Abril de 2016 ENTREPRENEUR MANIA. Pablo Millá

Transcription

1 Abril de 2016 ENTREPRENEUR MANIA Pablo Millá

2 Many of my students, during the Business Plan assignment, ask me how to start, or how to know if they have an entrepreneurial spirit. This has been a recurrent question in Spain over the last few years, promoted and fostered by the political class for a decade, When debt was at 1%, inflation and credit were at 3%, they were implicitly saying to savers; speculate or die 1 : unfortunately, I don t need to tell you how this story ended. So, going back to the challenging question posed at the beginning of my article in order to be able to reintroduce it at the end. Now, let s talk about entrepreneurship such a popular topic these days. Year Losses (Milion $) , , , , ,54 of problems and the investors considered that the founders were not fit for such a task resulting in the ousting of 3 of the 4 founders: Evan Williams, Biz Stone and Noah Glass, leaving Jack Dorsey as CEO; a little later, and for the same reasons as with his colleagues, he was removed from the management. Let s continue talking about entrepreneurship and consider Amazon5 (see Table 2) Launched on the stock Exchange in May 1997 and grossing $48m6, the issue prospectus specified that the losses would continue in the following quarters due to the extensive marketing and publicity policy that would be undertaken 7. And finally, let s look at WhatsApp, founded at the beginning of 2009 by 2 exemployees of Yahoo who, after a sabbatical, had applied for jobs at Facebook and were rejected. After this, they decided to embark on their own project investing $400,000 of their own money. A few months later, and after almost abandoning the project, they decided to invite some partners to work on it, bringing another 250,000. In mid-2011, Sequoia Capital. a venture capital firm, decided to invest $7m. For example, let s consider Twitter, founded in March 2006 by Jack Dorsey and another 3 co-founders. No sooner had it started operating than the arguments over Twitter losing money 2 started. And since then Twitter hasn t stopped losing money to date, and only 9 years have passed let s see the figures 3 (see Table 1). In 2006 and 2007 the company received some $55m from 6 venture capital companies for its foundation. Before the end of 2013 and showing the worst results in its short history, it launched on the stock exchange and grossed $1.6bn in its first day. 4 From day 1, the internal management, led by the founders, was a series Year Losses Profits Year Losses Profitss , ,303 Losses in the first 8 years = ~$ m TOTAL (Profits-Losses) in 20 years = $1.968 m 1. Fernando Trias de Bes. El hombre que cambió su casa por un Tulipán. 2. Nick Bilton. La verdadera historia de Twitter» (Ed. Gestión 2000) 3. &

3 To analyse the above cases, I am going to focus on the behaviour of the investor 9, resource mobilization and the capitalization of the business idea. At no time will I analyse the inherent risk from which these projects are still not free, which is to try to base the origin of capitalization on the idea of using the financial market instead of the commercial market. This is what causes the generation of a financial bubble, which when it bursts dashes the expectations of the non-financial investor. Ignoring this risk, and based on the three previously mentioned criteria: Investor behaviour: Year Losses 1 Assume the losses and focus on the longterm business model. Resource mobilization: (Millions$) ,5 (half year) Success stories are built by overcoming initial losses. The development period of an idea can last years. hinking big means mobilizing large investments Capitalization of the business idea: The revenue model and the idea can be separated. If this occurs, we will find a way to capitalize the idea. Meanwhile, only investors or partners can sustain the project. So, having analysed what happens abroad, let s look at the entrepreneur mania which has plagued Spain in recent years. As I am not a politician, I won t harangue you about the benefits of entrepreneurship and the number of new companies that have been created, or if our business and manufacturing fabric is highly creative or entrepreneurial, etc., etc. I am going to talk about the figures and you can compare them with the cases already outlined in this article. The Spanish association of venture capitalists (La Asociación Española de Entidades de Capital Riesgo) on page 24 of its annual report indicates that investment in Start-ups by venture capital firms is: In 2014, the volume of investment directed towards technology companies reached 255m, recorded as an all-time high. The number of investments in technology companies is also a record, having invested in 266 companies 10. Therefore, if we take a calculator and divide 255 by 266, we get the magic figure of approximately a 950,000 investment per project. Let s continue with the figures. If we analyse one of the largest private venture capital funds in the Valencian community 11, it invests up to 200,000 per project on some 30 mainly technology-based projects per year. The capital is disbursed in the form of a loan, and not all at once, but audited by a group of experts ( mentoring ) to establish investment stages and the achievement of proposed objectives as a basis on which the loan will be disbursed. Finally, having described these two national examples, I propose some reflection: Take note of the 3 cases I described at the beginning of the article, try to fit them into our venture capital investment system and try to predict the success of these projects had they been Spanish Conclusion When one gets up in the morning and as usual, if you will allow me to use the expression, evacuate your bowels 12. At this time and always after you have finished, take 50 from out of your pocket and flush them down the toilet. Then, start the day with confidence, take the kids to school, go to work, do the shopping, etc., whatever you customarily do. If you spend the day quietly without thinking about those 50 - congratulations you have the spirit of entrepreneurship in Spain. Now you only need tenacity. 1. Fernando Trias de Bes. El hombre que cambió su casa por un Tulipán. 2. Nick Bilton. La verdadera historia de Twitter» (Ed. Gestión 2000) 3. &

4 Pablo Millá Holder of a degree in Chemical Engineering from the Universidad de Alicante. MBA Cum Laude (Instituto de Empresa). Doctor of Economic Sciences and Business Studies; Department of Company Economics and Accounting UNED (Madrid). He has worked professionally in the following sectors: food and drink, construction, chemical engineering, industrial laundry, technology as a consultant implementing ERP systems (Navision etc.) as well as integrated management systems at a national level. Currently, he is Director of the professional association of pharmacists of the province of Alicante (Colegio Oficial de Farmacéuticos de la Provincia de Alicante) where all the departments, Human Resources and plans budgets among other functions. In the field of teaching, he has been a teacher at Fundesem Business School since 2007, teaching different subjects on different Master s programs. Since 2005, he has also been a visiting teacher and lecturer at Alicante University. 9. Let me provide a side note about what is and what is not an investor. An investor is he/she who assumes the risk and fortune of the business as well as its operations. Therefore, an investor is not a bank, although they try to convince you that they support your business and your investors. The bank is another supplier and/or creditor of the company. In the first case it sells money and in the second charges fees for a service. However, under no circumstances does it assume the risk and fortune of the company and its operations. Although the banks try to disguise themselves as investors and drive new ideas and entrepreneurs, they are not and do not. That will be the day when they assume the risk and fortune of the business and its operations without collateral Allow me to omit the name since it is part of a sponsor s private initiative (something that I deeply admire) and I do not want you to misinterpret my comments as destructive criticism.

5 C/ Deportistas Hermanos Torres, Alicante //