Velocity Made Good: Mike Mauzé on Growth Investing, the Consumer Product Space, and VMG Partners

VMG Partners is a San Francisco–based private-equity firm that invests in consumer and tech companies across sectors such as Beauty &Personal Care, Food & Beverage, Health & Wellness, Pet Products & Services, Marketplaces, and Software. Since its founding in 2005, the firm has made over 60 majority and minority investments in high-growth, transformative brands. Beyond capital, VMG emphasizes hands-on partnership through leveraging its ecosystem of founders, retailers, operators, and distribution networks to accelerate growth. Recently, VMG announced a $1B close of consumer fund XI, raising its largest fund to date. The firm’s goal is to “to take visionary companies and grow them into powerhouse brands people use and interact with every day.”

Episode Transcript:

Lauren Stenger: So what drew you into going down private equity versus the public markets or other asset classes?

What drew you into going down private equity versus the public markets or other asset classes?

Mike Mauzé: When I first started my career, there was really almost no private equity. To the extent that there was, it was a very nascent kind of career kind of on that there. So, I first went into investment banking because at the time that was kind of the area that I thought would be of most interest and the most exciting. I was working in a department that really focused on consumer product brands and businesses there. But what I found during that time, was that there was a lot of great entrepreneurial brands that we were working with that really didn't have access to institutional capital at that time. So there was really no growth capital to think about there. As I was kind of looking at my career, and looking to do something different than investment banking, I saw this opportunity to do something on growth investing, which at the time was not very popular, or very large group of firms were not doing it. But I really thought there was a unique opportunity to do that at that time. That was about 25- 30 years ago.

Lauren Stenger: So, you started VMG Partners back in 2005. What was the process like of creating and starting your own firm? What was that process like in the early days?

What was the process like of starting VMG Partners back in 2005?

Mike Mauzé: Yeah, if I’d known it would be so hard, Lauren, I don't think I ever would have done it, to be honest with you. I only had 5 years of experience working in another private equity shop, so I really didn't really know a lot about the business. But what I wanted to do was to start a firm that really reflected my values and how I wanted to interact with both the entrepreneurs that we worked with and the employees. So that was the first reason I kind of struck out and wanted to go do it. The second thing is I saw kind of an opportunity to really focus on individual brand investing. At the time, LPs as well as private equity firms, were focused more on bringing multiple brands together onto a platform as a way of showing diversification and trying to get synergies that way. But my experience as a banker told me that the big strategics who are willing to pay premium prices for what they've perceived as being premium assets, didn't want to buy a portfolio brands. They want to buy a single brand that they could slot into their current portfolio of brands. So what I want to do is to create a shop that would really invest only in individual brands and get that diversification at the fund level, not at the portfolio company level. That was something a little bit different at the time.

“What I want to do is to create a shop that would really invest only in individual brands and get that diversification at the fund level, not at the portfolio company level. That was something a little bit different at the time.”

Lauren Stenger: I love the name Velocity Made Good. It sounds really cool. Do you mind talking a little bit about what that means?

What does Velocity Made Good mean?

Mike Mauzé: When I was thinking about how we're going to name the firm, what I didn't want to do is to use my name or the other names of the folks that we were working with at the time. I think that's a reflection of our culture that we really want to be a team, whether you're a senior person here or whether you're a junior person here. I think it's always just a little different when a certain name is on the door. So I went to a marketing firm and asked them for ideas for names. And they sent me over a list of 10 names, and the names on the list were things like Summit, things like Accel, great names that are already been taken by great firms and great investors. But he didn't know because he was more of a marketing person. But number 10 on the list with the other 9 had already been taken was Velocity Made Good. I had no idea what it meant or anything about it.

