Interviewed By The Asian Banker Live
Spiros Margaris, renowned fintech investor, tells Emmanuel Daniel he must like the managers of the start ups he invests in on behalf of family offices and other investors, and they must have a compelling story
Here is the transcript:
Spiros Margaris on choosing the right investments
ED: Spiros Margaris, thank you very much for spending time with me today. You are the founder of Margaris Venture fintech. You’re one of the most prominent commentators on innovation and fintech and all that’s happening in finance today. How big is Margaris Ventures?
Spiros: In what terms “big”?
ED: In terms of funds under management.
Spiros: No. I work with family offices and other companies through Comvest. So, it’s not my own fund. Usually I join as an advisory board member of the funds – of the startups I’m involved in. And basically, it’s other people’s money and my money that goes into those investments. I basically facilitate things and also evaluate things.
ED: So, two sides of the equation. One is how much funds have been invested in total?
Spiros: I haven’t counted, but of all the startups I’m involved, is quite – hundreds of millions. But it’s not my money, it’s money from all kinds of ventures.
ED: I understand. I understand. And on the investment side, how many companies have you invested? What sort of profile?
Spiros:Oh, that’s a good question because I have to start counting. But it’s from cyber security to insurtech to fintech to even cannabis as a lifestyle. It’s a listed company in Canada. I’m across the board.
ED: Okay. And what is the running theme in the investments that you make? Growth?
Spiros: Yes, of course. It’s basically very promising companies. And it sounds very simple, but companies that usually already have traction, they already acquired customers, they’re on the right path of success. And usually they approach me if they need outside advice additionally. I mean I’m just one of the players. I see myself as a player, as part of a team. And of enhancing their brand because of course through my audience they get more recognized.
Spiros: And branding is very important because branding is trust.
ED:In some ways, would you consider your business model a funding model? Is it a funding industry? Is it a capital markets industry? Or is it a technology industry?
Spiros: It’s a technology industry. That’s what I say.
ED: Why do you keep insisting of it being a technology player when actually what you’re doing, or your income is from funding and then from selling them.
Spiros: Yeah. But I see a technology innovation industry. Because I mean I don’t look at – I look at those investments or firms I’m involved in as money. I look at it as a journey. And it’s a privilege to be involved with Wefox Group, InsurTech that raised 125 million two weeks ago. It’s a privilege to be one of the team players of the Wefox Group. But most of the work is done by them. I mean almost all – everything is done by them. I’m just an advisor to the board.
ED: At the same time, you have investors who trust you to put their money. And there’s a fee element in there.
Spiros: No. It depends where I am. If I’m already involved in a company, there’s no fee element. Because I’m already involved in their company and very transparent. I’m transparent of all the companies I’m involved in. So, when I rave about a company, basically I rave about a company I’m believing in. Because transparency is very important. Also, on this level. So, when I talk to investors, they know exactly that I talk my book. But hopefully they know that what I say I believe.
ED: Because it’s a unique or unique model of asset management or capital markets.
Spiros: And ethical judgement. Yes.
ED: Where a lot is based on the reputation that you have in the industry and your take on where technology is going and what kind of people it will take to make the change. How did you get into this role?
Spiros: I think I was at the right place at the right time as I said to the – as I always usually say. I come from a hedge fund business originally. I’ve been in money management my whole life. So, when I left the Family Office in 2010, I found – I tried to figure out what to do. So, I wrote about innovations. And then Family Office approached me and said, “Hey, don’t you wanna do something for us?” I say, “No, let’s invest in something.” And so, one thing the other. And the industry, fintech Industry, InsurTech, AI, the whole thing just grew during my time.
So, I guess I was at the right place, but I also put the work in. So, I mean that I’m also invested in successful companies that probably enhanced my reputation. But at the end of the day it’s a community.
ED: What were your initial wins or your initial success stories that just enhanced your reputation?
Spiros: They’re smaller ones. I mean the startups – actually, it’s not even the investments I made, but I mean – but it’s more the community grew that made – but that’s like parallel. But I mean I’m in a cannabis business that went out in December with $0.25 and now we’re at $0.75 after three months. People pay attention to this. I mean that’s a tripling of a listed stock. But startups usually don’t have this listing. You would just have the last investment side.
Being a private equity manager versus hedge fund manager
ED: All right. Now, there’s the skill of a private equity manager.
ED: And there’s a skill of a hedge fund manager.
Spiros: Yes. Very different.
ED: Yeah. And you seem to be somewhere in between. Are you more today a hedge fund guy?
