startup_isidre march

Isidre March (AJEV) : how the start-ups can expand to other markets.

“Internationalization of startups and investment rounds go hand by hand”

From AJEV, we interviewed a worldwide expert of start-ups, Isidre March, Director of the Master in Creation and Management of Innovative Companies of the University of Valencia. In addition, he is Professor of Management at the same University and Director of the Research project of Entrepreneurship and Innovation, and Visiting Scholar at the prestigious UC Berkeley in 2014, where he performed a wide empirical study on start-ups founded by Spaniards in Bay Area and Silicon Valley in collaboration with the Spain Tech Center.

All an expert of the world “Silicon Valley (SV)” and the keys that Spanish startups must consider to internationalize.

AJEV has had the opportunity to talk to him and find out how SV is and how the start-ups can expand to other markets.

AJEV. How was your experience in Silicon Valley?

An excellent experience, unforgettable both professionally and personally. They were frantic three months in which I pulled on the shirt of a reporter and with a bike and a helmet I walked San Francisco Bay attending events, presentations, and especially interviewing Spanish entrepreneurs with start-ups in the area. For a researcher in the field of entrepreneurship and start-ups, having the opportunity to visit San Francisco daily and the Silicon Valley area is a tremendous privilege because it allowed me to soak and know from within the entrepreneurial and technological world leader ecosystem, Mecca for start-ups and investment worldwide.

In addition, SV is a world of opportunity, also for researchers/journalists like me, for its open, inclusive and boiling character. It is a journey into the future and knowing by the promoters their projects, the developments and technologies that are being developed and will lead the world in the coming decades. But it is not all rosy in SV, that is a dual society with a familiar face, represented by the burgeoning business-class technology with astronomical salaries and benefits, but it hides the currency cross, formed by a silent majority suffering economic hardship to a very high cost of living that is growing and growing.

AJEV. Where does your passion for the startup world come from?

My first visit dates back to 1994 when after reading my dissertation I visited UC Berkeley for 3 months. There I rushed a large empirical study with start-ups of the emerging Internet industry and biotechnology, with the help of two key people to me, Frank Giunta, the director of the Science Park of the UC Berkeley, and Ann Winblad, a prestigious director of one of the leading venture capital funds in the area.

A few years later I decided to write a book about start-ups aimed at entrepreneurs in whom I recalled my experiences and lessons learned from this trip. This is the “Innovative or losers”, a book in a didactic format with touches of fiction, and well received despite its limited circulation. Moreover, much of my research career has been directed to the study of start-ups and their business models, with more than 10 articles in international journals on this subject. And in the Faculty of Economics I direct the official Master in Creation and Management of Innovative Enterprises ( whose 8th edition starts this October and that has left more than 20 start-ups. I love to help and guide young Valencian entrepreneurs starting forward for innovative business projects, not necessarily technology start-ups.

AJEV. What is the study of start-ups founded by Spaniards in Bay Area and Silicon Valley about?

Actually it is a macro-study which is divided into 3 reports, the first two qualitative and quantitative the third one.

The first report provides a comprehensive diagnosis of the SV ecosystem in order to provide answers to questions that our entrepreneurs ask themselves. In this report the reader will find reliable and contrasted answers to key issues of the ecosystem itself: what it is, what it provides, when it is interesting going and for what purpose, how they act and what are the shared values ​​of the agents  at SV, how they are, what investors look for and prioritized, what opportunities and business models currently in SV blunt, how networks or networks, accelerating rates of start-ups or the particularities of Stanford university model, source of most global leading technology companies.

The second report provides a comprehensive set of proposals and recommendations, actions to be taken by institutions, foundations, organizations supporting Spanish entrepreneurs to avoid errors, offset disadvantages and ultimately have more chances of success for your business venture in SV. Above all the criteria and recommendations this chapter contains, the basic premise is not coming too soon, due to the anxiety to succeed, but to bring a defined but flexible strategy and not appear as a solution in a sector well known.

The latest report provides a detailed study of the Spanish entrepreneur and start-ups profile in SV, derived from the results of the surveys and interviews to 54 entrepreneurs visited during my stay at UC Berkeley. It contains general information on the entrepreneur and start-ups, team profile of their founders and human resources, income and investment, product / service, market and customers.