I came to learn that it's a sailing term or an aeronautical term that talks about how you go from point A to point B and that might not be a straight line. You might have to go around. That's how we work with our portfolio companies. It tends not to be a straight line, you have challenges ahead. You might need to invest in the businesses and slow down growth. You might need to modify how you're growing the business there, how you're thinking about new products, etc… I thought that name kind of captured it. So, we think we landed on Velocity Made Good. We shrunk it to VMG for marketing. And when we're raising Fund I, everybody looked at the initials VMG and in our meetings, they're trying to figure out who is V, who is M, and who is G to discover that what it really meant was Velocity Made Good.

Lauren Stenger: Yeah, that totally does speak to your firm culture.

Mike Mauzé: Yeah, I think what's really kind of fun about a shop is that I think great shops are always evolving and recreating out there and new and younger investors that come into this space, here at VMG over the years, have had such great incredible ideas that we've been able to benefit from, and I want to have a culture that fosters that and doesn't push that away.

Lauren Stenger: Yeah, totally. When you and your team are evaluating all these potential opportunities, how do you guys identify and differentiate the really high growth brands that are visionary change makers from all the other ones? What kind of tactics and what is the filter process like?

When you and your team are evaluating potential opportunities, how do you identify and differentiate the high growth brands that are visionary and changemakers from all the other ones?

Mike Mauzé: Yeah, so it's part science and it's part art. You know, the art part of it is really pattern recognition. It's understanding and meeting a lot of entrepreneurs and understanding if these entrepreneurs have the qualities to really drive that brand to the next level as kind of the science of digging into the kind of the sell through data, the margin work, etc... out there. I think great investments are all about trying to develop a unique information set to make decisions out there. There's a lot of smart people out there that can look at businesses and make the determination that this is going to work on that there. What we try to do at VMG is really build up that interesting information set that allows us to make what we think are very thoughtful and informed decisions as to which brands and which entrepreneurs are going to break through and grow, and be of interest to strategic buyers 3 or 4 years down the line.

“What we try to do at VMG is really build up that interesting information set that allows us to make....very thoughtful and informed decisions as to which brands and which entrepreneurs are going to break through and grow and be of interest to strategic buyers 3 or 4 years down the line.”

Lauren Stenger: Speaking about your team, I think the first thing I noticed when I go on your website is how interesting and unique all the team bios are, and that's definitely not conventional when you go to bios, it's usually your standard paragraph. To me, that was definitely a signal that you guys have a very special culture, and you guys really care about these personal stories, perspectives. Do you mind sharing a little bit about how you've been able to curate such a cool culture for your firm?

How have you been able to curate the culture of your firm?

Mike Mauzé: Yeah, you know, I think it starts with how I started my career. I got married right out of college and my wife and I were both working in New York, and we'd walk out of our apartment and we were wearing the exact same outfit practically. I was wearing a blue suit and she was wearing, at the time women were wearing kind of skirt suits with shirts that had little bow ties or something to them there. There was this convention that we all had to be the same and that's how it worked out. What I realized is that we need to create a culture where we all can be our individuals but hopefully have the same values and ethics out there. So that's always kind of the grounding force that we look for, are those same ethical values there. But I really want individuals to represent themselves and to be themselves, because one of the jobs of an investor here is to connect and build trustful relationships with entrepreneurs. I think to do so, you have to be vulnerable and you have to open yourself as to who you are so you can connect who they are. If that match fits then we can be really good advisors to people on a go-forward basis.

“I really want individuals to represent themselves and to be themselves, because one of the jobs of an investor here is to connect and build trustful relationships with entrepreneurs. I think to do so, you have to be vulnerable and you have to open yourself as to who you are so you can connect who they are. If that match fits then we can be really good advisors to people on a go-forward basis. ”

I'm always looking for really interesting people that have that same set of values that we try to put ourselves together and hopefully we bring different perspectives to the table as we're wrestling around with these decisions on what to do.

Lauren Stenger: And then on your bio, you talked about your upbringing with soccer and how that was really important to you because it created a niche for you. I noticed you guys have that niche of elevating the consumer experience. So what is the importance of having a niche to you?