Spiros:No. No. No. No. The only thing I keep from my hedge funding experience, I lived in America for so long, is if the story’s not good then it’s probably hard to sell. Like I say usually, “The business concept has to be easy to understand if you’re in the BDC market. And the story has to be good and well told.” And I always write down my investments to zero until I cash out until the moment comes. And be realistic. The most successful startups become, the less you have any impact of exit.
ED: Takes a life of its own.
Spiros: Yes. And then it’s like all of a sudden, we sold, check. Or the company went under.
ED: Right. So, what is the most important discipline that you need to have to take a view – take a position? Is it an understanding of the people, understanding of technology itself, or just be agnostic about everything and just going for businesses that have good returns? I mean cannabis, for example, is...
Spiros: We’re talking about lifestyle cannabis. Medical use, etc.
Spiros: And cannabis just to make sure we’re not into drug.
ED: Well, that’s the cannabis story today, right?
ED: I mean the cannabis story used to be different.
Spiros: It’s a life. Yes. But it’s different now.
ED: Yes. So, what makes it a lifestyle – a life cycle story today? It’s because of the medicinal value?
Spiros: Yeah. Yeah. So, it’s a correlation behind it that you believe it will provide you some relief or some feeling better. As an example, if we talk cannabis. But talk about would you say it – I’m very pragmatic. As I said, I say what I think.
Spiros: I’ve had failures. New York startup failures. So, I know a little bit about what it takes. But then again, I also know anything can go.
ED: Okay. So, talk to us a little bit about the failures you’ve had.
ED: What did you learn from them? And what were the failure – where were the failure points? Was it that the technology that you bet on was at an end stage? Or that the execution was bad?
Spiros:I think mostly its execution is bad. And in terms of management or they’re not handling money wisely. Because, as I said, the longer you survive, the more likely it will be successful. I was involved in one company that went from $10 million to $300 million listed in payment. And then the founders fought each other, and it went down to almost zero. It’s so volatile. All of a sudden, they get to a certain level where things need to change, maybe bring a different management, and then egos come into play. But that’s why I always write things down to zero. And then you can look at things.
ED: Whatever happens is a profit.
Spiros: Exactly. The way you talk to people it’s different. Because I don’t have – I’m independent. If we would stop working now, nothing would change my life. Maybe let’s not work, as long as I stay healthy. And independence is a very good thing because it’s like you would like to be part of the story, like Wefox. This Wefox InsurTech Group, which is the biggest in Europe now, I came in last June and was privileged to be an advisor to the management, but they’re doing such a fantastic job. So, it’s a privilege to be associated with such a great brand.
ED: But you’re never majority. You’re never controlling them.
Spiros: No, at Wefox anyway, not. Because they were already two far successful.
Spiros: And there I was just part of the team.
ED: But isn’t some form of influence of the process is important to you at all?
Spiros: No, it’s not. Because realistically if they wanna listen to you, they do. If they don’t, they don’t. But the fact that so many people listen to what I say as an influence. I mean last year I had over 55 million readers on Twitter alone. I have over 73,000 followers. And we’re talking about a very specific field. It’s not teenagers, it’s CIOs, journalists, etc. I think it would be smart to listen to an opinion, but in the end it’s their responsibility to call the shots.
The future of Artificial Intelligence
ED: Right. But let’s talk about – a little bit about future technology, okay?
ED: How invested are you in Blockchain or in artificial intelligence? Where do you think it’s going?
Spiros: Blockchain I’m not invested at all, but artificial intelligence I’m invested in a cyber security firm that basically through AI machine learning takes illegal content down. So, basically paid TV, sports paid TV,and they pay millions of dollars to show it in their country, they don’t want people to use YouTube to see it – to watch it illegally. And my company, which I’m part of it, they take this illegal content down within five minutes. So, it’s very valuable because when your content is free, there’s no value. So, the less illegal content is out there, the more valuable your content is. So, therefore without AI machinery you could not do that. I mean you can’t just check everything.
ED: Yeah. So, in that regard, you – control is not very important to you, but do you then go in with other investors whom you think have – share your vision and stuff like that?
Spiros: Not even. I don’t really care. Because why waste time on things I can’t change?
Spiros: Does it shock you?
His philosophy and decision-making process
ED: I’m trying to, through this interview, create a profile of your decision-making processes. And at which point do you have control of your own destiny? Because you’re invested everywhere.
ED: And yet, you just let things run as they go. And in the investment universe there are several very clear disciplinary profiles. And I’m trying to place you.
Spiros: I’ve seen them all. I mean I’ve been a big believer in Warren Buffett. If you’re in the business for over 30 years you will follow a lot of people, from Tuda to Robertson to Warren Buffett. But in the end, it’s like an artist. You copy people and then you define your own style. I define my own style that I don’t care.
