Today we had Jorge Mata, a multi business entrepreneur specialised in found raising in the mobile and telecom industry. More than a real speech he gave us a number of tips based on his whole career. The conversation was easy going, full of insights, and often even fun.
It was extremely interest the fact that he gave us some characteristic numbers of a startups. He said that a good startup company should raise 500k from business angels as a seed investment and then 2/3 millions from VCs. Never to leave more than 30% shares to VCs that would take too much control over the company eventually resulting on a lost of steering power from the entrepreneur.
One of the most insightful suggestions was related to the first experience. He suggested not to create your own startup as first experience but join another entrepreneur that already has some success story on his track record. I have to admit that I never considered this option because I was captured by the impetus of my business vision.
Jorge told us that nowadays the investors usually look for specific characteristics of the entrepreneur and his project. I believe that these characteristics are important to know in order to have some chance to win the trust of a VC.
- good credentials
- scalable and disruptive technology solution
- a real process for a real problem
- clear commitment
However, clear commitment does not necessary mean that the entrepreneur should directly finance part of the venture. In fact, VCs that look for the founder seed investment usually are trying to reduce their risk. However, VCs know that kind of behaviour can be dangerous for them. In fact, if an entrepreneur puts his own money on the startup, he will be willing to do whatever thing in order to recover that money in the future. This might lead the entrepreneur and the VCs to pursue two completely different objectives. VCs want the entrepreneur to focus only on the core business (they differentiate the portfolio) while the entrepreneur might be willing even to sell pizza!
Contrary to what people normally think about found raising, Jorge told us that there are many VCs looking for investment in this period. If you really have a killer idea and a sound business plan you might probably find a long cue of VCs knocking to your door. So, what you should be worried about is to identify the right opportunity and develop a convincing business plan.
Below a list of some other insights he gave during the class:
- Manage your investors with care. The relationship you establish today might be a valuable asset in the future.
- Fighting with invading VCs who want to take control over the company is part of the entrepreneur's job.
- Professional advisor that don't have a stake on the venture might be able only to give general-wise kind of advice.
- Most of the investors invest only after others have invested. The difficult thing is to get the first investments. But knowing this, you can decide to optimize the VC request order.
- Explaining the value proposition is very difficult. Make sure that it is fully understood by your engineers and by your customers.
- Having an MBA might help to increase your credentials but what really matters is your ability to sell your idea and yourself.
- Technology might not be the key. The real competitive advantage comes from the way you execute your service, or on the quality of your product.
Among his various interests he might also decide to finance new ventures that use the artificial intelligence on the mobile internet area. Who knows, he could become your future VC!
I found interesting the way he talked about advisors: as you mentioned, he doesn't like "professional" ones, since they might well be biased, ut he mentioned the difference between advisors and investors: investors bring the money, advisors are people you want to have with you because they give you advice and ideas, but they don't necessarily have an investor's profile (even though in his case all his advisors had become angel investors, sometimes with small amounts of money).
ReplyDeleteI was also interested in the class' reaction to the scale of the numbers Jorge mentioned... were those numbers according to your expectations, or sounded like too high for the objectives you guys believe the average entrepreneur with barely no experience can fetch?
Personally I thought to a smaller number. Maybe the concept behind the 3 Million is that a tech startup should have a minimum dimension in order to have better chance to survive during the "dark period". However, I doubt that an unexperienced entrepreneur might be able to raise such amount. Probably this is why Jorge suggested to first develop skills and credentials by joining other's venture.
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