Pablo Larguía - bumeran.com

Yesterday we had Pablo Larguía, founder of Bumeran and laredinnova.com that told us the experience of selling his company to a large corporation. He started his presentation with some funny jokes about my last posting. Personally I appreciated his humour and I fully respect his view about choosing VCs and raising as much money as possible. It is interesting to see how Pablo and Roberto Saint Malo have a completely different view on these two topics (Entrepreneurs VS VCs!). However I noticed that someone in class interpreted Pablo's jokes in the wrong way. For this reason I would like to introduce the following:

DISCLAIMER: please do not interpret my statements as if I dislike or disagree with the topics addressed. I believe that every class has given substantial contribution to my startup skills. I never intended to be negative in my comments.

Pablo addressed a number of new concepts we never discussed in class with zero redundancy with the previous sessions [ Pablo is that ok? :-) ]. Among the topics discussed in class I particularly liked his definition of "being an entrepreneur" and also his experience of selling bumeran.com to Terra Lycos.

Being entrepreneur means having a 500 task job.

Your company can be divided by department and for each of them there are several issues that have to be addressed and developed. Then for each single issue you can further subdivide, address and develop. In the mean time you need to be sure that each decision you make is congruent with your overall strategy and in line with what the other co-founders are doing.

Being entrepreneur means being passion driven.

Probably you cannot sustain a 500 task work load if you don't have passion for what you are doing. A startup company quickly dries up all your energy and unless you are really motivated you risk to loose the magic touch that makes your product/service different from the others.

An entrepreneur is a salesman.

You need to sell yourself and your idea to VCs when you need to raise capital. Sell your products or services to your customers and also sell your image to suppliers and business partners. Last but not least, you might need to sell your company!

Selling a company

I believe that from the entrepreneur's point of view this is always a tough decision. Why should you sell your baby? I believe there is not a single answer. Of course you might decide to cash your work and get your life back. But you might also foresee a dark period during the next years. Or you might need another injection of fresh capital that you can't find. Behind the reason of selling, it was interesting what Pablo said about his experience.

• Carpe diem! In this business the window of opportunity is very short. VCs or acquiring companies always have multiple interests and when they come to you with an offer they don't wait too long before moving away.

• VCs VS Entrepreneurs The battle continues... how is possible that even on selling the company VCs and entrepreneurs have different point of views? We know that VCs have a cold and rational approach and tend to care mostly to the return of their investment. But why an entrepreneur should care about the future of the company? Because it is still his baby? Because he cares about the employees? What else?

Thank you Pablo for your insights. Hopefully I did not say anything that will cause a seaquake.

Roberto Saint Malo - Adara / Kibo Ventures

Last session we had Roberto Saint Malo, a VC of Kibo Ventures. Roberto explained us what usually a VC looks in a entrepreneur. In my view he did not say anything that was not already mentioned in other sessions or classes but it was good to hear directly from a VC.

So what makes an entrepreneur shine? Among all characteristics required the most important are: track record, competence, commitment, team leader. Even though having all those characteristic helps, Roberto told us that rarely an entrepreneur is able to excel all those requirements. They are still human beings!

Remember that also the entrepreneurs should choose their VCs

Professionality is required also on the other side of the river. You will easily notice the difference between an experienced VC that has invested many times and a brand new one without experience in dealing with entrepreneurs. We know well that a VC might require a big chunk of the shares or might be very pushy in expressing his ideas. As such, the choice of a VC might heavily influence the likelihood of success.

Having a lot of money financed is not always good

Between a few thousands bucks and a multi millionaire startup I would probably choose the latter. However, Roberto highlighted the importance of expectations. Since nobody expects big things from a poor startup, probably the entrepreneur would enjoy a lot of freedom in developing his ideas. On the other hand, having $20 Million on the company's bank account would force the entrepreneur to manage a bunch of pushy stakeholders.

Be there very early, act as co-founder

It is not true that all VCs want to have an already established and profitable company. The highest value creation is in the early stage. As such VCs look also in co-founding the company together with an entrepreneur that just has an idea. Of course this does not mean that VCs are willing to throw money out of the window just for the sake of co-founding. You've got to convince our VC!