“In Silicon Valley “the rules of the game” are very different from the ones in Spain game, it means accepting that businesses are short-lived and have to succeed quickly or disappear”

AJEV. What are the main conclusions of this study?

The findings are numerous and varied.

To begin, I found that the vast majority of Spanish entrepreneurs in SV are experienced, with a track record of success in previous start-ups or large companies. With an average age of 36 years they are ambitious, and the Spanish markets were too small so they came to SV looking for a major injection of capital to accelerate their growth and catapult them into a multimillion-dollar sale. But very few have succeeded so far.

In SV “the rules of the game” are very different from the ones in Spain, it means accepting that businesses are short-lived and have to succeed quickly or disappear. The tempus is very short and investors are very impatient. Divestments and “exits” do not occur within 5 to 7 years as in Spain, but after a year or two at most.

Moreover, culture, values, behaviors and routines are very different and often misplace our entrepreneurs when they arrive. Equality in opportunities and meritocracy are the values ​​that prevail in the SV 8with nuances), accessibility, enthusiasm to be the next Google or Facebook will soon spread to all who come there. The openness and culture of sharing and share without fear that someone can steal or copy your idea are also house-brands in SV.

There is much money to invest in start-ups in SV, 35% of all the money in the world, but there are thousands of entrepreneurs who come from all around the world and competition to attract investors is fierce.

It is important to recognize that the new things in Spain are not certainly new in SV because our opportunity and technological curve here in Spain is emerging whereas in SV probably is already quite widespread and lost interest to investors.

Timing is the great question that every entrepreneur asks himself/herself. Well, you have go to SV only when a product, platform or service is near to its complete production and design and ready to be showed in the US market. And you need to have enough “financial muscle” to withstand at least one year, because you will not reach results in the form of investment or revenue round before this. With the very high “burning ratio” of SV, it is not sensible to go there without at least 0.5 million Euros of investment raised in Spain to spend entirely there.

AJEV. What features do you consider that a startup should have to get to reach Silicon Valley?

I should highlight the following features and / or skills:

– Explore new opportunities in “hot” areas and especially in latent, unexplored areas.

– Approach from global to local, pointing from the beginning to the biggest and expanding markets, taking distances as soon as possible from the reduced Spanish market.

– Opportunity and correct timing: The interest of investors in SV pivots around projects that combine opportunity in a hot area and the right “timing”, that are just about to start an exponential growth curve.

– Suitable setting market-product-customer value.

– Clear and superior proposal to the one of the competitors. And with a flawless user experience.

– Entrepreneur leader, a top team and seeking local partners as soon as possible. The entrepreneur must be 100% committed to live for the start-up, be a visionary and be able to connect to networks of value.

– Adopt soon values ​​and trading style of SV and make a good pitch with a powerful storytelling.

– Maintaining the technical equipment in Spain because we have good developers and their cost is much lower there.

“In Spain we have a few start-ups with the ideal profile to succeed in demanding environments such as SV, but they failed in investment”

AJEV. What sectors do you consider that are more powerful in the start-ups world to get internationalization?

That would be the following ones: data customers, efficiency, Do it yourself, APP format, user challenge, 5G technology, wearable and connectivity, precision E-marketing, collaborative economy, monitoring-metric rating, fun and cool as user experience.

In addition, I propose not to be limited exclusively to these hot sectors but to take advantage and experience in Spain in other sectors, not technological, but rather neglected by the Americans. They are what I call latent opportunities that the entrepreneur is unable to discover there.

AJEV. Which position does the Spanish start-up lead with respect to other countries in terms of their potential for international expansion?

There are many “clichés” to eradicate and many habits and praxis to change if we want our entrepreneurs lead in international markets and the number of successful Spanish start-ups to be multiplied.

Internationalization and investment go hand by hand. In Spain we have a few start-ups with the ideal profile to succeed in demanding environments such as SV, but they failed in investment. In Spain the investment is large in the seed phase, up to 0.4 million Euros, but after this phase agents with the ability to invest in rounds A, from 1 to 2 million Euros, are practically nonexistent. This problem limits the international expansion of these new companies and prevents them to take advantage of opportunities that most of the times have to be taken in seconds.

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