19
d'Abril
de
2016
Act.
19
d'Abril
de
2016
Luis Martín Cabiedes (@luismcabiedes) is a key name when it comes to talking about investment in start-ups in Spain. His job as a business angel, in which he has carried out more than 80 investment projects, provides him with great perspective on the past and present of the sector in which few people speak as clearly as he does. Privalia, which has just been purchased by Vente-Privée, Olé, MyAlert, Trovit and Blablacar are "the five Oscars" that allow him to continue to always turn a profit when it comes to investing.
As the star guest at one of Acció's Funding Breakfasts, where he wows those who do not already know him, Cabiedes does not hold back when he later talks to VIA Empresa. The relationship between investor and entrepreneur, the industry created around start-ups or the differences between the Barcelona and Madrid ecosystems lead to reflections that will leave no one indifferent.
Investment is often spoken about as a question of probability, that two out of every 10 investment projects work. Aren't you frightened about scaring off entrepreneurs if they think that they are just seen as a number?
It is not a case of seeing them as just a number! Good investors invest when the statistics are in their favour, but that does not mean that they are investing in statistics. The risk is believing you are better than average. Therefore, you have to invest as if you were average. If the average success rate is 20%, you have to invest based on that. If you are then cleverer, fantastic, you will be more successful. What I don't do is spray and pray. I am very selective when it comes to investing in a project, but nevertheless aware that there is always a degree of uncertainty that can only be approached with statistics. That does not mean that the entrepreneur is just a number, but neither is the project your child.
Some entrepreneurs talk about projects as if they were their children...
I recall one entrepreneur who said that to me three times. I told him: "Okay, for you it is like a child, but to me it is like a calf." I have a farm and when they are three I take the calves to the slaughterhouse. So, don't talk about it being your child because for the investor there is not the emotional link the entrepreneur has with the project. For me you are another of the calves on my farm.
In your speeches you normally say exactly what you think. Surely entrepreneurs who come to you with their projects must also get an intuition that you are talking to them straight?
Yes, and one of the things that I have to do when I meet an entrepreneur is to try to make them unlearn what they have been told they have to do when with an investor. I don't let them show me a PowerPoint presentation nor do I let them pitch to me. I ask them in a natural way, as I would with anyone, about who they are and what they are doing? I try to have the same type of conversation I have with the woman I buy bread from. I don't go into the baker's and ask how often they have thought about eating healthily. There is a lot of nonsense surrounding the communication between entrepreneurs and investors. There is a whole industry dedicated to showing entrepreneurs how they have to speak to investors, as if we weren't using a common language. They tell them they have to communicate their excitement. Just tell me what you do and that will be enough.
You are quite critical of the way we usually listen to motivation and passion. Is entrepreneurship misdirecting us?
I don't believe in conspiracies and I don't believe there is anything behind them. I believe the pendulum swings and now we have gone to far over the other side. There is now an industry of mentors, incubators and consultants dedicated to helping entrepreneurs but that I think bring very limited value. A while ago I read that there is no worse insult than giving advice when what is needed is money, referring to the issue of donations. There are those who give advice to a homeless person, when what that man needs most is to eat. And that is what often happens. There are people giving advice to others who really need money. If you have it, you give it to them; if you don't, you leave them be. The industry around entrepreneurs has often been created with the best of intentions, but providing limited added value.
A series of clichés has built up that entrepreneurs use systematically when they meet investors. Who are the ones you hate most and make you rule out providing investment?
One of the classics is "we don't have any competition." When they tell you they have an idea that has no competitor, it is better to move on to the next one. I do not invest in ideas, I invest in companies. If you have a fantastic idea, I don't care. What I want is for you to tell me about the company. I have spent 17 years doing this, only for someone to come along who has been told they have to use a PowerPoint presentation and in the first slide they tell me the Internet is growing... You don't say! The second one says that mobile is growing. And then the third asks: how many times have you thought about that? Please, tell me something I don't know! Like who you are and what you are doing. How many households in Spain have the Internet I either already know or can find out in a minute on Wikipedia.