The magic is in the execution

This is the most redundant concept in this course. It is good that also VCs believe so. You don't really need to reinvent the wheel every time. VCs will appreciate if you take an already used model and decide to copy and improve it. The most important thing is in the way you implement your idea. Sometimes this is even more important that the idea itself.

Make a proof of concept

Having a good idea is not enough. You need to proof that this idea may work. Once you have the result of your proof of concept it will be much easier to convince your VC.

Set short term targets

VCs like to see clear objectives in the short term. This is in line with their investment strategy. Alternatively give them an easy way out. Usually if the idea is not working after a short period of time investors want to leave and invest in other ideas. If you give them an exit strategy they might be more willing to invest on yours.

Try to impress in every single detail

Starting from the business plan document, try to take care of every single detail. Everything you do says something about your way to implement things.

Thank you Roberto for your insights. Hopefully following your suggestions it will be easier to attract good investors.

Ronald J Friedlander - reviewpro.com

Yesterday Ronald J Friedlander presented his reviewpro.com. Founded in october 2008 reviewpro experienced an impressive growth during these years. Ronald said that has been the "least known fastest growing company". A part from his fabulous humour that made the class really enjoyable, Ronald wanted highlight the fact that reviewpro is a B2B company. The numbers of clients are lower but of course they have a higher contribution to the company's profits compared to B2C, which sometimes are not profitable at all.

Ronald identified a specific need and created a service for that. He realised that there are many businesses that live on the basis of their reputation. If their reputation is high their business is good but if their reputation falls they might have a very dark period. Nowadays the community online has a clear idea about every single product or service delivered. If a user experiences a bad service he will probably share his experience online in order to prevent other users to buy the same service. So, how do companies monitor their reputation online?

Ronald decided to implement a Reputation Management System able to create customised feedback on how is perceived a specific brand or company from the community. More in detail he decided to focus on a long tail and extremely fragmented industry such as Hospitality. In fact, I believe that we all use review websites (i.e. tripadvisor) before to actually book a room in a new hotel. By having a subscription with reviewpro, a hotel can constantly monitor the perception of users and make corrective actions to improve.

Of course this kind of business requires the development of a software that is able to catch user generated feedbacks all around the web, to run a semantic analysis and to fill a report for the customer. This means that the core part of the reviewpro is its cutting edge technology. The problem related to this is that you cannot approach a hotel until you have already developed the core part of your system. On the other hand the development requires a huge financial effort. So, how to develop a B2B service without a huge upfront investment?

Pedro Jareño - Minube.com

Yesterday we had Pedro Jareño, entrepreneur of Minube.com. He started this website three years ago with the idea to create something different from the usual travel website. He felt that there are two different types of travellers; the tourist and the new traveler. Only once identified the differences between them he could make decisions on how to targeted the new traveler.

The tourist usually goes on holiday once a year in order to avoid his daily routine and buys a package from an agency. On the other side we have the new traveler, which starts his holidays from the exact moment he decides to plan the trip. He makes a lot of research on Internet, asks for opinions, and builds his own package by himself. The new traveler tends to use this approach not only for his long yearly holidays, but also for little special events (it might be a weekend, a single day, but even a single dinner).

So, on the basis of this new way of planning travels, what is the most important part?

Pedro noticed that the usually the new traveller goes trough the following steps for every trip: Inspiration, planning, comparison, booking, traveling, sharing memory. Then he realised that travel websites were mainly creating services for planning, comparison and booking and none of them addressed the inspiration part of the process. However, it is true that there are many websites where people can share their pictures and get inspired from other's (i.e. flickr, facebook, picasa, etc.), but none of them were directly connected to a travel website.

Now the problem is how to inspire new travellers?

Pedro identified some key factors that play a fundamental role:

Constant Innovation - Because people come again and again because they know there is always something new.

Passion - They have passion for travels and want to interact with people who have the same passion.

