VC Profile: Wavemaker Partners’ Michael Mizrahi

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Michael Mizrahi is an early stage investor at Wavemaker Partners

From an early age, Michael Mizrahi knew that he wanted to be an entrepreneur.

Growing up, he spent his days at his parents’ various retail and wholesale businesses. His parents, successful serial entrepreneurs, ran everything from coffee shops and gift stores to a wholesale business which imported brasswares. Admittedly, Mizrahi was the “essence of what a mallrat was. [I] grew up in a mall, at my parent’s stores, [and] at my parents’ warehouses.”

Mizrahi remembers one time when he was playing inside one of his parents’ Costco-esque warehouses. 

“I remember seeing customers come in, and seeing them stack picture frames that they want to buy on the table. My dad would just count out, ‘Ten of these picture frames are $100. Four of these are $7.’ I remember seeing the transaction. There was cash moved from one side of the table to the other side. I thought that was cool. I liked [seeing] the casualty. You sell something, you get the money.”

Inspired by his parents’ entrepreneurial spirit and a desire to create meaningful impact, Mizrahi knew that he wanted to become an entrepreneur.

Later on, Mizrahi enrolled at the University of Southern California, where he majored in entrepreneurship. There, he started a consulting company to help small mom and pop shops with their businesses. One of the businesses he consulted for happened to be a small boutique investment bank. 

At the firm, Mizrahi performed a variety of small, yet important tasks ranging from “setting up HR systems to negotiating office space.” However, his duties at the firm would eventually grow beyond his traditional consulting services to include more finance related tasks. For someone who didn’t have a background in finance, Mizrahi was entering unfamiliar territory. But he knew that if he persisted through it all, his hard work would pay off.

And he was right. 

When Mizrahi graduated in 2009, his boss at the firm noticed his ambitious attitude and gave him a shot at investment banking. He started out as a junior analyst, a position he didn’t even know existed, and focused on “the most basic work.” He was still relatively new to finance and had lots of catching up to do. But with the support of a nurturing team and a hunger to learn the space inside and out, he became more comfortable in his role and successes began to come his way. 

For 6-7 years, Mizrahi dealt with mergers and acquisitions and worked directly with founders of early stage businesses. During his time in investment banking, one area always stuck out to him: the interactions he had with entrepreneurs.

In one of his deals, Mizrahi was captivated by the entrepreneurial mindset of two cofounders he was working with. The pair came to Mizrahi looking to expand their startup’s presence on the national level or make a successful exit. But when they were able to elicit multiple acquisition offers, all of which were far below their expectations, they decided to press onward without accepting any. Although the pair left without taking the offers, Mizrahi admired their decision and drive.

“They had [the] hope and the conviction that this business would really scale up to be something much bigger than what it is today, and what people think it is today. I appreciated that they had the foresight and the conviction to see that this business is going to be the next Ticketmaster… to see these people stick to their guns even when they had offers on the table for their business– I appreciated it.”

Through his time in investment banking, Mizrahi developed lifelong connections and skills applicable to many areas of business. By the time Mizrahi left investment banking, board members of CBS, Yahoo, and DirecTV and owners of companies like Eric Manlunas–the founder of Wavemaker Partners–and all knew his name. 

Yet despite Mizrahi’s successes in investment banking, he notes that there were a lot of drawbacks. First, Mizrahi believes that bankers stop learning many technical skills as they advance through the ranks. All of the skill sets that he’s developed and continues to use on a daily basis were developed during his time in lower level positions. 

Also, due to investment banking’s transactional nature, Mizrahi often found himself moving onto a new client before he got a chance to develop a meaningful connection with the last one. This didn’t fit well with his interests. Mizrahi wanted to develop closer relationships with the founders, and, ultimately, see his actions lead to startups to unfettered success. In investment banking, this isn’t easily facilitated. 

So when Mizrahi was contacted by Manlunas about an opportunity to join Wavemaker, he couldn’t resist. Mizrahi had the chance to finally join an industry where he could fully dive into entrepreneurship and create a constant impact on early stage startups. Soon after, he packed his bags and switched his title from “Investment Banker” to “Venture Capitalist.”

Eric Manlunas, founder of Wavemaker Partners

At Wavemaker, Mizrahi found parallels between his new firm and his old investment bank. Both are smaller businesses in comparison to their respective industry titans, and at smaller firms, regardless of their industry, employees have to work extra hard. 

“…[it doesn’t matter] if you’re an analyst or a managing director, if you need to stay late to print books or throw out the trash, that’s what you need to do. And the same thing with Wavemaker. It’s a small shop, and Eric, our founder, lets us have as much latitude as we want. We can evaluate deal flows. We can build out models. We can talk to anyone and everyone we want to learn about their business or do any part of the jobs in the firm… at Wavemaker, I’m able to do what I think is important in being a VC.”

Mizrahi also found that venture capital was more suited to his desires and goals than investment banking. Instead of closing five or six deals in a year as a banker, a VC (venture capitalist) may only do three or four investments. For Mizrahi, this means he can spend more of his time working directly with founders, even long after he makes an initial investment. 