In other words, it is better not to talk about ideas, or not having competition, nor to introduce metaphysics...
Do you think that when Amancio Ortega launched Zara he did a market study about fast fashion? No, he sold smocks!
But if they act like this it must be because at some time it has worked and investors have bought this speech...
I think there are people who have heard it works, but I am not so sure that there are many investors who have bought it. They have done courses for entrepreneurs and instead of showing them how to sell, they showed them how to do a presentation. I recall years ago being invited to a course for entrepreneurs and when I looked at the programme there were subjects like Body Expression, Presentation, Speaking Skills... But, is this a course for entrepreneurs or politicians? Where is the class about selling earphones? And the one about buying earphones? And the one about taking salesmen on to sell earphones? That is what an entrepreneur has to learn. It is as if athletes, instead of running, had to do PowerPoint presentations on how to run.
You have also often talked about an investment bubble and that, in the end, too much available money is bad for entrepreneurs. Why is that?
I think the bubble is over. In 2016, things were tough at the beginning, which is how 2015 ended. There was a bubble with too much money, and that is not good for anyone. But within this movement of swings, I think that we are moving to the other extreme and there won't be a penny for anyone. This is a strange business. At one moment there is a lot of money for everyone, and suddenly there's none for anyone. With interest rates at 0%, the central banks injecting the economy with money and without other assets to invest in, a lot of money came this way because money has to circulate. There are a lot of people with a lot of money who used to invest in the property market and who are now putting the money here.
Will they lose a lot of money?
Yes, but if you see it from a social point of view, it is a good thing. For a pile of money to go from rich idiots to clever entrepreneurs is a good thing. It is another thing if the market has become muddied, but socially a certain amount of redistribution is good. However, a lot of money has been thrown away, and is still being thrown away.
In fact, in 2015 you did not make many investments....
I invest in about 10 a year, and at the end of 2015 I made no investments. In fact, in the second quarter I only made one and that was outside Spain. We see the atmosphere here as unbreathable and as we investors are lucky enough not to need to invest, we business angels at least do not invest.
Was there a lack of interesting projects or were they overvalued?
The problem is not overvalution but competition. I have told a lot of projects that I will invest in them because I like them and the team is good; but I can't do that if there are seven super-funded projects that are all similar. For example, a guy comes and tells me about a project to use mobiles to find work close to home. It was presented to me last year and it made sense. But suddenly it turns out that there is Job Today, Job Corner and Job and Talent, each of which has large amounts of money behind it, just getting into the sector. That makes it very difficult. Or there is the case of Deliberry. I spoke to Gemma Sorigué, who is a fabulous entrepreneur, a lot and perhaps in other circumstances I might have invested. But they have three direct rivals, Amazon did the same thing and Ulabox, which I also invested in. There are businesses in which it makes sense to invest, but if the competitive environment is so hard... Perhaps I want to jump in the deep end, but if there are so many sharks about, I won't. It is more a question of the competitive environment than the evaluation, which I have never been bothered with.
We are seeing a lot of apps with models that lose money with each user. Do they have a future?
I don't think so. Whoever has a negative margin with each order will crash. In the United States there is already a lot of criticism for Instacart, which has admitted to losing 10 dollars on each order. That is part of the on-demand business bubble, which is causing them to drop like flies. But it is natural. They say it is the new economy, but until they invent a new euro, there will be no new economy.
We normally think it is the entrepreneur who has to seek out the investor, but you argue that it should really be the other way round...
The thing is that is seems as if the entrepreneur has to go looking for investors and that all investors are equally good. But I think that entrepreneurs have to learn to be very selective when it comes to choosing investors. And not only for the quality, but also so that they fit with the project. Not everyone is right for investing in you, in fact, if they do invest in you then it is not good news.
Why? Closing a round of investment is always seen as good news...
It is as if a chef were to celebrate having gone to the market to buy fish. He still has to cook it! Or if they threw a party in a chemist's for having bought condoms. No! Now comes the real work... What has to be done after securing a round of investment is to be successful, and these days there is a lot of rubbish surrounding the celebration of investment rounds. In a company, the important thing is the money you make, not what you attract. What money made is in measured against what goes out: first the employees, then the entrepreneur and finally the investors. It now seems as if a company is large according to what it raises, and it should not be like that.
