Who Is Michael Marks?
Michael Marks is an American technology executive and investor best known for building Flextronics into one of the world's largest contract electronics manufacturers, and for co-founding the Silicon Valley venture firm Riverwood Capital. He served as chief executive of Flextronics from 1994 to 2006, a period in which the company grew from a regional manufacturer into a global operation employing well over a hundred thousand people across dozens of countries. He later served as interim chief executive of Tesla in 2007 and as chief executive of Katerra, the construction technology company.
From operator to investor
Marks' career is unusual because it runs in the opposite direction from the pattern most investors follow. Rather than starting in finance and learning operations later, he spent more than a decade running a business with razor-thin margins, enormous fixed assets, and customers who could move volume elsewhere on ninety days' notice. That background shapes how he evaluates companies: he looks first at whether a business has genuine operating leverage — whether the next dollar of revenue costs materially less to produce than the last — and second at whether management can execute a plan through a downturn rather than only during expansion.
What he looks for in founders
In the conversation below, Marks describes a consistent set of filters. He wants founders who understand their own unit economics without referring to a spreadsheet, who can explain what would have to be true for the business to fail, and who have already made at least one painful decision about cost or headcount. He is sceptical of growth that depends entirely on continued cheap capital, and he places unusual weight on supply-chain and manufacturing literacy in hardware businesses — a discipline he argues most software-trained investors underestimate.
Lessons from scaling Flextronics
The Flextronics era produced several principles he still applies. Acquisitions should be integrated on a fixed clock or not attempted at all. Geographic expansion works when it follows a customer commitment, not when it precedes one. And the most dangerous moment for a manufacturer is not the recession itself but the twelve months before it, when capacity commitments made at peak demand become fixed costs against falling volume.
The full conversation
alrighty Hello, everyone, and welcome to the Dealmaker Show. so Today, we have an amazing you know an amazing guest, you know really you know someone that has gone from the operator side now to the investment side very successfully. so and We're going to be talking about all the good stuff that you are all dealing with, you know whether it is how to think about fundraising, how to build your team and the management team, and what's important when you do so, ah product market fit, what does that look like.
And then also how to think about outcomes you know for companies, which I think that that's essential because always the end i mean the beginning needs to to start with the end in mind know and how you reverse back engineer to where you are right now.
So again, a very inspiring conversation in front of us. So without further ado, let's welcome our guest today, Michael Marks. Welcome up to the show.
So originally born and raised in Missouri. So give us a walk through memory lane. How was life growing up over there?
Well, it's funny. ah you know I always like to say the Midwest is a good place to be from. I mean, it was a wonderful place to to grow up, you know community and all that sort of stuff. Very different from from the way I live today in Silicon Valley, which is you know just high energy, lots of new things happening, all kinds of cool people. i mean so it was a bit It was a bit quieter in the Midwest growing up.
So how was that transition from psychology to the world of business? You know, that's quite a shift.
Well, like a lot of people in college, I didn't really know what I wanted to do. And psychology was interesting to me. you know It just wasn't really ah really much of a profession to get into. So like a lot of people, I went to business school to get some real training, broader training, so that I could have a lot of other opportunities. That worked out great.
So what was that moment in time? Obviously, you know you do the MBA in Harvard, and I'm sure that opened up your eyes you know to the the world of business. But what was that moment where you realize, hey, I i need to pack the bags and go to Silicon Valley? I mean, you already had family at that point, so I'm sure that was say not an easy decision.
No, it wasn't, and and it's funny, you know, I was in St. Louis, my kids were young, I was 37. I had been working in small technology companies, which is all there was in St. Louis, and it's the case in most of the Midwest. And, you know, my customers were in were in Silicon Valley, you know, some of our employees were there. And, you know, we just said, look, you know, we're adults, we have a choice, why don't we just go where the action is for the kinds of stuff that I'm interested in.
And you know a lot of our friends said, like you know what are you doing? You don't have a job. You're just leaving. I go, look. um it's just It's just an adventure. We can always come back. And it turned out to be a pretty good adventure.
So then let's talk about that adventure because you land there in Silicon Valley without a job, you know doing consulting. How does that transition into getting to work for other companies and being part of that Silicon Valley you know ecosystem?