“It’s not like once you give them that quarter million dollar check, or half a million dollar check, you walk away. It’s not a transaction. A lot of our investments have spanned more than 10 years. [So] we need to like that person– we need to have that conviction that, ‘I’m going to be standing behind this business to the next 10, 12, [or] 5 years.’“

Equally as important to Mizrahi is the fact that venture capital isn’t transactional. At Wavemaker, Mizrahi is deeply involved in “forging real relationships for the long term, especially at the early stage game.” He is always looking for ways that he can help his founders.

“Every quarter, we send out updates to all of our CEOs. I read every single one of them. I go through every single deck. I see how their numbers are moving, and then we reach out to the CEOs like, ‘Okay, how can we be helpful? I see that your churn rate went up, why did your churn go up?’ Was it a cause of your competitor? Are you guys still advertising? Whatever’s going on in that business, we jump in, and we start helping them as need be.”

Wavemaker also allows Mizrahi to fulfill his own entrepreneurial aspirations by helping founders grow their startups and face various problems. Whether it’s by utilizing his personal network to connect CEOs or thinking of ideas to help them grow their revenue, Mizrahi becomes “that founder alongside them.”

Since joining Wavemaker, Mizrahi has focused on early-stage startups. The startups that approach him always have a possibility of drastically changing in even just a few years. Other than his early-stage niche, Mizrahi loves working with businesses that have authentic solutions and a team he can believe in, regardless of their industries or business models. But he notes that working in venture capital is not as glamorous as it’s often made out to be. 

“It’s not all fun and games. It is a lot of tough days [and] tough conversations. You have to hire and fire people. You have to kiss a lot of frogs to get a prince or [get] a successful exit.You have to deal with the situations in between day one [and the day you exit].”

While there’s always the potential of coming across the next Uber or Airbnb, the reality of venture capital is often much more humbling. In fact, Mizrahi admits that he doesn’t need every one of his startups to grow into unicorns. He realizes that investors and founders make mistakes, too, and he likes to approach every investment optimistically. 

“If some company quadruples, that’s fantastic. Why complain about a quadruple? Sometimes you get a double, Sometimes, you invest in a company, and you just get back your money. And you’re like, ‘Okay, we learned a lot. It was a good bet, [but] things didn’t work out. [But] hey, we got back our money. It was a good day.’”

Although the journey from initial investment to exit is hard to predict for both startups and their investors, Mizrahi believes that a company’s founders are a reliable indicator of their future success. Specifically, he looks for founders who can adapt to challenges on the fly and exhibit patience and level-headedness. 

“I’m more than happy when I ask some founder, ‘Hey, tell me about this thing, or why is this the problem?’ And he’s like, ‘Let me get back to you.’ I’m always happy when people say, ‘I don’t know. I’ll get back to you.’ Being wrong is okay. It’s all about having the right attitude.”

Through his work in venture capital, Mizrahi hopes to continue helping ambitious entrepreneurs reach their dreams. Becoming an entrepreneur is still his end goal, but in the meantime, Mizrahi loves the insights that he learns from his founders. 

“I learn from their successes and their failures. And one day, I will apply that to my own business, whether it be starting a roofing company or starting the next Zoom. There’ve been a lot of companies that have pitched to us, and then we passed [on them] because we didn’t believe in it, that have gone on to raise a significant amount of money. But there’ve [also] been many other companies that I’ve seen that we pass on that fail miserably because we were right in our belief.”

Through his extensive exposure to a variety of startups and different problem-solving methodologies, Mizrahi plans to use all of his teaching moments in his own future. Additionally, Mizrahi has also developed another, more recent attraction to entrepreneurship: providing for his kids. 

Blessed with parents who “worked to the bone to succeed and give me and my brother everything that we ever could imagine,” Mizrahi wants to give his children the life that he was afforded because of his parents’ entrepreneurship.

While Mizrahi’s future in entrepreneurship is still being written, his journey is marked by his desire to “fight the fight. I like being in the trenches. I like putting in work and seeing results.”

Advice to Improve Your Pitch

“Everyone’s a salesperson. [If] you’re a doctor, you’re selling services. [If] you’re a lawyer, you’re selling yourself. [If] you’re a garbage man, you’re selling yourself to get that job. [If you’re a] technical CEO, and know backwards and forwards how to create whatever product you’re creating, you’re a salesperson. You need to sell yourself to the VC. You need to sell yourself to the first few employees. You need to sell your business. So entrepreneurs need to know how to present themselves and know how to sell. The moment they get that right, I guarantee you they’ll have a much easier time interacting with VC’s and getting their point across and getting that VC funding.”

How NOT TO Improve Your Pitch

“I hate a big ego. It’s okay to say, ‘I don’t know.’ Another thing that I love [is] when I see in [pitch] decks, ‘First year we’re gonna do $2000 in revenue. Second year, we’re gonna do $30,000 in revenue. Fourth year, we’re gonna do $120 million.’

How are you going to go from $2000 in revenue to $120 million in a matter of four years? I understand the idea to sell, but you also have to temper things and not oversell. The last thing you want to do is oversell yourself.”

Advice for Early Entrepreneurs 

“Go in with your eyes completely open that ‘this may fail, and failing is okay.’ You need to understand that there’s going to be potential months and years of you making next to nothing, and then potentially hitting it out of the park, and then potentially failing again. I think the number one thing that entrepreneurs need to know [is] that it’s okay to fail. The second thing is [to] get really good at your vertical. Know your stuff, become great in sales, and I think a lot of it will just happen on its own when you start doing those things.”