Iñaki Arrola - coches.com

Today we had Iñaki Arrola entrepreneur of coches.com. The topic was related to a number of practical problems he encountered during his venture and how he solved them. Compared to the other guests we had so far I felt that Arrola's experience was much closer to the projection of myself as an entrepreneur. He started with other three friends almost from zero with a small seed investment and together with them he went through a slow but steady growth. I still believe that nowadays is very difficult to raise capital especially during the initial phase in which a startup is not producing a significative cash flow. Unless you can convince a business angel or VC to finance your idea, auto financing and growing by reinvesting your earnings might be only effective way to start.

Arrola had an idea about selling cars online. Even though Internet was already mature, when he started there was basically no market for online car sales in Spain. It is true that at that time he did not have competition, but it is also true that he was facing a lot of uncertainty. How do you make plans when you do not have reliable data? How do you shape the market if you do not have the dimension that enables you to do it?

The answers probably can be found in creativity, flexibility, and hard working.

• Even though the real market was on used cars he decided to start with new cars probably also because it was easier to compare products (a new Golf is a new Golf does not matter who is selling it) but in the used market you have to asses the car on several dimensions. Also it was easier to take revenues as a percentage from dealers.
• During the MBA course we have always talked about the importance of the network effect but today was the first time I heard about a practical way to create the initial spark without having millions to invest in marketing. Arrola and his friends started contacting car dealers one by one and taking agreements with them. Then, since at the beginning car dealers did not use the technology that supported the exchange of information, they had to manually insert the offers. This was impressing!
• One of the reasons of its success was related to the capacity of the venture to earn money since the beginning. This was due to the fact that during those years it was very easy to sell cars. I believe that this is a key point. Startups are not under vacuum but interact with the surrounding environment. It is important to judge if this environment will support or penalise the business.

"Does not matter what idea you have, the real competitive advantage is in the way you implement it." This is the third time I hear this sentence. It must be at the core of the entrepreneurial philosophy!

At the beginning they were four people doing the same thing. Arrola advices to consider diversity when choosing the partners. You will have less risk to ruin your relationship with partners/friends, more chance to divide the work, and a wider range of skills to exploit.

When evaluating the earning of the company you should take in consideration that salaries and expenses should be aligned to a market benchmark. If your company has a positive net income but it does not pay real salaries or other expenses (i.e. office rent) your company might be worth much less than you expect. Take this factors in consideration before requesting a loan or a VC investment.

At the beginning they had technical people outside the company and only later (probably too late) they have integrated a technical department. Arrola says that if they started since the beginning with some internal technical expertise they would have avoided many issues. This concept was widely discussed by Julio Alonso when he recommended to consider technology part of your core business.

The last concept I want to report is related to the motivation of employees. People who join a startup want to dream with you. For this reason you should be willing to give them some equity and make them part of the challenge. Giving away part of your equity, you are giving them something that is not valuable until you actually sell the company. But in the mean time you make employees highly motivated to work with a long term view.

Thank Iñaki for sharing your experience with us!