What does the importance of having a niche mean to you?

Mike Mauzé: In a career, as people think about it, as you start a career, you really only know the broad strokes of what's out there. And what I tell people as you're building your career, what you want to find out, is that little niche that you can be really good at. I kind of laugh. you mentioned soccer, when I played soccer, it was not as popular as it is today. It was really kind of a niche sport. And it worked for me because I wasn't strong enough to be on the football team and I couldn't throw a big ball 90 miles an hour. But soccer kind of worked out well for me. Of course, now soccer is a much more popular game. And we try to do the same thing here at VMG. We try to find these niche areas, and it could be something in the food space or in the beauty space that has a small group of passionate consumers that we think could be much larger out there, and that's what we try to do here. I think the same is true for a career. Try to find that little area that you think could be more expansive tomorrow than it is today. Learn that area and see if you can be productive in that area. If so, you have both the tailwinds of a growing category out there as well as that expertise that you put in place.

“Try to find that little area that you think could be more expansive tomorrow than it is today. Learn that area and see if you can be productive in that area. If so, you have both the tailwinds of a growing category out there as well as that expertise that you put in place.”

Lauren Stenger: I love that parallel. I feel like working in the consumer space is really fun. I went on your website and immediately saw so many products I use in my daily life. Sun Bum, [solidcore], I mean, there's no [solidcore] in Ithaca unfortunately, but Justin's, just so many brands. So are there any brands that your family or you were excited that you guys were investing in because it’s a household name for you guys?

So are there any brands that your family or you were excited that you guys were investing in because it’s a household name for you guys?

Mike Mauzé: Over the years, it's really been fun to see these kind of brands grow and kind of be part of it. And the great thing about being a consumer investor is my family and my friends all have opinions of the brands there out there. I think one of the more interesting ones is Justin’s that you raised. Here was this incredible entrepreneur who started making peanut butter in his bathtub because he was a massive fan, and selling it in farmers markets in Boulder. With his hard work and ingenuity, he really started to build what was a very regional brand, first in Boulder on the West Coast, into a national brand. It was wonderful to work with Justin in trying to build that brand under his leadership. The great thing about this experience is we go on these journeys with incredible entrepreneurs, and we really become friends with them over the years. Justin is still a close friend after all these years.

“The great thing about this experience is we go on these journeys with incredible entrepreneurs, and we really become friends with them over the years.”

Lauren Stenger: It seems like your firm really values relationships. I saw somewhere, one of the mantras is the most valuable investments are the people. So how does the role of relationships and connections, how do you take that into your personal and professional lives? How do you kind of prioritize that value?

How do the role of relationships play a role in in your personal and professional life?

Mike Mauzé: What we try to do here is have this really honest relationship with these entrepreneurs. We tell them what our goals are and what our objectives are and the fiduciary responsibility that we have for our LPs and investors out there and how that can match with what their goals are. If for some reason there's a conflict of those two, we kind of address it head on, and that’s how we build those trustful relationships with those entrepreneurs.

Lauren Stenger: So stepping a little bit back from private equity and investing, when you're not working on VMG partners, how are you filling your time?

When you're not working on VMG, how are you filling your time?

Mike Mauzé: Well, I just finished a cross-country bike trip I did over five years. Since I was a little boy, I've always wanted to bike across the country. It was something I've always dreamed about. But just given the jobs I've had over the years and the family responsibilities, I just couldn't take off five weeks to go do that. But with two friends, we started in Florence, Oregon, and we carried our own gear, no sag wagon. We worked our way across the country. We went through Missouri where I was born, we went through the town where my mom and dad met, through North Carolina where I met my wife and we went to college and we got married in the college chapel there, and we ended up just last week on Sullivan's Island outside of Charleston, so 3,400 miles over 5 years and it was a real joy to go do it and a great way to see the country and just meet all these incredible people along the way.

