Those in the know about the startup and investment world know that growth is necessarily multifaceted. And who better to discuss this with than Carlos Blanco!
Carlos joins Polyglotters Hanane Jendoubi and Paolo Fusaro to share his unique insight and perspective as both a founder and investor of numerous startups. Carlos’s repertoire extends right across the field: a serial entrepreneur, business guru, founder of a successful online incubator, author of many books, and co-founder of First Tuesday Spain, a hub connecting entrepreneurs and investors in the digital sector.
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As the podcast is in Spanish, we’ve added a transcript in English below!
Hanane: What advice would you give to a young entrepreneur seeking funds? Is it difficult to find a good investor? Where and how do you find them?
Carlos: The first thing I would say is that nowadays there is a lot more investment in projects, so if you take a long time to find funds… you have a problem.
It means that either your project or you and your team are not attractive for investors. Nowadays, projects that are in an attractive market, and with an attractive leader and team, are actually experiencing over-funding.
I’m now seeking investment for Fintecha, which is a promising start-up in the Fintech sector. The issue? We’ve attracted four times the amount of investment that we can take. I’m having to tell investors that they haven’t been chosen, or that they can only invest one-quarter of the amount that they would like to offer.
So, the first advice I would give? Launch a start-up in an attractive sector with a good market size. Also, be sure that you are prepared to be a CEO, and ensure that investors will like you. Finally, the most important and difficult part: you should have a good team.
I can tell you that 70-80% of projects I see face the exact same problem. They have a weak team. These projects may have a good leader and a good and be in an attractive market, but they require a good CTO (Chief Technology Officer), too. The main problem and where investors focus the most is the team.
Paolo: So, in your experience, does the key to success lie in the team or in the product?
Carlos: It is always the team. I’d say that the 30 perhaps most successful startups in Spain are almost all ‘copycats’ who replicate successful business models from other countries.
What this means is that the key is the execution of this business model, and the execution is made by the people who are in the team.
Hanane: Regarding the ‘copycats’, nowadays it seems that everybody is investing in digital businesses. In Spain, there are a few trends on the rise. We’ve seen, for example, job portals, coupon websites, and electric scooter rentals. Are there any sectors which are different and disruptive and that you think have great potential for the near future?
Carlos: I always divide businesses into two types: They’re either more represented by ‘lettuce’ or by ‘nuts and bolts’.
The businesses that are lettuces are those that are perishable. With these companies, it is not yet clear that their product is part of a market trend that is actually here to stay.
The businesses that are nuts and bolts have been around for ages and are built to last a lifetime. For example, everybody knew that coupons were a trend and would not stay forever. Real estate businesses, on the other hand, have existed for years. So, by taking a traditional business and digitalising it, you know that it’s not a mere trend; the demand will remain.
Paolo: Speaking of intuition and making judgements…have you ever made a mistake?
Carlos: I have failed so many times. Pretty much all big, successful companies in which I have no capital were great opportunities that I missed out on.
I think that as an investor, you should try not to dwell on what you could have done. For example, when Wallapop was founded, I didn’t know who Miguel Vicente was yet and nobody presented the company to me. So, I didn’t have the chance to invest in it – it wasn’t in my hands.
In the case of Trovit, I was aware of the company, but my business partner wasn’t sure about it, so I didn’t invest. The €10,000 that I decided not to invest at the time would have returned €530,000.
With Badi, I made an even worse decision. I could have entered into the business and had free equity, but decided to go for another startup instead – which failed miserably. I probably could have gone for both companies, because I liked the CEO of Badi. But the fact that he didn’t have a clear business model and wanted to offer the service for free left me unsure. If only I had known how big Badi would become!
Hanane: What would you recommend to people who want to invest right now?
Carlos: If they are somebody with a lot of money to invest (starting from 100k), I would tell them to first go to a venture capital fund. Let the venture capital fund manage your investments, because you are five to ten times more likely to earn money through them than on your own!
But we need to distinguish between a ‘business angel’ and a private investor.
A business angel is somebody who is a successful entrepreneur, who knows how the “game” works. Take me, for example: I have earned more money as an entrepreneur than as an investor, so I use what I earn with my companies to invest in new ones.
A private investor is a person who has earned money not in an entrepreneurial way. The private investor uses their own funds to invest in startups. By not having a background in entrepreneurship and the ecosystem, they are likely to face more problems when deciding which investments are the most promising.
Hanane: What would you say to those who want to be an entrepreneur?
Carlos: I would ask them this: are you ready? Not everybody is made to be an entrepreneur. There is huge social pressure nowadays to go down that path. Entrepreneurship is made out to be this glorified thing that everyone should aspire to… but this is not the truth.
Some have neither the time nor the character (nor the knowledge) to be a successful entrepreneur. It requires a process of self-evaluation, which is not easy because most people don’t really know themselves.
Another thing I would say to those who want to become an entrepreneur is that the most important thing is to have a good team. Many choose their friends, their couples, former colleagues, etc. instead of seeking out the best profiles to build their business.
Paolo: How do you build a good team?
Carlos: How do you find a good wife/husband? Anywhere, right? But will it work with just anybody?
The answer is no. Generally, you have a kind of selection process: you grab a drink, go to the movies, spend a weekend together, have sex, go on holidays…and if it all goes well, you get married and form a lasting union.
With a business partner, it should be similar. A lot of people skip this process and go too fast. They meet somebody at an event who they find interesting and immediately ask them if they would like to join the project for a percentage of the company.
Seems easy and efficient, right? It is, but they have no idea if the person shares similar values and ambitions. The key is to find profiles with strengths that complement your weaknesses. But your values should always be similar.
The world of business is complex. You should choose your partners wisely.
Nowadays, it’s more difficult to legally split up with our business partners than it is with our romantic partners!
Paolo: In the startup world, which profiles are in high demand? And which are less desirable?
Carlos: Technicians and CTOs are the most sought after in general.
I personally find it more difficult to find a good marketing profile than a technician. Also, I am finding it more and more difficult to find good Sales
Managers (CCOs) who have experience in inside sales, normal sales, cold calling, and know how to use CRM and manage people. I think this will soon be the third-most difficult profile to find.
Hanane: Let’s talk about corporate innovation. What do you think it means for entrepreneurs, traditional companies, and startups?
Carlos: For the entrepreneur, the corporate solution is never the ideal solution. But it is true that we must improve relationships between startups and corporations. The problem here is that the startup speaks Chinese, whilst corporations talk German [laugh]! So, they don’t understand each other.
To bridge this gap, Accelerators (like connectors or TexStars) can really help by encouraging corporations and startups build relationships and establish the rules of the game
Better still are independently-managed Accelerators, not those managed by the corporation. The mistake that Spain is making (unlike Germany, the UK or the US) is creating corporately-managed Accelerators. There are, like, 40-50 corporately-managed Accelerators and only 4-5 independently-managed ones.
Some Accelerators are managed by consultancies (mistake!), while others are managed by service companies (another mistake!). The good corporate Accelerators in Europe and the US are managed by TexStar or other organisations. And the final step, for which the Germans and British are way ahead of us, is creating corporate funds to invest in startups. In Spain, it is starting to happen now, little by little!