Rocky Balboa – the perfect entrepreneur?!?

Rocky Balboa - big ego, big fighterRocky Balboa – the perfect entrepreneur?!?

Why in my view Rocky is a perfect entrepreneur

Ok, I love Rocky and I have a poster of this guy hanging here in my room in Madrid but I think we can learn a lot from this guy! 🙂

Because of the following reasons I think that Rocky has the  attitude that makes a good entrepreneur:

  • Passion: He loves his sport and he kicks ass running and training the hell out of himself to achieve his goal
  • Team: He has dedicated friends that support and train him
  • Will to fight: “It ain’t over till it’s over” is an attitude that each entrepreneur should have. For sure there will come times when you get “knocked down”. That are the critical moments which show if you have the guts to go through with it or just give up. Rocky gets up and so should you! 🙂
  • Vision: A unknown boxer from Philly that wants to become champion. Sounds just like every start-up starting to compete in an unknown market sometimes against big competitors that seem to be impossible to fight against. Have a vision and just go for it!

Short intro – who am I – what this blog is about

Hi there, I am Sammy Gebele and this is my first personal blog. Besides being co-founder of the start-up foodieSquare I am currently MBA student at Instituto de Empresa Business School in Madrid. During my fifth and last term at IE I attend the class “MANAGING THE TECH STARTUPS” of Enrique Dans. Enrique has a great way of teaching, he simply invites great speakers for the relevant topics and moderates the discussion…and there is a great deal to learn from these guys!!

One of our first speakers was Jorge Mata, a very successful serial entrepreneur. With his first start-up myalert Jorge raised over $40 million  in the early 2000’s. With his second start-up he was able to raise seed money quickly as he already had the contacts and the reputation of being a successful entrepreneur. He has been appointed twice technology pioneer by the World Economic Forum in 2001 and 2002.  So this first post is related to the session we had with Jorge.

“As an entrepreneur you have to have a lot of ego” Jorge Mata – true or not true?

Jorge is an energetic, outgoing person with a definitely big ego. When he states “the most important thing as an entrepreneur is yourself, get something for your personal investment” you see that he truly believes in this attitude. Especially when it comes to negotiating with investors he states, “you want to make money, don’t give away too much – your seed round should be made at a pre money valuation of 2-3 million…and you should not give away more than 30%-40% of the company”.

One might say that Jorge is biased due to his personal experience of subsequently raising cash and growing companies successfully. Having a great first time experience as an entrepreneur gives you a lot of credit with future investors, and the time when he raised money was also the time when you could (oversimplified statetment coming:) raise money with a good powerpoint presentation.

So nowadays, does it help you to be a testosteron driven entrepreneur?

I would say it is not necessary but it helps a lot because

  • You show passion: Even if you as a first time entrepreneur might not be able to go for a valuation of €2-3 million because the market is just not like it was in early 2000’s, you must believe in your company and your abilities and you must defend that in front of every investor. You might not get the valuation you want, but you are definitely more likely to get investment if investors see someone who is passionate about his start-up.
  • You have to be a fighter and believe in yourself: You will for sure go through ups and downs as an entrepreneur.  Especially in the down times you have to believe in yourself, your idea and your core team to survive and come out stronger.
  • You have to stick to your core hypothesis: Even in my short life as an entrepreneur, every second expert in that I ask for advice in a special topic gives me suggestions to change core pillars of our business. If you don’t stick to your hypothesis you will never execute well as your vision is blurry and you change directions too often

Valuations in seed and further stages

Jorge’s claim of not giving away more than 30-40% company after the first seed round seems a good approach for both, the investor and the entrepreneur. The entrepreneur is the one driving the company and as an investor you want to have a motivated driver. If you take more, you might discourage the driver and your money is immediately worth less even though you just invested. VCs love to control 15% to 30% of your company, Jorge claims that this is the point of time when an entrepreneur makes money as the initial valuation goes up. Downside is that you have someone invested that needs more “attention” and wants more influence on your business than an angel investor

How investors choose their startups!

Jorge is also an angel investor who usually puts €100k into a startup. He worked for a seed stage fund in silicon valley called applaud and thus knows both sides of the business.

His key decision criteria for investing into a startup are

  • Market: He wants to see a process solving a real problem
  • Scalability: this is key to every business
  • Management team: Clear division of team roles (ceo, finance, technology, operations ) so you create a team that complements each other with all necessary skills. He researches about each person of the core team – good credentials are a must
  • He wants to see a real company, something real happening! So prototypes are a big advantage. This reduces the risk of the investment. Revenue however is not necessary at seed investments.