Spiros: I care, but it’s like Zen. I do my job well.
Spiros: I do my job very well. Or at least I try. But I don’t believe in trying to change other people. Because if you don’t have the right people, what are you going to change? You’re gonna tell people – like Lombard, the big investor who invested in – it was one of the big, it went under anyway.
Spiros: We should not believe that we are much better off managing things.
ED: Okay. That’s an easy to understand philosophy, but yet something which nobody really subscribes to because control is very important to them.
Spiros: I don’t believe that. I mean if things you can’t control, why do you wanna control it? But there’s things you just leave it. And it’s much better if you leave and adapt. I can control my destiny. I always tell people I always wanted to be Spiros Margaris. Now I am.
Spiros: That’s my philosophy.
ED: Well, that’s a happy position that not many people are able to have.
Spiros:I had bad moments in my life, but that’s why I’m here because that’s what credibility comes from. But I don’t think – control is not the way to go.
ED: Okay. Why not in Blockchain? Why aren’t you in?
Spiros: Because I think we are still early in the development. So, the fruits of success are way off. So, therefore why invest my time? I mean there are other smart people/organizations. They do invest in the private Blockchains which work, like in shipping, etc. But it’s not a game I would be good at playing. I mean I know what’s happening, but it’s not something – there’s not much input I can give there. But we’re still early and I think we’re gonna be some – we’re gonna see successes as I said. As I said too, it’s the Viagra effect. Viagra was made for blood pressure; success came from something else. Blockchain has some intention, but maybe the success will come as a trust verification for news, whatever. We don’t know. I might be wrong.
ED: Okay. But if you are right, then you’d wait until the business model is clearer?
Spiros: Clearer, but not clear. Know why?
ED: If it’s too clear, then the investment unfortunately is not...
Spiros:If you analyze something to death before you invest, you have the answer, but not opportunity. And therefore, go with your gut feeling and assume some will go under.
ED: So, you wouldn’t classify your investment style in any form that a regular investor can understand how you do this?
Spiros: No. Yeah. No. A regular investor can’t understand it because look at Warren Buffett. Do you think Warren Buffett invests in things value play, not startups? But he doesn’t mix up with these companies. I have this very much in common with Warren Buffett. He doesn’t mix up with any of his companies. He lets them run by the management.
ED: That’s true. And at the same time – at the same time, he looks at the financials and has an income stream.
Spiros: Yeah. But it’s his game.
Spiros: But we talk about startups, it’s very hard to look at the financials. I mean they’re running losses.
ED: Yeah. But at the same time, you’re not – you’re insisting it’s not a game of – like selling art, for example, it’s – you sell it to series A, series B, series C.
ED: Yeah. So, you have Amazon, which survived long enough. And actually, you subscribe to that which is if you survive long enough therefore you have a story.
What to look for when making an investment
ED: At the same time, you’re not looking for an income stream, right? So, I’m trying to figure out from you what is your exit and at which point do you benefit from the positions you’ve taken?
Spiros: That depends. Basically, unless the company’s – I can sell my shares anytime I want. Which I’m involved in listed companies, but...
ED: How active are you…?
Spiros: No, not even that. I’m not. I’m not actually active.
ED: You buy it and then you forget about it then?
Spiros: Kind of. I mean if it goes down like some companies go down, it hurts a little bit. But that’s part of the game. But for the startups, there’s no point to think about exits because I don’t think the good startups think about exits. The good startups they think about wanting to dominate the space, change the status quo.
ED: You like that, do you?
Spiros: I love that. And they do not think about selling. I mean maybe one day they will be forced to sell because investors want to get the money, the big ones. But I find it much cooler to be part of great startups. Because you talk to a lot of smart people. The fact that we talk now here is also a fact that I’m involved in so many companies and I’m an influencer. And so, we have this great conversation. So, that’s privileges we have.
ED: Yes. So, the profile I’m trying to draw is, 1.) Is the discipline by which you make your decisions. 2.) Your own take of where the technology is heading, right? So, in that regard, you like players who like to dominate their marketplace. That sounds to me like you like platforms.
Spiros: I think eventually some players will become platforms. Yes. They will want that, but not everyone. But, yes. Because platform is a – either you wanna be the best milk in the supermarket or you wanna be the supermarket. They’re two different approaches.
ED: You accept both approaches?
Spiros: Yes. Yes. But because not both approaches apply to every startup. Some startups will never be a platform. Some startups are just good and selling milk.