So, from the self-interested point of view of the investor, it would be a good thing for entrepreneurs to think like that...
Yes and no. The market is immature and does not discriminate, and there are a lot of bad investors. That happens because the entrepreneurial system does not have enough experience. Before, it seemed as if anyone could be an entrepreneur, and now it seems as if you are not an entrepreneur you can be an investor. And that is not a good thing.
You spend your time between Madrid and Barcelona, and you know the two cities well. Are there any differences between their two entrepreneurial ecosystems?
I am from Madrid but I spend more time in Barcelona because I love it and, above all, because it has the sea. That gives it an unfair competitive advantage! Seriously though, the truth is that I have more and better projects in Barcelona. It has a better and more developed entrepreneurial ecosystem than Madrid, infinitely better. And the important thing is not what I think, but where I put my money; and I have put a lot more into Barcelona than Madrid. It puzzles me why more support is not given to Barcelona, which could become a major centre of European entrepreneurship. But that is how we are in Spain and we are always spread thin. We want a Silicon Valley in every neighbourhood.
Why do you think Barcelona is better than Madrid in this aspect?
It has a number of advantages because that is how things have worked out. Natural clusters work like that. I think, for example, that business schools have a lot to do with it. None of Spain's universities are among the top 100 in the world, but it has three business schools that are among the best in the world, and two of them are in Barcelona. Another reason is that Barcelona is very attractive. You go to Berlin and you tell a CTO that you are from Spain and he tells you to get out. But if you tell him you are from Barcelona, it is an entirely different thing. It is a cool city, the weather is good, it is full of tourists and it's a centre of fashion, like San Francisco used to be; and that counts for more than you would think. Moreover, Barcelona is where many of the first good Internet companies came from: the Intercom group, Privalia, eDreams... That is an ecosystem. Because of those first companies, an ecosystem has grown up because entrepreneurship spreads like a contagion. And in fact that is more difficult to replicate. A Pau Gasol can be born anywhere, but there is only one in the NBA. What we all need to do is give support to this Barcelona ecosystem rather than imitating it or trying to reproduce it in other places.
Does the coffee for all idea also affect the world of entrepreneurs?
I don't know if it is a political thing. There are also people who say that it is due to the business-minded Catalans, and I love the Catalans, but the best entrepreneur in Europe in the past 10 years is from Galicia and is called Amancio Ortega. And there is another, from Valencia, who set up Mercadona. It is true that there are a lot of Catalan entrepreneurs and business people, but I don't think it is either genetic or political. In fact, we are experiencing a moment when the best thing for the economy is not to have a government.
Is having an acting-government positive?
It is fantastic! If only we had a budget for life and no politicians. Socially it would be terrible, but for companies the best thing politicians can do is to do nothing. The best politics can hope to do is regulate the limits of what is legal and what is not, to provide the rules of the game, but interfering as little as possible.
Is one way of encouraging entrepreneurship in Barcelona down to projects like that of the Palau de Mar?
I do not want to criticise because I think it is a good thing. But I like Barcelona Activa's austerity more. In the Palau de Mar you'll find Tiendeo, which began in a living room at home, and later went to Barcelona Activa and is now there, where those people deserve the office they have. I don't think it is a bad thing for them to go to the Palau, but personally I prefer starting in garages and finishing up in palaces. I think it is a little over-the-top. It is not that I think I deserve anything, but sometimes I have gone to see entrepreneurs with offices that are better than mine. Having said that, Miguel Vicente and all the rest are stupendous people. But it is like when they put a football table in Google. This is not about football tables or palaces, this is about garages, living room tables, Barcelona Activa. It is beautiful, with an atmosphere I love. Everyone is the same, with the name of the company outside and everyone working. And now you go uptown to the Palau de Mar and you find Tiendeo and HolaLuz, which both come from Barcelona Activa. That is what I like, for the Palau to be there when you get to the same level as Tiendeo or HolaLuz, which are both large projects with more than 100 people working for them, when they began with just three. I don't want to be negative, but it is like developing a base of football fans by constructing another Camp Nou. In that case, you wouldn't, would you? When you are world and Europe champion, you will get your Camp Nou.
