He is one of the most popular investors in Spain: due to the volume of operations he has accumulated (150), the successes he has achieved and the characteristic clarity with which he usually expresses his speeches and ideas. Carlos Blanco, founder of startup factory sunflower seed and mutual fund depositour next guest Cornellà Creacio ForumHe will host the conference at noon this Friday.
The title of his conference is ‘How to seduce an investor’. Are there keys to do this?
First, it is important to understand the difference between a viable company and an investable company. An SME growing 20 percent or 30 percent [al año] This is a very good business, but a professional investor looks for companies that are growing from 60% or 70% to 100% every year. That’s why we invest in high growth companies that have a technological component… We know the 90% are dead, and when you know the 90% are dead, you should always go for the ones that show they can be a good rocket. Six of these rockets failed, two or three turned out good, and only one turned out very good.
What are the characteristics that define a company that could be nurtured by a private investor?
It should be a ‘startup’, not just a newborn company, but a technology company created by entrepreneurs with high performance motivation… The first thing we look at here is the leader; the second is the market; and third, the team. And if the company is already in more advanced stages, of course we look at the metrics or the business plan. I am a ‘seed’ investor, investing in early stages, so a business plan tells me whether a person is realistic, organized… Consider the basic business plan the biggest lie there is. There has never been a startup in the history of Spain that made 20 million turnover in four years, and you also come across similar plans. This tells you that this person is deluded or uninformed.
No startup in the history of Spain has achieved a turnover of 20 million in four years; An entrepreneur with such a business plan is either misleading or uninformed.
Is there a sure sign that you’re dealing with a team that will almost certainly succeed?
No math. The only math is that profitability comes from quantity. So, if I build a vehicle with 50 investments, I have a chance to make much more money than with 20 investments. But I go further. If I classify my investments as A, B and C, if A were the investments for which I had the highest expectations from the beginning; B are the ones with moderate expectations and C are the ones I like but can’t see quite clearly, statistics tell me that only 20% of my great successes had high expectations to begin with. 40% of my big successes are companies with moderate expectations, the other 40% are companies with low expectations.
How is the investment market doing now after the post-pandemic correction?
We returned to normality and consistency. Valuations were exaggerated due to the pandemic, we lost the pot. During the Covid period, Nasdaq companies began to be listed at 100x [100 veces más que antes]. This is really crazy, meaning these companies will be as powerful as Walt Disney, General Electric or Coca-Cola. In addition, there was a wave of bored millionaires, many people with money began to invest in new ventures, not knowing how to distinguish good from bad, and all this led to hyperinflation.
So what will the 2023 closing statistics say?
2023 will be lower than 2022 because the first half of last year was good. However, if we compare with 2018 or 2019, these must be correlated statistics. Don’t forget that we come from the fall, that is, from negative energy. And here another factor comes into play. Major European funds invest in companies going public, and as IPOs slow down, the return flow of money has slowed by 90%. This causes many companies to continue financing their companies to avoid dying, rather than investing in new companies.
This seems to be indicative of a crisis.
We have been struggling in the ‘risk capital’ and ‘startup’ sector for 18 months. All this means entrepreneurs have no choice but to adapt, quit, reinvent themselves, offer advice and services… This year, cash has dominated.
How does this affect the goal of organizing larger tours in Spain?
They slowed down, the bullets decreased.
Doesn’t having to apply for European funding so much reduce our competitiveness?
This is good and it will stay that way. You start with a Spanish seed fund, you continue with a Spanish growth fund, and then you continue with the international fund. It is consistent and even healthy. If you want to grow internationally, it is healthy to attract investors from the markets you want to go to: they will introduce you to people, tell you how the market is going, help you lobby… If you want to establish a large and international company, the right thing to do is to go to international investors.
So, what issues would you recommend working on for the Spanish investment ecosystem?
Real tax incentives for early stage investments. The truth is that Investors who can receive a tax deduction of up to 50,000 euros, these are the ones who invest only in ‘startups’ with the ‘startup’ seal, which are very few. They made laws with traps. For example, if an entrepreneur starts a startup from personal assets — which is becoming increasingly common — he can no longer pitch his startup that way.
Don’t we have too few success stories of startups growing and surviving?
We have it, and we criticize what happens. In other countries, a monument would be erected for a person like Oscar Pierre, here they want to put him in prison.
What have been your biggest accomplishments as an investor?
My ‘exit’ that brought the biggest return was Deporvillage. I invested in 2011, sold it in 2021 and multiplied more than 120 times. Holded was also a very good investment, or it was an unknown video game company from Valencia, and I invested 40,000 euros and took out 1.6 million. With Glovo, I also multiply by 30 or 40. And the best of the last 4 or 5 years has been the luxury glamping company Kampaoh from Seville.
It seems easy, but you need to have a little extra money to be an investor, right?
There is no need for someone with 2,000 Euros of savings to invest in startups. Investing in startups is for those who have over 1 million assets and do not allocate more than 10% or 20% of their assets. If you have 70,000 euros saved up, apply for a mortgage, buy and rent a small flat.