Why Mike Jones was the first to invest in Dollar Shave Club

Mike Jones was the first investor in Dollar Shave Club, which just sold for a reported $1B to Unilever. AngelList also facilitated a secondary DSC transaction, led by Mike, in 2015. AngelList investors participated through a fund advised by an unaffiliated investment adviser.

In this interview with Mike, we go into his investment in Dollar Shave Club, AngelList’s second billion-dollar exit this year, to learn:

  • How he identifies early-stage companies with big brand potential
  • How he uses AngelList to get more leverage in his deals
  • Why he’s starting to invest in eSports

Julie Ruvolo: You were the first investor in Dollar Shave Club. How did that happen?

Mike Jones: Dollar Shave Club was one of the first companies that we engaged with utilizing our investment and studio model at Science. We wrote the very first check.

When we initially met with DSC co-founder Michael Dubin, he was incredibly compelling and brought a big vision to the men’s grooming market. He hustled, tested out ideas and found some initial traction. He also came forward with what was obviously a really, really compelling video.

Science was happy to be the first investor. It matched a lot of the criteria that we look at for sustainable, long-term direct-to-consumer businesses, which the brand had in a subscription model. DSC had a really high lifetime value per user, and it was a replenishable product that drove strong loyalty within its customer base.

When we started Science, there were three areas that I focused on. One was the idea that brands didn’t typically know their customers’ names. We thought the unique opportunity with direct-to-consumer was that brands could get to know these details.

Was Dollar Shave Club an opportunity unique to LA, given the brand and content aspects you were looking at early on?

Just look at who followed.

San Francisco investors have become very amenable to investing in L.A. companies. When I first started angel investing down here, I think available capital somewhat limited us, but now we have strong partners that like to invest in the area.

How did AngelList come into your timeline as an investor?

The idea of being able to get leverage behind my dollars was exciting. Frankly, I love doing deals with AngelList. There are plenty of people who want to invest, and now they have a platform to do so. Also, AngelList allows me to get into deals in bigger ways. Previously, I wasn’t able to write huge checks to the companies I believed in, but now I can syndicate those deals out to my AngelList followers.

It’s become a critical component of my investment thesis. I’m doing a deal per month now on AngelList, and I’d like to speed that up substantially. I’m a big believer in what we’re doing.

Are the founders you work with usually pretty savvy about AngelList?

I do have to do a bit of knowledge sharing in regards to how it works, but I haven’t found that this has prevented any deals.

What is your ideal configuration regarding your relationship with founders of your portfolio companies? More of a hands-on, operational mentorship/partnership, or put the money in and let it run?

A little bit of both. I think that a Science syndicate is more tied to founders that we have direct involvement with. I have a later-stage thesis focused on later-stage businesses where we buy common shares or founder’s shares. I also have the Michael Jones early stage syndicate where I’m participating in an early stage round with companies not led by Science. In those cases, I’m typically just one angel of many.

How do you look at your relationship with your backers? What are your criteria?

My personal syndicate, which is all my early stage deals, is open, so I know about 25% of my backers. I also just launched a later stage syndicate. In this case, I upped the minimum because I wanted heavier investors involved. As we syndicate later stage deals my hope with is that they ought to participate directly in these deals, which is a bit of a different relationship.

Why aren’t you a VC?

Doesn’t AngelList make me a VC?

Any words of guidance or caution for people reading this who might consider backing one of your syndicates?

I’ve been fortunate in that I’ve done a lot of early stage investing, and I know the high rate of failure. Whenever I talk to people who are excited about putting dollars into the early stage segment, my perspective is, “Don’t think you’ve ever picked ‘the one.’ Make sure to spread your money across a big portfolio.” Even as an experienced investor, I couldn’t have told you which companies were going to be our biggest in the earliest moments.

I think a diversified portfolio is crucial, as is having strong backers that you align with who are putting dollars to work. Letting time play out for these companies is important; you need patience and diversified investors with smart leads.

Can you give us any sense of where you are heading, or how your perspective is looking ahead? What kinds of things are getting you excited?

I love marketplaces, and I like the concept of technology consolidating highly fragmented local businesses. Theme two is apps as the new TV channels. What media companies will emerge from mobile phones with unique application experiences? Third, I’m excited about starting to play in the eSports sector. The fourth is that —

What are eSports?

eSports is the ecosystem promoting gamers as athletes — especially in L.A with breakouts like Riot Games, which is an often overlooked yet completely unbelievable company. We are also starting to play a bit within the VR/AR space and the automated bot space. We syndicated our first bot deal with Earny through AngelList, and we’ll be doing a lot more of that in the future.

Originally published at blog.angel.co on August 4, 2016.