Well, that's a good question. you know It's just so much fun to be an entrepreneur in Silicon Valley because you know what I what i and tell people, one of the differences between the Midwest and being in Silicon Valley is that you in the Midwest, if somebody would make an introduction, you know you should go meet this person. People don't really do it because it's just no it's not interesting. It doesn't lead to anything.
You know, in the Bay Area, people are making introductions and everybody does it because your paths are interwoven and you're always meeting in different places. And so just just meeting people turns out to be something that that is very reinforcing for the climate that, you know, for the but the business climate. And it was just fantastic. And so it was easy for me to get jobs. I mean, you know I knew some people there and they would introduce me to other people and say, hey, why don't you come and do some work over here? And it was just so energizing. I just had a smile on my face every day.
So then so then at that at at what point, because I think that flextronics was a pivotal moment for you and you ended up pay going and working for them, but they how did they how did the the whole idea of of of being and and working there to then all of a sudden having an opportunity to buy you know the company?
I mean, that's that's quite the ah the the the sequence of events there, Michael.
Well, it is. And thanks for asking that question, because I think, you know, I think for your listeners, there's a good message here, which is, you know, being prepared for the moment when when you can you know, really take action as important and then taking it when the time comes. So the story was I moved to Silicon Valley. I did ah had a consulting project at Flexronics and I had a ah consulting project at Electronic Arts and both of them offered me full-time jobs.
So I went to, like I took the FLEXtronics job and I was a plant manager there for a year and the company was struggling and and I still had this offer on the table to go to Electronic Arts so I went over there for for a year which was really fantastic. I was then asked, FLEXtronics was a relatively small company and and through a series of events they asked me to join the board so I was actually on the board of FLEXtronics while I was off running ah a small company then I took a three year gig running a company called MedCal But I was on the board of electronics, and and what happened was the company was struggling. The banks that had the loans were planning to sell the company to to you know recover their loans. And I asked them what they were going to sell it for, and they said $8.5 million. dollars So then I went and raised money from Sequoia and Kleider Perkins and NEA, and raised the $8.5 million. And we we bought 55% of the company, and then I was installed as the CEO.
And it was just an opportunity in time. I was there. I knew the company. i I knew the management team. They wanted me to be the leader at that point. And I just i just went for it. I mean, literally, when the banks told me what they were going to do, I resigned from the board the next day so I wouldn't be in a conflict, and then put together a group that bought control of it. Look, when i when when we did that, this was a relatively small company. It was $90 million of revenue. But in the manufacturing space, that's not a lot of revenue. That's actually a small amount. That would be a lot in the software business.
But wait you know my idea then was was to build it up to a couple hundred million dollars and sell it and and move on. And through a series of ah you know very you know lucky fortuitous events, we got the opportunity to to to stay and play. We became a public company. And when I left in 2005, it was $25 billion. So it was quite a ride, but it was unexpected.
No kidding. Now, for how long were you involved with the business when the opportunity comes for you to to put the group of investors and and strike a deal? ah
Yeah, so i I had worked there full time for a year, and then I'd been on the board for three years. So I knew the company pretty well at that point. And then the opportunity came just because the banks decided they were going to move in and take over.
Because the company was struggling, and there wasn't a good they they there wasn't a view towards a good outcome for the banks. Like, how am I ever going to get paid back? So they just wanted to go sell their stock. They had stock and security for the loan, and they just wanted it take over the stock and then go sell it and get their money out and move on.
So how did the the conversation unfold? you know I mean, obviously you were not a deal maker up until that point, right? ah But here you are, all of a sudden, you know structuring things, getting the deal to happen, and buying you know that piece of the company.
So walk us through how those you know ah events unfolded you know until the transaction finally gets a gets finished.
