Partner

Panache Ventures

Mike Cegelski is an entrepreneur, investor, mentor in the start-up community, and Managing Partner at Panache Ventures. Since scaling several technology companies, Mike has gone on to work with more than 50 companies over the past 15 years as an angel investor. Mike is visibly involved in the startup investment community through Panache Ventures, Anges Québec, the National Angel Capital Organization, and many other initiatives. Nurturing entrepreneurship is his passion.

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Q: How does PV fit into your personal investment thesis?

A: I first invested in PV because of the unique model, which differs from most VCs. I was drawn to the smaller funds because they felt within reach, and was intrigued by the way that your team managed deals and seemed to operate more similarly to a family office. I liked the deal by deal approach and really wanted to learn the process. I also liked the guys.

Today, PV helps to connect me to the Toronto ecosystem and there is a bit of a VC strategy play between PV and Panache. Our deal flow could eventually feed into PV for later stages, so it makes sense to me.

There’s also a wonderful community around Plaza. The roster of personal investors was an additional pull.

Q: Prior to becoming a full-time angel investor, you successfully founded and exited two technology companies. What was the largest challenge you endured in scaling?

A: The first concern I faced in the past, and one that is still true and challenging today is finding the right talent. There is a significant shortage of ‘A players’ available to meet the demand. As an example today, AI expertise is extremely difficult to find.

The second major concern with scaling B2B companies is the time it takes to close deals. It is a long sales cycle.

Q: How have you seen the capital raising landscape evolve over the course of your career?

A: Because my companies were self-funded, I never required any VC funding. However, in the last 15-20 years, I have entered into angel investing and the VC world.

I think the landscape is getting better and better year after year. The expertise from investors and the understanding of the landscape continues to improve. There’s a lot of money available out there in general and I think that the industry has proven that entrepreneurs and investors can gain strong returns from funds.

There are more start-up companies than ever, so the ecosystem appears to be in the right place.

Q: In 2015, you were named ‘Angel of the Year’ by the National Angel Capital Organization (NACO) for your significant contribution to Canada’s angel ecosystem. As an active investor, what metrics do you use to evaluate the companies that you encounter?

A: First and foremost, the most important metric I use to evaluate companies is the team. The quality of the founders/ management/ people, their background, their drive, their focus, their ambitions, etc. The founding team is my first focus, and that is probably the most difficult piece to evaluate because it’s qualitative, not quantitative. Then, there’s the metrics and the business itself. I assess everything from: the product, product market fit, market signs/ pains, demand for the product, scalability, the financials and revenue model, international market reach, valuation, the structure of the deal, the capitalization table, the company’s board and the value of co-investors.

I also like to look at timing to market, which I feel is key to scalability. In other words, is now the right time for your product to come to market?

Q: Panache Ventures is looking to make 100+ seed and pre-seed investments by 2021. What advice do you have for early-stage entrepreneurs looking for your capital? And what advice do you offer to those same entrepreneurs when they eventually look to raise later stage capital?

A: For early-stage entrepreneurs looking for Panache’s capital, my advice is to have answers to all of the considerations above. Entrepreneurs must have a product or prototype ready and a comprehensive understanding of their business with respect to its history, metrics, financials and their market space.

I also think it is important for early-stage entrepreneurs to choose their first investors right because these will often be the people that assist with follow-on financing. Panache is positioned as a strong partner to many early-stage businesses because we are connected to all of the A and B rounds in Canada and the US. Make sure that your investors can bring long-term value to your business.

For entrepreneurs looking for follow-on investing, my advice is to ensure that your business is “deal ready”. Ensure your metrics and financials are up to date, keep a detailed record of what your company has accomplished.

Lastly, I encourage both early-stage and later-stage entrepreneurs to be frugal on their expenses. If you have an office space that you’re paying too much for, we will certainly ask you why. The less you spend, the further our investment will bring you.

Q: What attributes do you feel set apart a good entrepreneur from a great entrepreneur? Are there any particular characteristics or traits that you look to as an indicator of future success?

A: At our stage, people are the most important indicators of future success. Because the company has no substantial history, we need to be sure that the management team can execute and scale the business. We invest in people, not ideas because ultimately it is the people that are responsible for pivoting if the ideas prove to be fruitless.

I look for entrepreneurs that possess focus, ambition, good judgment, leadership and the ability to think big. While it can be challenging to assess management during an initial meeting, our team has developed a refined assessment method. I’d say it’s somewhat of an art. Let’s be clear, it’s not perfect and we do miss out sometimes. But most of the time, we’re pretty on the ball.

Q: A resounding theme of entrepreneurship is sacrifice. What sacrifices have you had to make in your journey to get to where you are today? On the other hand, what have you gained?

A: As a young entrepreneur, you have to be prepared to sacrifice almost everything. Early-stage founders are often required to take everything upon themselves at first (from the financials to strategy to sales to code, etc.), so it’s a major and important sacrifice. Having said that, it is definitely worth the ride.

The way I see it is the harder you work, the more you will ultimately get out of it. You may not receive financial incentives to stay on course on day one, but those entrepreneurs that persevere and remain focused will eventually experience the gains they seek. Perseverance is key.

Q: Entrepreneurs are often told to not fear failure. Have you ever had an experience of failure? If so, what truths about failure have you learned to embrace, and what role has it played in your success?

A: We all have failures as entrepreneurs. That is part of the journey. I have had many small failures in my life that I have learned from. While failure is inevitable, how you respond to it is important. You have to learn, grow, refocus and continue moving ahead without looking back too often.

I have no qualms with a good founder having experienced a few failures. I appreciate when an entrepreneur is upfront about their challenges, so long as they continue focusing on building what they set out to achieve. We all gain from our failures.

Q: What has been the best piece of career advice that you have received and how have you implemented that advice into practice?

A: I have a few. The first is “focus, focus, focus”. I think focusing is sometimes difficult for entrepreneurs because of our opportunistic nature. We want to touch everything, but discipline and focus are both extremely important when it comes to opportunity.

Second, “fail, but fail fast” is something that I think I learned too late in my career. As an entrepreneur, it’s sometimes difficult to give up on what you’re building when it’s not working because you want to prove yourself. But while you’re holding on and trying to prove something, you’re missing other opportunities. So for me, fail, accept it and move on.

Third, “think big” is something that I use to assess and validate my start-ups today. It’s amazing how many founders limit themselves by thinking inside of the box. They need to step outside and think bigger. It’s frustrating when I see opportunities for entrepreneurs that they don’t see themselves.

About Panache Ventures

Panache Ventures is a seed stage venture capital fund focused on enterprise SaaS, FinTech, and AI start-ups. Panache is led by a team of experienced operators, with a strong angel investor track record and years of institutional VC experience.

Visit the Panache Ventures website and follow them on Twitter.