He Scaled A Company To $25 Billion In Revenues And Has Now Created A $1.1 Billion AUM Deep Tech Venture Fund

In the business world, some stories stand out not just for their success but for the bold decisions and risks that paved the way.

Michael Marks, founding partner at Celesta Capital, is one such figure whose journey from Missouri to Silicon Valley is about the spirit of entrepreneurship and the transition from operator to investor. His career, marked by strategic moves and seizing opportunities, offers invaluable lessons for entrepreneurs at every stage.

In this exclusive interview, Michael talks about aspects like fundraising, building and managing teams, and finding the ideal product market fit. He also talks about working out outcomes for companies and the art of reverse engineering.

Listen to the full podcast episode and review the transcript here.

A Humble Beginning: Growing Up in Missouri

Michael Marks was born and raised in Missouri, a place he describes as “a good place to be from.” The Midwest, with its tight-knit communities and slower pace of life, was vastly different from the high-energy environment of Silicon Valley, where Michael would eventually make his mark.

However, Michael developed a strong foundation in Missouri that would support his later ventures in the fast-paced tech world.

The Shift from Psychology to Business

Like many college students, Michael wasn’t initially sure of his career path. He found psychology intriguing but soon realized that it wasn’t the profession he wanted to pursue. Business school became the next step, providing him with broader training and opening up a world of opportunities.

Attending Harvard MBA school made Michael realize he needed to pack his bags and move to Silicon Valley. This decision would set the stage for a career that spanned operating roles and investments.

The Leap to Silicon Valley

Michael’s journey to Silicon Valley wasn’t an obvious one. At 37, with a young family in St. Louis, he had been working in small technology companies, as in most of the Midwest. However, he realized that most of his customers and employees were in Silicon Valley.

Michael recognized that his interests and the opportunities available to him were leading him to Silicon Valley, the epicenter of innovation and technology. Despite the uncertainty and the concerns of friends, Michael and his family headed west.

“It was just an adventure,” Michael reflects. “We can always come back.” But as it turned out, this adventure would be a pivotal chapter in his life.

Entering the Silicon Valley Ecosystem

Upon arriving in Silicon Valley, Michael quickly found that the environment differed vastly from the Midwest. In Silicon Valley, networking was more than just a buzzword—it was a way of life. Introductions led to new opportunities.

Michael found himself energized by the constant flow of ideas and connections. It wasn’t long before he was consulting for major companies like Flex and Electronic Arts, which eventually led to full-time roles.

The Flex Opportunity: A Pivotal Moment

One of the most significant moments in Michael’s career came with his involvement in Flex, a then-struggling company. Initially brought on as a consultant and later as a board member, Michael had an insider’s view of the company’s challenges and potential.

Michael saw an opportunity when the banks that held Flex’s loans decided to sell the company to recover their funds. As it turned out, Flex had its headquarters in Singapore with operations across Asia, and the bank was in Wisconsin.

“I knew the company, I knew the management team, and I knew it was a fantastic opportunity,” Michael recalls. He quickly resigned from the board to avoid a conflict of interest and raised $8.5M from venture capital firms like Sequoia, Kleiner Perkins, and NEA to buy 55% of Flex.

This move installed him as the CEO and set the stage for a remarkable transformation.

The Transformation of Flex

When Michael took the helm, Flex was a small company with about $90M in revenue. Michael’s initial idea was to build it up to a couple of hundred million dollars, sell it, and move on.

Through a series of fortunate events, he got the opportunity to stay. Under Michael’s leadership, the company grew exponentially, eventually going public and reaching $25B in revenue by the time he left in 2005.

This transformation was not just about scaling operations; it was about being in the right place at the right time and aggressively driving costs down while expanding services to customers. Michael attributes much of this success to timing and market opportunities.

In the early 1990s, most companies were looking to outsource manufacturing—a trend that Flex was perfectly positioned to capitalize on. “We were at the forefront of a great market opportunity,” Michael says.

But opportunity alone wasn’t enough. It took strategic decisions, a strong management team, and relentless execution to turn Flex into a global powerhouse. By the time Michael left, the company had factories in 26 countries.

Knowing When to Move On–A Brief Stint at Tesla

After 13 years as CEO, Michael made the decision to step down. He recognized that fresh ideas were needed to keep the company growing. “Companies’ management gets stale,” Michael notes. “It takes younger people with different views to keep a company growing.”

For Michael, it wasn’t about retirement but rather moving on to new challenges. He had had a great stint as the chief operating officer, and it was time to hand over the reins.

One of those challenges came in the form of Tesla. Michael was introduced to the fledgling company before it had a car on the market. Impressed by the vision, he invested in Tesla and later served as interim CEO at the request of Elon Musk.

Although his time at Tesla was brief, Michael had a significant impact during a critical phase in the company’s development.

Transitioning to the Investment Side

After leaving Flex, Michael initially planned to become a personal investor. However, he was recruited by KKR, a leading global investment firm, and later co-founded Riverwood Capital. Yet, Michael found his true passion in the venture capital space.

