What has brought us here? Startupxplore’s retrospective
Category: Understanding startup investment
Today we are going to go a little bit out of the usual blog tone, and we are going to talk in first person. We would like to share with you a little chronicle of what these last two years have been like for us, what we have learned along the way and how we see the investment platform market… All this before telling you what you are going to see in Startupxplore from now on ;-)
THE ADVENTURE OF CREATING STARTUPXPLORE
Just over two years ago my partner Nacho Ormeño and I decided to leave our jobs, he was in charge of a technology company and I worked as an investor and advisor for startups and investment funds, to start a great adventure.
Following an exciting stay in Israel analyzing its investment ecosystem, we realized that in Spain, and in general throughout Europe, the entrepreneurial and investor world share a serious problem: they are opaque, closed and difficult to access. Whether you are the founder of a startup or an investor who wants to start investing in startups, the problem is common.
Determined to solve this problem, we decided to create Startupxplore. A few months after launching the community, several top level investors decided to bet on this vision of a more efficient and transparent ecosystem, and became our partners. Without the support of people like François Derbaix, Iñaki Arrola, Plug and Play, Pedro Serrahima, Paco Gimeno or Álvaro Ortiz, this would not have been possible.
We decided to solve the problem in two phases: first, we launched in summer 2015 the community of startups and investors, where there are currently more than 12,000 incredible companies, and in which the main actors of the ecosystem have a place: startups, investors, accelerators, incubators, coworkings, suppliers, etc…
Our objective with this first phase was to help increase transparency in the entrepreneurial ecosystem and make it easier to find what you need: investors, accelerators, startups to invest in…
THE DECISION TO CREATE AN INVESTMENT PLATFORM
Once the community was created, it was time to approach a second part, more complicated but with a much greater potential impact: an investment platform that democratized the process of investing in startups, both for investors who had no experience and for those who, even if they had it, could not spend so much time studying and analyzing opportunities.
The idea of launching Startupxplore and focusing on this aspect comes from a personal experience: a little more than 10 years ago I decided to start investing in startups, and like most investors, I lost a lot of money with my first investments… as a result of my lack of experience and knowledge on the subject. Then I started investing with experienced investors, and the situation improved a lot.
This was the experience we decided to facilitate with Startupxplore. That is to say, that any investor, regardless of their capital, experience or situation, could have access to the best opportunities and invest together with top investors, under the same conditions and valuation.
We launched the investment platform and started trading with a clear focus: quality in operations and co-investment with leading investors. We also started a registration process with the CNMV, the financial regulator in Spain, which would take up to 17 months. During those months we were fortunate enough to have new investors joining our company as partners, whose contribution has been incredibly valuable: Cabiedes & Partners, Bankinter, Yago Arbeloa, Carlos Domingo… and later, Javier Llorente and Vincent Rosso.
We are fortunate to have some of the best investors in Spain, both business angels and venture capital funds, helping us to improve, something that has been decisive.
At the end of 2016, we obtained the CNMV’s formal authorisation to operate as a participative financing platform, an important guarantee for us. At the same time, the team had grown and strengthened to include the 8 people who are currently working at Startupxplore, all of them large and experienced professionals, and all committed to our vision.
OUR LAST YEAR
The last few years have been really exciting: since we created Startupxplore we have launched 15 investment operations, and all of them have been financed (I think we are the only platform in Europe with this 100% success rate in financing).
Startupxplore’s investor users have invested more than 4 M€ in these companies, 2 M€ in the last 7 months alone. But this is not the relevant data. The important thing is that many of these companies continue to grow significantly, strengthening their core business metrics and creating more value for their partners.
In addition, in all our operations we have not only counted on large companies, but also on excellent benchmark investors, who have invested under the same conditions as our investors: JME Venture Capital, Marcos Alves, Yago Arbeloa, Faraday Venture Partners, Vincent Rosso, Pinama, SOSV or Javier Llorente.
From the outset, we believed that the fact that there was an independent and experienced investor who would invest on the same terms as our investors was something that gave an additional layer of confidence.
HOW WE SEE IN THE MARKET
Despite all this, we have a bittersweet feeling: we absolutely believe in the importance of doing things very well, and we feel that the market in general has taken a path that we feel is not the right one.
In general, it is based on the premise that an investment platform must be a mere link between investors and companies looking for investment, and in our opinion this is not only not enough, but also entails important risks: investing in a high-potential company is very complex, since assessing the business potential of a company with a few metrics and a document is insufficient and not within the reach of most companies… Especially if these data are not sufficiently matched.
In addition, many investors accessing investment platforms have no prior investment experience with this asset and often overlook basic diversification standards, committing excessive amounts to few projects, or not investing in sufficient transactions. There are many investors who, while complying with the formal requirements of the Law, are not aware of how risky investment in companies with high growth potential is.
As if that were not enough, we are concerned about the growing misalignment of interests that may arise between platforms and investors: if the platform’s business model is based on charging a percentage of the amount invested in the startup, it seems logical to believe that its default incentive will be to get many operations to get financing… what we think is a perversion: this is not about quantity, but investing well: quality.
And yet, in the absence of better numbers, most platforms take pride in the volume of investment “lifted”, the number of startups financed… but, what then? what will happen in a few years’ time when many of those companies have to shut down?
In Startupxplore we have decided to take a step forward and go much deeper into what makes us different. In focusing on giving a premium experience to investors, in prioritizing quality over quantity and in giving our users the facilities to create an investment portfolio that is sensible, diversified and balanced, focusing on filtering risks in the best possible way.
That is why in the next few days we are going to present you something that we believe will interest you, in which we have tried to be faithful to our principles and to go even deeper into what makes us different… Stay tuned!