These criteria are in line with what every professional investor wants to see. Market, team, scalability and ability to execute.

Angel Investors and VCs –  how to choose and get them

First of all, Jorge has a special relationship with angel investors. A good personal relationship is a must and angels especially need it as they mainly invest in the people not in an existing revenue generating business. VCs on the other hand are a little bit more difficult as they want to have more influence on the business and on strategic decisions.

Jorge says that it is generally not a good signal that you have to put your own money into the business – vc and angel investors should take risk, be a risk taker. Especially VC’s  shouldn’t force founders to invest – founders would then rather sell pizza (diversify) to survive instead of focussing. I partly disagree, especially for angel investors. They put usually €100k+ in your company and want to see you being committed and not quitting when times get rough. So a certain investment that at least signals that you will fight to survive should be made by every entrepreneur. However, it is not easy to determine the right amount in order to not force the entrepreneur to “sell pizza’s”:)

Make strong due diligence with your vcs – ask invested companies – how are they treating their entrepreneurs? Especially as a first time entrepreneur it might seem hard to get your first round of funding going. Like mentioned in the great book of Techstars “do more faster”, you have to focus on the first 1/3, the rest will usually follow.

Explain value proposition properly –  trigger something, people want to feel an emotional connection to your product!! This is not an easy task and it is good to ask for honest feedback about your marketing and pitching strategy. I strongly believe in abp – always be pitching! The more you pitch your product, the better your idea on how people perceive your pitch and the better the chances you can improve and adjust your pitch to trigger this emotional orgasm of your potential customers!

How to treat your investor

Finally, once you got your money, Jorge says; treat your investors like family, especially the angels. They invest in you as a person, love your angels and always try to give them back their money. I agree in the sense that you should work hard to make your investors happy. However start-up usually fail and an investor invests in a market hypothesis. Sometimes it is not the fault of an entrepreneur that a business fails. The art is to know when to close down in order to give back the remaining  money to your investors.If you treat your investor badly nobody invests in you again, treat them right!

Treating an investor right means

  • Be truthful, especially in bad times and with bad news. Boards have to have all info 7 days in advance
  • Board is there to protect investors from yourself – to control you. This is a two sided blade, I agree in the sense that an investor you trust will give you good advice on e.g. when to quit. I disagree in a sense that not every hunge of an investor is right and you have to be up to a certain degree stubborn and test your hypothesis before moving to a new one

A board of advisors is different to a board of investors. They put some money but are there to give you practical advice because of their sector knowledge.

Know your strength

Jorge says; “I am good for 4 years – some other entrepreneurs are more industrial and have more fun doing that – I likes to do new things, grow them big and give it to someone else – the craziness creating new ideas is different”.

Personally I can identify myself with this statement. I am a restless person and keen on doing instead of talking…basically my credo is “walk the talk”. This becomes increasingly difficult in a bigger insitutiono because these companies move slower. There are more steps needed in order to make decisions and implement new ideas. I just love to see things happen, its like an addiction. That’s why I can say that I really like the craziness of our start-up foodieSquare, there is so much to do and so much happens every day that I feel like being on an adventure every day. This is the kick I need!

So then it is good to know when to quit and give the leading positions in your company to people who love growing bigger institutions…sounds easier than it probably is.

When to sell – good Angels/VCs help

Selling the company is like opening a water melon – early not tasty – late not good any more.

How Jorge chooses his business ideas

Jorge says he “is not a guy of brilliant ideas” but rather builds ideas on things he has done in the past. I would rather say go for something you love to do. Get the right team to complement the missing skills and get a good board of advisors and then just go for it! If you truly love something you will learn very fast and you will put all your passion into it…both keys to a successful business!

Tipps for startups

Here some tipps from Jorge for startups:

  • Understand the things that the client does, gives you a good idea on how the process cycle of your product should look like
  • Most of the value of the company is not in the technology – it’s how you solve the problem for you consumer – how you execute
  • Get ceos from the countries you want to make business – it is all about culture!
  • Technology; do inhouse for a couple of years until the technology is clear and set – then outsource. Inhouse in the beginning helps a lot as  communicating to your developers is key – sourcing is not gonna work for transmitting the value proposion
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