Financial management wasn’t particularly interesting for Michael since he was more of an operator. Venture capital allowed him to work closely with entrepreneurs and focus on operating issues and finding the product-market fit—areas where his experience as an operator could truly add value.

The Birth of Celesta Capital

Today, Michael is a founding partner at Celesta Capital, a firm that stands out in the venture capital world for its focus on deep tech and its unique team of general partners, all of whom have held significant operating roles.

This hands-on experience gives them a distinct advantage in helping companies navigate the challenges of growth. “We’re an unusual group of characters since the general partners have all had operating jobs.” Michael says. “We’re very hands-on with our companies.”

One of Michael’s partners is Nic Brathwaite, the chief technology officer at Flex, and Sriram Viswanathan is another partner. He ran a big operating business at Intel and was instrumental in founding Intel Capital.

The Celesta Investor Model

The Celesta approach, combined with a focus on smaller deals, sets it apart in a venture landscape increasingly dominated by larger funds that need to enter into really big deals in order to provide strong returns.

Michael points to the misconception that as against hardware, software isn’t capital-intensive, which really is not the case. It’s just a different kind of use of capital focused on product development and R&D. Enterprise software companies also need lots of capital to build and scale their go-to-market activities.

AI emerged on the scene as Celesta was doing semiconductor, storage, and data center activities. Using Artificial intelligence takes so much computing power that the entire hardware system in the world now has to be remade.

For this reason, as Michael noted, the most valuable and top companies worldwide are hardware companies like Nvidia, which designs graphics processing units. Thus, Celesta now has two processor companies, Auradine and Recogni, with the potential to become public companies.

Michael also mentions opportunities and demand, like for Stathera, which makes a timing chip that costs much less and operates at greatly reduced power levels.

Celesta AUM

Today, Celesta has assets under management (AUM) worth $1.1B. Michael reveals that they have about 70 active companies after exiting 30.

Celesta has also had a public offering in India and one in the United States in the last 18 months.

Auradine is two years old and already has $100M worth of orders and a pipeline of $200M for next year, which is pretty unusual for a venture investment. Michael stresses the importance of the product market fit.

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Advice for Aspiring Entrepreneurs

Companies should ensure that the products they intend to create have a clear demand and the ability to stand out from the competition. They should also have the right skill sets to make that fit.

In Michael’s opinion, entrepreneurs make three critical mistakes. They overestimate the market size, the market share they can capture, and their costs to get that share. Entrepreneurs can never target the whole market or entire industry; they can only focus on some subset.

Michael advises entrepreneurs to be aware of funding cycles and that, at this time, raising capital is very tough. Distributions are few, and investors are not actively looking for companies to invest in. Aspiring entrepreneurs also tend to overestimate the amount of capital they can raise.

But they should go ahead and get money without worrying about the valuation. Early-stage companies should focus on securing the capital they need however necessary and be very thoughtful about not spending money on things they don’t need.

Running companies cost-efficiently with a low burn rate is crucial from day one for success. Michael often notes how lean companies get when they have to, right before they go out of business.

Exits typically occur when big companies dominating the sector with high sales, advertising, and marketing budgets offer to buy out the new players. Bigger companies generally are not very innovative, and to create innovation, they must buy startups with disruptive ideas.

If entrepreneurs can build a company with a great market opportunity and can demonstrate good growth in that opportunity, a bigger company is most likely going to come along and purchase it.

Vision for the Future of Celesta

Michael is proud of the companies at Celesta, some of which have gone public. He mentions Credo and ideaForge in India. The Celesta partners’ objective is to create great jobs, and they are trying to get these companies to take advantage of their knowledge and expertise.

Michael tells founders to be fearless, curious, and open to new ideas. They should listen to the top investors and business leaders of the world and get all the relevant information they need.

Conclusion: Lessons from Michael Marks

Michael Marks’ journey from Missouri to Silicon Valley, from operator to investor, is about the power of taking risks, seizing opportunities, and knowing when to move on and explore new opportunities for growth.

His story is one of strategic decisions, bold moves, and a deep understanding of what it takes to build and grow successful companies. For entrepreneurs, the lessons from Michael’s career are clear: be prepared, seize the moment, and always keep the end vision in mind.

Listen to the full podcast to know more, including:

• Always be prepared to seize opportunities, even when they come unexpectedly, as demonstrated by Michael Marks’ acquisition of Flextronics.
• Sometimes, taking risks—like relocating to Silicon Valley without a job—can lead to remarkable career transformations.
• Building and leveraging a strong network is crucial, especially in vibrant ecosystems like Silicon Valley.
• Success often comes from being in the right industry at the right time, as seen with the growth of Flextronics during a manufacturing shift.
• Knowing when to step down and bring in fresh ideas is key to sustaining a company’s growth.
• Transitioning from operations to investment requires a shift in mindset, but staying connected to operational roles can be more fulfilling for those with a hands-on approach.
• Maintaining a focused, smaller venture fund allows for more meaningful involvement with portfolio companies, leading to potentially better outcomes.

 

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