Lauren Stenger: Wow, that must have been really meaningful to go back to all these places that impacted your life so much.

Mike Mauze: Yeah, it was really fun. Because it took five years, you we did that a week every year, it gave us something to train for, to talk about, to think about, and it was really a lot of fun.

Lauren Stenger: Yeah. Totally. My parents grew up in Springfield, Missouri. My aunt lives in St. Louis, so we go there a lot. So I’m very familiar with Missouri.

Mike Mauze: Yeah, yeah, so it was a beautiful safe to bike across. Hillier than you think. Yeah, you think it would be flat. It didn't seem too flat to us.

Lauren Stenger: That's so cool. So I guess I have a little bit more of an introspective question. Over your years of experience investing, what has that practice taught you about your own self?

Over your years of experience investing, what has that practice taught you about your own self?

Mike Mauze: That you can make mistakes and dust yourself off and move forward. And I think that’s kinda the one, that you make mistakes as an investor. And the question is, are you willing to learn from the, or are you willing to try to explain it that it was somebody else's fault or some other exogenous reason. So number one is learning that you can make mistakes in life and then kind of move ahead.

The second thing, and this is the reason why I still love doing this kind of today, is that I still learn so much. Consumer is always changing. How we market the brands, you know, think about it, when we first started VMG 20 years ago, we had field marketing teams out there in Costcos and Whole Foods, giving product away as a way of trying it there. Now we don't do that barely at all and we're on TikTok, we're on Instagram. You know, a lot of new marketing channels that weren't even around 20 years ago. So, we get to keep learning about how people are interacting with brands, how people are interacting with the technologies out there, and I feel very fortunate just to kind of be on this steep learning curve over the past 20 years. I don't seem to be getting close to the top. It seems I still have long way to go.

Lauren Stenger: Yeah, there's always so much to learn, especially in these investment fields. When you're investing in all these companies, you get to learn about all of these sub industries and all these things you would have never thought you would have spent all this time learning about.

Mike Mauze: It's really true, you know. My kids are all kind of grown now, and I love to kind of surprise them when over Thanksgiving dinner we're all together, and I'll start talking about Mr. Beast and they're like, “Dad, how do you know about Mr. Beast?” But that's the advantage of being part of these brands is that you're really learning from how these creators are really connecting with consumers.

Lauren Stenger: Yeah, that's awesome. So my last question for you is what advice do you have for young adults like me, I'm 22, senior in college, what advice do you have for people like me who want to pursue a career in investing and more specifically on the buy side?

Mike Mauzé: So a couple of things that I would kind of say to it. I look at a career as kind of three big blocks. One block is your learning phase, where you're really kind of learning the nitty gritty about the jobs there. And so a lot of those initial jobs could be an analyst on Wall Street, working at a consulting firm, working at a commercial bank, working at a company, really learning kind of the nuts and bolts about an industry and how you get work kind of done that way. Because what you really want to be positioned for is what I think is the next phase, which is really interesting, the creative phase, which is you got this base of knowledge, you got this energy, you got this drive, and then the question is how are you going to capitalize on that?

What I would tell somebody, young person today, like as a senior in college on that there, is how you're to capitalize on the creative area may not even exist today, even as an investor. Growth investing, like what I do, wasn't around when I was a senior in college. It never would have crossed my mind that 20 years or 15 years after I graduated college, I was sitting in your shoes, that I would be in California, where I'd never been in my entire life, starting a private equity firm in the consumer product space. I mean that just didn't even occur to me as an option, and I think that's where if you focus initially on building that base knowledge so that you'll be able to take advantage of that creative phase and that second part of your career.

Lauren Stenger: Yeah, totally. That's really good advice. Well, thank you so much for your time. I really appreciated hearing all about your career journey. Wishing you guys all the best of luck.

Mike Mauzé: Thank you for having me. I really enjoyed the conversation.