ED: Right. Or even making milk, right?
Spiros: Or making milk. But that’s where they really excel.
ED: Right. So, you’re looking for the excelling point where distinguishes them and makes them unique – a unique proposition.
Spiros: Yes. Absolutely. It’s a great thing if you can associate yourself with some startups which would – had a little base of a part of it. It’s a privilege.
ED: Tell me about a company that you liked that you enjoyed investing in and you saw it grow and it fulfilled all of the elements that you had.
Spiros: Yeah. I mean Capilendo it’s a crowd-lending platform in Germany. They have excellent processes. An excellent team. Not much impact for me other than as an advisor. And whatever they do, I must say I’m very proud to be part of it. Or Mediastalker, the one that takes down illegal content, makes me very proud because I’ve been involved even more. And I think most of the time you’re proud of hopefully most companies you’re involved in. Even some failures because – I had two startups in New York and failure. And sometimes it’s the wrong timing. And sometimes you make mistakes that can’t be corrected.
ED: It’s very interesting because some people like reading books. And then at the end of reading books they put it away and they say, “I liked reading that book.”
ED: Whereas you’re someone who invests in a company and at the end of the day you’ll say that, “I like the people there. I like what they’re doing.”
Spiros: Yes. Very much so.
ED: “I had a great time investing in this company,” right?
Spiros: Yes. Or being part of it.
ED: Right. And the people that you co-invest with, what do they expect from you?
Spiros: Oh, they’re very different. They are maybe more the types you – because depending how much money you put in, if you have a venture capital fund, they have some other obligations not to themselves, but to investors. Therefore, you think about exits. You think about. But me, I only have to answer myself.
ED: And those who coinvest with you have to subscribe to your way of working?
Spiros: No, not really. Because I introduce great propositions. And since my piece of it is much smaller usually than their piece, it doesn’t matter. I don’t have to change them. It’s just we all look at a good company. And they have their approach in their obligations and I have mine.
ED: Do you learn from them? Do you see things that they see or do situations?
Spiros: Yeah. Yes. And we always learn from each other.
ED: Right. And final question, in terms of AI, for example, where do you think this is heading? That as technology changes a number of things that happen, one of which is there’s a lot of destruction in value, prices fall, the ability to make money is affected and all that.
Spiros: Yes, good point. Job losses.
Where Spiros is heading
ED: Yeah. So, in all of that, how do you identify value? And what do you put your finger on to know that the companies that are being created will survive that process?
Spiros: With AI you mean?
ED: Well, yeah.
Spiros: In general?
ED: As a frontier technology.
Spiros: I think its survival of the fittest. And I can’t change the consequences of success because it will force some other players out. It will have made – probably consequences on jobs. But that’s regardless of my doing. It’s just the way technology advances. And the very important thing is we have to have social consciousness in our business to try to educate people to keep learning and give them opportunity. Because if we don’t do this, what will happen one day is all the tech guys will be hated by the people who are less fortunate.
Spiros: Like the Wall Street. People hated Wall Street. So, it’s a responsibility for us to try to give opportunities to less fortunate ones. And FinTech does exactly that because most – the underbanked, the nonbank people, are the most – are the ones who benefit the most from fintech. And I think if there’s a legacy, now business is probably helping people who are less fortunate. In return, we have a better society where we all wanna live in. And this is not philosophy, that’s the reality.
ED: At the same time – at the same time you didn’t have the pressure, or you did not give yourself the model of setting up bootcamps and accelerators.
Spiros: Oh, I’m in two accelerators actually. I’m in SparkLab’s group which we advise Ping An.
ED: Right. It’s SparkLab’s group, but it’s not your group.
Spiros: No, but I’m part of it.
Spiros: And I’m part of the...
ED: You make yourself available to accelerator.
Spiros: No, no. I’m also part of the fintech part of SparkLab’s group. And we’re advising Ping An. And I’m in big accelerator F10 in Switzerland. So, I’m very much involved in helping the community.
ED: Right. But that’s an individual helping accelerators as opposed to managing or running an accelerator.
Spiros:Yes. No, but that’s not my schtick. Let’s do what you’re good at. I mean why should I do something ego-wise which I know I’m not good at. I try to be involved in things where I can contribute something.
ED: You’ve found a very sweet spot where on the strength of your personality, and the brand that you have around yourself, you are mobile, you get to invest in anything that you want to, and you don’t carry the weight of having to set up an infrastructure or an organisation.
Spiros: It’s a very sweet spot. As I said, I always wanted to be Spiros Margaris. Now I am.
ED: Thank you very much.
Spiros: Thank you.
[End of Audio]