Sure, sure. Well, so what happened was I was on the board. So it was a small group of of ah board members. And some of the board members were in Asia, because at that point, the company's headquarters were in Singapore and the operations were all in Asia. The bank was in Wisconsin. And and so, you know, they they called I was in the US and and and I met with them and they said, Look, we we don't see a good outcome here. We just want to take over, you know, convert our our debt into the equity of the company. We have the right to do that. It's 55% of the company. And then we're going to sell our stock. And I said, well, what are you going to sell it for? And they said, $8.5 million, because that's how much they were owed. And I said, OK, I'll be back to you. And then I thought that was going to be a fantastic opportunity. I knew a bunch of the venture capitalists in the Valley. So I resigned from the board. I went to visit ah you know these venture capitalists and said,
For eight and a half million dollars, we can have 55% ownership of this company, and that'll be a steal. We can really make something out of it. And so you know I was able to raise the money. and And then I went back to the banks and said, we're just go to pay you the we're going to take over the 55% of the stock. We'll pay you the eight and a half million. I i was installed as the CEO. The bank went away. And then we just started running the business. And it was it was a great moment in time. And you're asking a really good question because, you know,
when when When an entrepreneur gets an opportunity and knows how to deal with it, I'd already worked at the company, so I understood the business, and and here was an opportunity to get in and have a real equity stake for not very much money. And I'd already gotten to know some of these venture firms because of my time in Electronic Arts, because they were invested in Electronic Arts, that's how I knew them. And they just said, you know, seems like a good guy, did a good job of Electronic Arts, decided to back me, and you know, the rest is history, as they said.
That's unbelievable. So how, how, how, what was the value of the company when the transaction happened?
was eight and a half million for 55%, so roughly 15 million for the value of the company.
And then when you turn chapter, you know it was 25 billion. So that's quite the ride, Michael. So what do you think what do you think needed to happen you know um for for that incredible rocket ship to you know from a company that is struggling to all of a sudden, it gets transformed into a rocket ship and it goes all the way to 25 billion?
I mean, what were the key ingredients that allowed for that journey to happen?
Yeah, so this is one of those those times where one of those things where you say, you know, better to be lucky than good. I got involved in that business at a time when the industry was taking off, which is not the way it is today. Today, it's very mature. You know, in so this is 1993, when most companies did their own manufacturing. You know, today, nobody does their own manufacturing. So we were at the We were in the forefront of ah of a great opportunity. And entrepreneurs you know need to always be looking at that, as we call product market fit, which we can get into later. but But the fact is companies were looking to get out of manufacturing. And we we were just in the early stages of that. Now, that hasn't been said. That's opportunity. There's lots of big markets in the world. And we got the opportunity to get into plexronics. But there was a lot of expectation involved. And we can go talk about with that.
What that's about, but in terms of building a management team, it was a global company. When I left, we had factories in 26 countries. That is not easy work. and and But we had the opportunity, the the market opportunity was there. And so we're in the right place at the right time. That hasn't been said. We had to be very aggressive in driving costs down and increasing our services to the customers to get permission to continue to grow. And and fortunately we were able to do that. It was a huge success.
so then So then, obviously, you know you build it up to 25 billion, remarkable journey. At what point do you decide you know the chapter is coming to an end and it's time to turn page?
Well, that's ah another good question. Thanks for that one. um You know, and and we have a we have our our own podcast called Tech Surgeon. I interviewed recently, Indra Nooyi, who was the CEO of Pepsi.
She did that very much like me, went out on the top. And one of the things we we talked about that is that, you know, companies' management gets stale. I was the CEO for 13 years. I think Ender was 12 years. It was very similar. But you get to the place where you need new ideas and fresh ideas. and And the way you get that is by taking younger people who have different ideas because the tools change. We all know just look at cell phones that didn't, you know, even exist, you know, back you know, back when I started in flexronics and the way information is ubiquitous and all kinds of stuff. So it takes it takes younger people who have a different view to keep a company growing. And, you know, it's 55 and it wasn't the end of my career by any means, you know, I've gone on to do all these other things.
But I really felt it was that I was getting stale. I tell a story about this. you know I went to Davos for four years. And I was on you know panels with you know important people and blah, blah. And you know when my marketing manager came to me and said, it's time to plan your trip to Davos again this year, that was the moment I decided it was time to move on. Because I didn't want to go to Davos again. I'd already done that. And I wanted the CEO of the company to be excited about doing that.
And I had a i had a ah great chief operating officer, and it was time to hand over the reins. And people would say to me, you're too young to retire. And I go, I'm not dying. I'm just going to go do some other things. And it's turned out great.
Well, one of those other things was becoming the interim CEO of Tesla. and What an exciting chapter. and i mean what What Tesla has become today is absolutely unbelievable. But how did that happen?