As the star guest at one of Acció's Funding Breakfasts, where he wows those who do not already know him, Cabiedes does not hold back when he later talks to VIA Empresa. The relationship between investor and entrepreneur, the industry created around start-ups or the differences between the Barcelona and Madrid ecosystems lead to reflections that will leave no one indifferent.
Investment is often spoken about as a question of probability, that two out of every 10 investment projects work. Aren't you frightened about scaring off entrepreneurs if they think that they are just seen as a number?
It is not a case of seeing them as just a number! Good investors invest when the statistics are in their favour, but that does not mean that they are investing in statistics. The risk is believing you are better than average. Therefore, you have to invest as if you were average. If the average success rate is 20%, you have to invest based on that. If you are then cleverer, fantastic, you will be more successful. What I don't do is spray and pray. I am very selective when it comes to investing in a project, but nevertheless aware that there is always a degree of uncertainty that can only be approached with statistics. That does not mean that the entrepreneur is just a number, but neither is the project your child.
Some entrepreneurs talk about projects as if they were their children...
I recall one entrepreneur who said that to me three times. I told him: "Okay, for you it is like a child, but to me it is like a calf." I have a farm and when they are three I take the calves to the slaughterhouse. So, don't talk about it being your child because for the investor there is not the emotional link the entrepreneur has with the project. For me you are another of the calves on my farm.
In your speeches you normally say exactly what you think. Surely entrepreneurs who come to you with their projects must also get an intuition that you are talking to them straight?
Yes, and one of the things that I have to do when I meet an entrepreneur is to try to make them unlearn what they have been told they have to do when with an investor. I don't let them show me a PowerPoint presentation nor do I let them pitch to me. I ask them in a natural way, as I would with anyone, about who they are and what they are doing? I try to have the same type of conversation I have with the woman I buy bread from. I don't go into the baker's and ask how often they have thought about eating healthily. There is a lot of nonsense surrounding the communication between entrepreneurs and investors. There is a whole industry dedicated to showing entrepreneurs how they have to speak to investors, as if we weren't using a common language. They tell them they have to communicate their excitement. Just tell me what you do and that will be enough.
You are quite critical of the way we usually listen to motivation and passion. Is entrepreneurship misdirecting us?
I don't believe in conspiracies and I don't believe there is anything behind them. I believe the pendulum swings and now we have gone to far over the other side. There is now an industry of mentors, incubators and consultants dedicated to helping entrepreneurs but that I think bring very limited value. A while ago I read that there is no worse insult than giving advice when what is needed is money, referring to the issue of donations. There are those who give advice to a homeless person, when what that man needs most is to eat. And that is what often happens. There are people giving advice to others who really need money. If you have it, you give it to them; if you don't, you leave them be. The industry around entrepreneurs has often been created with the best of intentions, but providing limited added value.
 |
| Photo: Àngel Bravo |
A series of clichés has built up that entrepreneurs use systematically when they meet investors. Who are the ones you hate most and make you rule out providing investment?
One of the classics is "we don't have any competition." When they tell you they have an idea that has no competitor, it is better to move on to the next one. I do not invest in ideas, I invest in companies. If you have a fantastic idea, I don't care. What I want is for you to tell me about the company. I have spent 17 years doing this, only for someone to come along who has been told they have to use a PowerPoint presentation and in the first slide they tell me the Internet is growing... You don't say! The second one says that mobile is growing. And then the third asks: how many times have you thought about that? Please, tell me something I don't know! Like who you are and what you are doing. How many households in Spain have the Internet I either already know or can find out in a minute on Wikipedia.
In other words, it is better not to talk about ideas, or not having competition, nor to introduce metaphysics...
Do you think that when Amancio Ortega launched Zara he did a market study about fast fashion? No, he sold smocks!
But if they act like this it must be because at some time it has worked and investors have bought this speech...