Humanisation - Nowadays people are real. They no longer don't hide behind a nickname/avatar.

Honesty - Being someone else or publishing fake contents will eventually backfire.

Differentiation - Be unique (type of products, the way you communicate, branding, etc.)

Focus - Do not broaden to much your scope. Do little but do it well.

Pedro also explained what he did to create network effect. He followed several activities in different directions in order to promote his website. Among them he said that he listens his customers and let them decide in what direction the website should go. Even though I generally agree on this approach, I would not follow strictly the suggestions of minube's customers. For instance in marketing there is a school of thought that believes on the fact that customers don't really know what they want. So, should you always listen your customers?

Thank you Pedro for your speech. I wish you the best of luck for Minube's future!

Alberto Torrón - todotaladros.com

Today we had Alberto Torrón, part time entrepreneur and founder of todotaladros.com. Everything started from a personal problem of his friend Javier Gomez, which wanted to start a personal activity in order to continue to pay taxes for the wife's retirement program. They decided to create a small shop on ebay and sell electronic tools. Soon they realised that there was a good market opportunity and they decided to create an e-commerce website. They also decided to differentiate the activity by creating other websites that sell different type of product. The advantage of this differentiation is that they could target different niche markets with different websites, but thanks to the same nature of the business, increasing only partially the level of work required.

Today they are still small but they enjoy a healthy business and a steady growth. Their value proposition is based on the following 5 key elements:

Cheap

They offer very competitive price. They buy stocks of products from the Internet and try to keep the cost of ownership as low as possible.

Fast

They really want to excel on this element. They make sure that the product is sent as soon as possible. They believe that a fast delivery is among one of the key elements of customer satisfaction.

Guaranteed

All products are covered with the European warranty. Moreover, if the customer is unsatisfied can ask for full refund.

Reachable

This is simply amazing... if a customer calls the support service would be surprised to talk directly to the entrepreneur! However, this can be achieved because the business is still small with few transactions a day. Despite the small number of daily sales they can still have a good income thanks to fact that the average product cost is high and the margin is good.

Secure

The money transaction is handled directly with the bank and other intermediaries such as paypal. Also, they tend to be extremely flexible in terms of payment methods.

Below some key suggestions he gave us:

The relationship with suppliers and partners is critical. He seems to go beyond the professional relationship by considering their partners as real friends. As such he knows he can ask for help on particular subjects and he is willing to give help on others.

Considering the web interface he said that it should always respect the K.I.S.S. (Keep it simple, stupid!). As Jesus said last time, we should design an interface for people that pay only partial attention. If they still can achieve and find what they want you will probably are going to be more successful.

When he created his startup he decided to use his own capital. This demonstrated to partners and suppliers his full commitment to the venture. On the other hand Jorge Mata told us that a professional VC would not recommend the entrepreneur to put his own capital. This is because he knows that the entrepreneur will be willing to even "sell pizza" in order to recover his investment. It looks like that we are in front of a strategic decision when we decide to put our capital on the venture. Does auto-financing prevent future VC investment?

Concerning the technology side, Alberto's decision to deploy a crowd and open source software (PrestaShop.com) was in line with the low-cost-of-ownership constraint. However, it is important to underline that this is not in contradiction with the suggestion of the other entrepreneurs we had so far. In fact, even though Alberto did not develop his technology he still has a lot o competence in using this technology. So, even if they rely on third party (the crowd), they are still committed in mastering and controlling the technology they use.

In conclusion, I believe that they designed and started an all rounded business taking care of every single detail. They make sure that every decision is taken accordingly with their value proposition.

Jesús Encinar - Idealista.com

Yesterday we had Jesús Encinar, one of the most famous and successful entrepreneurs in Spain. His speech was very interesting because he faced critical issues related to found raising, value proposition, network effect, and international expansion.