Well, one of the flextronics executives went over to Tesla was running R&D over there and said, you ought to come and see this company. This was before there was even a car, right? It was very early days. And so I went over and visited. It seemed kind of cool. And I put some money in it. I had a little sort of a private venture fund that I had started.
I put some money in it and I was hanging out over there. I got to know Elon. He used to stay with me when he was coming up to visit from from Southern California. and he He really wanted more professional ah operating management, which I was not in a position to do because I was i had started this this growth capital firm, Ripwood Capital.
um But he asked me if I would step in for for a few months, which I did. And I had a pretty big impact. he he he He acknowledges that. But by no means do I want to lead any of your listeners to believe that that I'm in the ballpark with Elon Musk. I mean, that's a brilliant guy who pushed the envelope in so many directions. And i I couldn't be more excited for what he's done for the world, honestly.
So I mean, here you are an operator that decides to um go to the other side of the table, and to the investment side.
Well, you know, I was I was really, you know, I had a lot of connections in the world because of flex products. I mean, I had friends all over the world and friends in high places and all that kind of stuff. So, you know, I thought I was just planning to when I retired from flex products just to be a ah ah personal you know investor like many people do, you know, after after having had a successful career.
um And I got recruited to to join KKR, which I was not planning on that. I didn't know if if that was something I wanted to do. It was, ah you know, the headquarters out in Silicon Valley was was very close to where I lived. I go, why don't I give it a try? You know, and I did that. I didn't find it particularly interesting for me because in in these very large buyouts and it and subsequently it at Riverwood,
You know, it's more financial management, which just wasn't that interesting to me. I'm an operator. And as I as i have have have moved into the venture business, that's way more interesting for me because because there's so much operating so many operating issues that it takes to try to create a valuable company. when you're you know When you're buying a giant company, you know you're just you know You're just doing financial management.
It just didn't fit me as an operator. I wanted to spend more time working directly with entrepreneurs, working with with companies that are just getting started, help them figure out product market fit, help them figure out how to do management teams.
So obviously that they ended up getting you into what you're doing now, which is Celesta Capital, which was the spinoff of Riverwood.
But on Celesta, tell us about Celesta. What are you all doing at Celesta? What companies are you excited about? What's what's really the the purpose you know that gets you guys you know out of bed every morning?
Well, thanks for asking that question, because I'm really, really excited about it. So happy to answer that one. but We're an unusual firm, because the the four the four general partners have all had big operating jobs. So you know I ran Flexronix, as we just discussed. ah Nick Brathwaite, one of my partners, was a chief technology officer at Flexronix. Sri Ram Viswanathan, our other partner, ran ah ran a big operating business at Intel, and then was was instrumental in the starting of Intel Capital.
And the fourth one, Matt Marsh, who's our CFO, was the CFO of a publicly traded company. So we are an unusual group of characters. We're also older. And um we we are very hands on in our companies. Each one of us has been CEO of one of our companies at a time when we needed you to step in. and Excuse me.
but um What's exciting about what we're doing and and different from the other. First of all, the the results in the venture business have not been very good of late. There's a lot of articles being written. you know The results aren't very good. And part of the reason for that is that the venture firms have gotten really large. And in fact, all the companies have gotten really large. The growth capital companies, just you know the KQR and TPGs of the world.
And when people have lots of money, they have to do really big deals. And venture, is venture as it was always constructed, is smaller deals. And if you have a $10 billion dollars fund, you're not in the venture business anymore. Because you can't put $10 million in a company and and and hope for a $100 million return. Because you have to return $30 billion. That doesn't do anything for you. We've stayed small. We had $300 million dollars funds. We're raising a $500 million dollars fund now. But that's that's big enough.
now what's What's differentiated about us, and part of the reason our results are, you know, all of our results are top quartile and top decile and a couple of the funds, is because we we're we're hardware guys. You know, we did the we we did all this hardware work, we did it in flexronics, and you know, everybody started thinking that hardware is capital intensive and software is not, everybody should go do software. In the last 25 or 30 years, it's all been about software, which by the way, is very capital intensive. It's just a different kind of use of capital.
because it takes a lot of money. If you're in the enterprise software business, it takes lots of capital too you know to build these companies. So here we are doing semiconductor deals and you know and storage deals and and and data center activities and so on. And all of a sudden, AI comes along. It explodes on the scene. And what's happening is, of course, there's lots of great software things to do in AI. But what it turns out is that Artificial intelligence, in order to use it, takes so much computing power that the entire hardware system in the world now has to get remade.