I think there are people who have heard it works, but I am not so sure that there are many investors who have bought it. They have done courses for entrepreneurs and instead of showing them how to sell, they showed them how to do a presentation. I recall years ago being invited to a course for entrepreneurs and when I looked at the programme there were subjects like Body Expression, Presentation, Speaking Skills... But, is this a course for entrepreneurs or politicians? Where is the class about selling earphones? And the one about buying earphones? And the one about taking salesmen on to sell earphones? That is what an entrepreneur has to learn. It is as if athletes, instead of running, had to do PowerPoint presentations on how to run.
You have also often talked about an investment bubble and that, in the end, too much available money is bad for entrepreneurs. Why is that?
I think the bubble is over. In 2016, things were tough at the beginning, which is how 2015 ended. There was a bubble with too much money, and that is not good for anyone. But within this movement of swings, I think that we are moving to the other extreme and there won't be a penny for anyone. This is a strange business. At one moment there is a lot of money for everyone, and suddenly there's none for anyone. With interest rates at 0%, the central banks injecting the economy with money and without other assets to invest in, a lot of money came this way because money has to circulate. There are a lot of people with a lot of money who used to invest in the property market and who are now putting the money here.
Will they lose a lot of money?
Yes, but if you see it from a social point of view, it is a good thing. For a pile of money to go from rich idiots to clever entrepreneurs is a good thing. It is another thing if the market has become muddied, but socially a certain amount of redistribution is good. However, a lot of money has been thrown away, and is still being thrown away.
In fact, in 2015 you did not make many investments....
I invest in about 10 a year, and at the end of 2015 I made no investments. In fact, in the second quarter I only made one and that was outside Spain. We see the atmosphere here as unbreathable and as we investors are lucky enough not to need to invest, we business angels at least do not invest.
Was there a lack of interesting projects or were they overvalued?
The problem is not overvalution but competition. I have told a lot of projects that I will invest in them because I like them and the team is good; but I can't do that if there are seven super-funded projects that are all similar. For example, a guy comes and tells me about a project to use mobiles to find work close to home. It was presented to me last year and it made sense. But suddenly it turns out that there is Job Today, Job Corner and Job and Talent, each of which has large amounts of money behind it, just getting into the sector. That makes it very difficult. Or there is the case of Deliberry. I spoke to Gemma Sorigué, who is a fabulous entrepreneur, a lot and perhaps in other circumstances I might have invested. But they have three direct rivals, Amazon did the same thing and Ulabox, which I also invested in. There are businesses in which it makes sense to invest, but if the competitive environment is so hard... Perhaps I want to jump in the deep end, but if there are so many sharks about, I won't. It is more a question of the competitive environment than the evaluation, which I have never been bothered with.
 |
| Photo: Àngel Bravo |
We are seeing a lot of apps with models that lose money with each user. Do they have a future?
I don't think so. Whoever has a negative margin with each order will crash. In the United States there is already a lot of criticism for Instacart, which has admitted to losing 10 dollars on each order. That is part of the on-demand business bubble, which is causing them to drop like flies. But it is natural. They say it is the new economy, but until they invent a new euro, there will be no new economy.
We normally think it is the entrepreneur who has to seek out the investor, but you argue that it should really be the other way round...
The thing is that is seems as if the entrepreneur has to go looking for investors and that all investors are equally good. But I think that entrepreneurs have to learn to be very selective when it comes to choosing investors. And not only for the quality, but also so that they fit with the project. Not everyone is right for investing in you, in fact, if they do invest in you then it is not good news.
Why? Closing a round of investment is always seen as good news...
It is as if a chef were to celebrate having gone to the market to buy fish. He still has to cook it! Or if they threw a party in a chemist's for having bought condoms. No! Now comes the real work... What has to be done after securing a round of investment is to be successful, and these days there is a lot of rubbish surrounding the celebration of investment rounds. In a company, the important thing is the money you make, not what you attract. What money made is in measured against what goes out: first the employees, then the entrepreneur and finally the investors. It now seems as if a company is large according to what it raises, and it should not be like that.
So, from the self-interested point of view of the investor, it would be a good thing for entrepreneurs to think like that...