Found raising

When Jesús decided to start idealista.com his name was unknown among VCs and entrepreneurs. As such he encountered a lot of scepticism on his ability to implement his idea. However, when he hired Anderson Consulting for the implementation of the technology he noticed that VCs were more willing to invest on the project. He finally was totally unsatisfied on the Andersen's performance and he had to rework completely the technology implemented. However, without the Anderson's name included in the business plan he probably would never have convinced a VC to invest on his project. The take home from this story are that (i) technology is core and you should keep the development in house, (ii) sometimes in order to achieve a goal you have to be flexible, give away something and go for a suboptimal solutions.

Value proposition and network effect

Jesús told us that we should not be discouraged on the fact that an industry has already a lot of players. It is normal to have a fierce competition in an attractive market. You should think what you can do in order to differentiate your service and make it better than the others. When Jesús started idealista.com he knew that the issue was on how to create a database of offers. He could copy advertisements from the other websites but doing this way he would not differentiate his service. Moreover, he noticed that the advertisements had very poor quality and were mainly generated by intermediaries such as real estate agencies. He decided that idealista had to offer high quality ads generated by a good mix of privates and agencies. Then he started filling the database of idealista with real street ads all around Madrid. This allowed idealista to offer a unique and high quality set of real estate ads. Also in order to create a high quality service, idealista started its operations only on Madrid and slowly expanded in the rest of Spain.

Internationalization

Not for all countries international expansion is a good idea. In some countries you can encounter more difficulties than others. Idealista decided to invest two years of its revenues from operations into the expansion project in Italy. Unfortunately Italy became a place with the toughest competition for real estate ads websites. When budget is limited a decision to expand in one country prevents the company to expand in others. As such, it is very important to asses in which country is more convenient the expansion in term of profitability, competition, and likelihood of success.

Jesús also stressed the concept of the interface. It should be extremely easy to use and designed for someone that pays only partial attention to the website. Simplicity is difficult to achieve; it should be carefully designed and constantly pursed during the whole website lifecycle.

Thank you Jesús for all your ideas listas!

Gabriel Aldamiz - chicisimo.com

The guest speaker of yesterday was Gabriel Aldamiz Echevarria. He shared with us the experience accumulated during the management of his three startups. He talked about (i) the idea behind a startup, (ii) the management of the technology, (iii) and the topic that I most liked regarded how to create the spark (or I should better say the various sparks) that trigger an upward network effect.

The idea

Gabriel said that he started three companies but he never had an idea... actually when he later explained what he did I though that he had incredible ideas! What is true is that the ideas were not actually generated by him, but he was still brilliant in finding new applications for something that already existed. So what is the takeaway of this story?

1) Do not focalize only on finding the killer idea but look forward and try to foresee real applications.

2) More important that the actual idea is how you implement it (this is the most recurrent thought in this blog!)

Also, sometimes young entrepreneurs keep their ideas so secret that even customers and business partners don't know. This represents a little precaution to prevent eventual competitors but on the other hand it might represent a strong limitation for the health of the venture.

The technology

As we already discussed in other sessions it is important the development of your own technology. In fact, if since the beginning you are able to develop the core technology by yourself you will not only have a competitive advantage over competitors, but also you will have less troubles with external developers and more control over your platform. However, Gabriel recommends not to focalize too much on the technology development. In fact the risk is that you eventually develop a technology that is "too generic" having plenty of potential applications but no one concrete. In front of this situation it becomes very difficult to convince a VC to invest.

Help your luck

You can create your .com and wait that someone slowly discovers your website or you can do the all your possible to make them know your company. This latter is the approach that Gabriel has decided for chicisimo. Below a checklist of things to do:

- Go to events. You've got to be seen!

- Get to know who writes about you (or that can potentially write).

- Think what type of news you can you give them.

- Think what they like.

- Think about trends.

- Release new data that can be used by journalists.

- Train your speech.

If you give informations they like, bloggers might decide to write about you and your new service. This could not only boast the number of visitors on your website, but also open the door to new potential investors. In fact, Gabriel told us that once one of the most famous bloggers decided to write an article on chicisimo he received emails also from VCs interested in getting contact with him.

I believe that these three elements should be included in the book of the perfect entrepreneur. Thanks Gabriel for your advice. Hopefully your suggestions will contribute to successfully manage my future startup.