which is why, you know, the most valuable company in that top companies in the world are, you know, Nvidia is a hardware company. I, gosh, I knew Jensen, you know, love the guy knew him when he had, you know, 15 people in Santa Clara and a little office trying to design, you know, graphics processing units. And now it's like the most valuable company in the world. It's like, awesome. I send him texts once in a while. Cause I see him on TVs become so famous, but we we had this group of people, hot tan at Broadcom, you know, Sanjay Marotra, at Micron. I just had him on one of our podcasts as well. um And now the entire hardware system has to get remade because it uses too much power and is too expensive. And so, gosh, it is you talk about a target-rich environment for an investor. And so you ask the question, what what are we excited about? We have two processor companies, Auradine and Recogni. Both will likely be public companies before too long you know that are exploding on the scene. We have all kind of we have a company that
Stothera that makes a timing chip you know at a hundredth of the cost and a hundredth of the power and so on. There's there's there's opportunities everywhere and there's so much demand. So when you talk about we talk about product market fit, I mean right now everybody is in the market for for products that run faster and use less power. And so we just we're just kids in a candy store right now. It's just really fun.
You know, you ask good questions, unusual questions. I haven't been asked that one. You know, what we what we live and breathe, Alejandro, is building successful companies that we can be proud of. You know, I had, ah you know, I did my share to make Flextronics a successful company. I've been gone for nearly 20 years now. I still like to look at the stock and see that they're doing well and they're doing really well over there. You know, I had my little bit in in Tesla that, you know, interested forward and now it's become this big successful company.
We have wonderful companies at Celeste. Some have gone public. We had Credo, which went public last year, has done really, really well. We had a company we're very excited about, Idea Forge in India, that went public about nine months ago. Very successful. We're proud of these things. it's you know It's not the money. We don't get up in the morning and go, how do I make more money? It's like, I get up every morning going, how do I help these companies be more successful?
and have really and you know create great jobs and have you know entrepreneurs who've been successful. That's what really drives us. And you know I've had a big career. I'm not trying to create some big new career. I'm trying to help um how trying to get these companies to take advantage of what I know how to do. And that goes for my partners and our other investors. you know How do we make these companies successful and turn into things we can be proud of? That's really what drives us.
So Michael, let's talk about the past now, because obviously you know we're talking about the future, but I want to talk about the past with a lens of reflection. I'm going to bring you you know in a time machine, and I'm going to bring you back in time all the way back to, let's say, 1992.
You are at the boardroom, where now it's being discussed you know with the banks, you know what's going on, and and the idea you know comes to mind of potentially doing a deal. Now you resign. And let's say you are um on your way to meet with the Sequoias and everyone in Sun Hill Road. And right there, you know while you're in the cap, you're able to sit down with a younger self.
And let's say you're able to give that younger Michael one piece of advice before going at it, you know, now as a CEO, as a founder too. What would you tell that younger self? What would you tell? What would that one piece of advice that you would give to that younger self before embarking in the journey?
Be fearless. Be curious. Be open to ideas. Listen to these other people. You're going to talk to these, the Sequoias and NEAs, the designers of the world. They know things I don't know. I shouldn't go in there going like I have all the answers. I need to go in there and go. I have an idea, but I You know, I am open to any ideas you have ah of how I can most likely be more successful. I'll relate a story that happened later in life that that is that is the advice I would have given to myself younger. I had a guy in my office from Dell, and and I was asking him how do they manage some logistics thing. And he goes through this whole thing, puts it on the board, draws it all out, and he turns to me and he goes, so that's how we do it unless you have a better idea. And I've never forgotten that in my life.
And so if I were giving that advice to myself on my ah way over to Sequoia is my ideas are good ideas because they're my ideas, but surely they will have ideas that will make me better and I need to be open to that. That's the advice I would give.
Love it. So, Michael, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
You know, I, I am very open. So Mark's M-A-R-K-S at celesta.vc. um My phone number is 408-209-6967 send me a text.
I am real-time answer everything Well this the honor is all mine, thank you for having me
wow you see know Well, hey Michael, thank you so much for being on the Dealmaker Show. It has been an absolute honor to have you with us.
