Founder vs. Investor: Every Start-up Has Two Sides

Those in the loop about the start-up and investment world know that growth is necessarily multifaceted. And who better to discuss this with than Carlos Blanco!

Carlos joins us to share his unique insights and perspectives as founder and investor of numerous start-ups. Carlos’s repertoire is quite extensive; he’s a serial entrepreneur, business guru, founder of a successful online incubator, author of many books, and co-founder of First Tuesday Spain, a hub connecting entrepreneurs and investors in the digital sector.

Please note, as the podcast is in Spanish, we’ve added a transcript below in English for convenience!

What advice would you give to a young entrepreneur seeking funds? Is it difficult to find a good investor? Where and how do you find them?

Carlos: The first thing I would say is that nowadays there is a lot of investment happening, so if you are taking a long time to find funds…there’s a problem.

It means that either your project, you, or your team, are not attractive enough for investors. Nowadays, projects that are in an attractive market, and with an attractive leader and team, are actually experiencing over-funding.

I have seen this myself with the start-ups I have founded at Nuclio Venture Builder. Housfy, for example, collected double or even triple of its investment targets in all funding rounds.

I’m now seeking investment for Fintecha, which is a promising start-up in the Fintech sector. The issue? We’ve attracted four times the amount of investment that we can take. I’m having to tell investors that they haven’t been chosen, or that they can only invest one-quarter of the amount that they would like to offer.

So, the first advice I would give? Launch a start-up in an attractive sector with the good market size. Also, be sure that you are prepared to be a CEO, and ensure that investors will like you. Finally, the most important and difficult part: you should have a good team.

I can tell you that 70-80% of the projects I encounter face the exact same problem. They have a weak team. These projects may have a good leader and be in an attractive market, but they require a good CTO (Chief Technology Officer), too. Investors focus the most on the team.

In your experience, does the key to success lie in the team or the product?

Carlos: It is always the team. I’d say that the 30 most successful start-ups in Spain are almost all ‘copycats’, who replicate successful business models from other countries.

What this means is that the key is the execution of this business model, and the execution is made by the people who are in the team.

Regarding the ‘copycats’, nowadays it seems that everybody is investing in digital businesses. In Spain, there are a few trends on the rise.

We’ve seen, for example, job portals, coupon websites, and electric scooter rentals. Are there any sectors that are different and disruptive and that you think have great potential for the near future?

Carlos: I always divide businesses into two types: They’re either more represented by ‘lettuce’ or by ‘nuts and bolts’.

The businesses that are lettuces are those that are perishable. With these companies, it is not yet clear that their product is part of a market trend that is actually here to stay.

The businesses that are nuts and bolts have been around for ages and are built to last a lifetime. For example, everybody knew that coupons were a trend and would not stay forever. Real estate businesses, on the other hand, have existed for years. So, by taking a traditional business and digitalising it, you know that it’s not a mere trend; the demand will remain.

Speaking of intuition and making judgments…have you ever made a mistake?

Carlos: I have failed so many times. Pretty much all big, successful companies in which I’ve had no capital in, were great opportunities that I missed out on.

I think that as an investor, you should try not to dwell on what you could have done. For example, when Wallapop was founded, I didn’t know who Miguel Vicente was, and nobody presented the company to me. So I didn’t have the chance to invest in it – it wasn’t in my hands.

In the case of Trovit, I was aware of the company, but my business partner wasn’t sure about it, so I didn’t invest. The €10,000 that I decided not to invest at the time would have returned €530,000.

With Badi, I made an even worse decision. I could have entered into the business and had free equity, but decided to go for another start-up instead – which failed miserably. I probably could have gone for both companies, because I liked the CEO of Badi. But the fact that he didn’t have a clear business model and wanted to offer the service for free made me unsure. If only I had known how big Badi would become!

What would you recommend to people who want to invest right now?

Carlos: If they are somebody with a lot of money to invest (starting from 100K), I would tell them to first go for a venture capital fund. Let the venture capital fund manage your investments because you are five to 10 times more likely to earn money through them than on your own!

But we need to distinguish between a ‘business angel’ and a private investor.

A business angel is somebody who is a successful entrepreneur, who knows how the ‘game’ works. Take me, for example: I have earned more money as an entrepreneur than as an investor, so I use what I earn with my companies to invest in new ones.

A private investor is a person who has earned money in a non-entrepreneurial way. The private investor uses their own funds to invest in start-ups. By not having a background in entrepreneurship and the ecosystem, they are likely to face more problems when deciding which investments are the most promising.

What would you say to those who want to be an entrepreneur?

Carlos: I would ask them this: are you ready? Not everybody is made to be an entrepreneur. There is huge social pressure nowadays to go down that path. Entrepreneurship is made out to be this glorified thing that everyone should aspire to…but this is wrong.

Some have neither the time nor the character (nor the knowledge) to be a successful entrepreneur. It requires a process of self-evaluation, which is not easy because most people don’t really know themselves.

Another thing I would say to those who want to become an entrepreneur is that the most important thing to have is a good team. Many choose their friends, their couples, former colleagues, etc. instead of seeking out the best profiles to build their business.