Yes and no. The market is immature and does not discriminate, and there are a lot of bad investors. That happens because the entrepreneurial system does not have enough experience. Before, it seemed as if anyone could be an entrepreneur, and now it seems as if you are not an entrepreneur you can be an investor. And that is not a good thing.
You spend your time between Madrid and Barcelona, and you know the two cities well. Are there any differences between their two entrepreneurial ecosystems?
I am from Madrid but I spend more time in Barcelona because I love it and, above all, because it has the sea. That gives it an unfair competitive advantage! Seriously though, the truth is that I have more and better projects in Barcelona. It has a better and more developed entrepreneurial ecosystem than Madrid, infinitely better. And the important thing is not what I think, but where I put my money; and I have put a lot more into Barcelona than Madrid. It puzzles me why more support is not given to Barcelona, which could become a major centre of European entrepreneurship. But that is how we are in Spain and we are always spread thin. We want a Silicon Valley in every neighbourhood.
Why do you think Barcelona is better than Madrid in this aspect?
It has a number of advantages because that is how things have worked out. Natural clusters work like that. I think, for example, that business schools have a lot to do with it. None of Spain's universities are among the top 100 in the world, but it has three business schools that are among the best in the world, and two of them are in Barcelona. Another reason is that Barcelona is very attractive. You go to Berlin and you tell a CTO that you are from Spain and he tells you to get out. But if you tell him you are from Barcelona, it is an entirely different thing. It is a cool city, the weather is good, it is full of tourists and it's a centre of fashion, like San Francisco used to be; and that counts for more than you would think. Moreover, Barcelona is where many of the first good Internet companies came from: the Intercom group, Privalia, eDreams... That is an ecosystem. Because of those first companies, an ecosystem has grown up because entrepreneurship spreads like a contagion. And in fact that is more difficult to replicate. A Pau Gasol can be born anywhere, but there is only one in the NBA. What we all need to do is give support to this Barcelona ecosystem rather than imitating it or trying to reproduce it in other places.
Does the coffee for all idea also affect the world of entrepreneurs?
I don't know if it is a political thing. There are also people who say that it is due to the business-minded Catalans, and I love the Catalans, but the best entrepreneur in Europe in the past 10 years is from Galicia and is called Amancio Ortega. And there is another, from Valencia, who set up Mercadona. It is true that there are a lot of Catalan entrepreneurs and business people, but I don't think it is either genetic or political. In fact, we are experiencing a moment when the best thing for the economy is not to have a government.
Is having an acting-government positive?
It is fantastic! If only we had a budget for life and no politicians. Socially it would be terrible, but for companies the best thing politicians can do is to do nothing. The best politics can hope to do is regulate the limits of what is legal and what is not, to provide the rules of the game, but interfering as little as possible.
Is one way of encouraging entrepreneurship in Barcelona down to projects like that of the Palau de Mar?
I do not want to criticise because I think it is a good thing. But I like Barcelona Activa's austerity more. In the Palau de Mar you'll find Tiendeo, which began in a living room at home, and later went to Barcelona Activa and is now there, where those people deserve the office they have. I don't think it is a bad thing for them to go to the Palau, but personally I prefer starting in garages and finishing up in palaces. I think it is a little over-the-top. It is not that I think I deserve anything, but sometimes I have gone to see entrepreneurs with offices that are better than mine. Having said that, Miguel Vicente and all the rest are stupendous people. But it is like when they put a football table in Google. This is not about football tables or palaces, this is about garages, living room tables, Barcelona Activa. It is beautiful, with an atmosphere I love. Everyone is the same, with the name of the company outside and everyone working. And now you go uptown to the Palau de Mar and you find Tiendeo and HolaLuz, which both come from Barcelona Activa. That is what I like, for the Palau to be there when you get to the same level as Tiendeo or HolaLuz, which are both large projects with more than 100 people working for them, when they began with just three. I don't want to be negative, but it is like developing a base of football fans by constructing another Camp Nou. In that case, you wouldn't, would you? When you are world and Europe champion, you will get your Camp Nou.