Workshop on Raising Capital with Jorge Mata

On 21.03.2011 successful Spanish origin entrepreneur Jorge Mata in the mobile industry held a workshop with IE Business School students about founding start-up and getting funding. These are short notes from the workshop. You can find tweet stream from the workshop here.

• Features of the business ideas to be attractive to investors:
  • Scalable & Disruptive
  • Contain real process that solves a real problem
  • Management team - CEO, CFO, COO, Sales Director, who are working in the company
  • Good credentials of the founders

Jorge is building on the experience from his past whenever evaluates a new idea. Which experience from the past and knowledge he possesses can be leveraged in the idea.

• Remarks about raising capital to the venture
  • Venture Investor diversifies by investing to multiple ventures. On the other hand Entrepreneur must focus on product not decreasing risk by further diversification within the venture. Hence, Investing Entrepreneur's own funds to the venture is not recommended by Venture Investors.
  • Do not differentiate among investors, money is green everywhere.
  • You have to create a spiral of investment. Majority of investors do not invest unless somebody did that before. Think to whom you will talk as first, second, etc.
  • At the beginning - give away max. 30% of the company

 

Jorge share with us his insights about dealing with different types of investors.

• Angels
  • Be careful in nurturing relationship with them. Angels invest in you rather than into company. There is more into the relationship than what is in the contract.
  • Expected outcome for an Angel Investor 20X as they invest in early stages.
  • Angels usually invest around $0.5 mil.
• Venture Funds
  • Maintain formal and informal Quarterly / monthly communication.
  • Investors use a big chunk of entrepreneurs to learn from them rather than with interest to invest.
  • As an Entrepreneur, achieve at least $2-3 mil. pre-money valuation to be in good negotiating position before exiting from the venture. With valuation of $0.5-1 mil. you will have difficult time to extract money.
• Venture Governance
  • Board of Directors - equity investors representatives
  • Advisory Board (optional) - board of experts or well connected persons
  • Get a local CEO in local country esp. at emerging markets

At the end, Jorge made few remarks about the current hot trend in mobile applications.

• Few mobile applications are solving a real problem
• Most of the company value is making things simple to the user and solving a real problem rather than possessing superior technology.
• Currently, there are thousands of patents unused e.g. in Bell Labs