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Undertake and not die trying: why 90% of companies created in Spain do not reach three years

2023-01-30T11:06:56.988Z


Most of the emerging companies end up closing. Studying the market well, creating good teams, controlling debt and getting legal advice are recipes for success.


Internet has it all, and also has no mercy.

So it is not surprising that the digital world, which gave birth to a new way of thinking about entrepreneurship and business —with its web pages and applications, with that language full of Anglicisms and its own metaphors, with that incessant search for problems and needs from the market, has also devised a cemetery for them.

In fact, this cemetery, a platform called Failory behind which is a young Argentine, is itself a

start-up,

or emerging innovative company, which is dedicated to cataloging failed projects, identifying what the errors were in each case, and presenting these forensic reports as content to serve other entrepreneurs.

"Learn why they have closed and avoid being part of the 90% of businesses that fail," reads one of the messages on the web.

It would seem that, with the triumphant announcements that

start-ups

make about investment rounds, hiring or mergers, there can be no realities as stark and mundane as a bankruptcy or bankruptcy.

And yet it happens, and often.

Already in the field of small and medium-sized companies in general, according to Eurostat data collected in a Cepyme report from the beginning of this year, 6 out of 10 companies do not exceed five years of life in Spain;

the highest proportion among European countries after Romania and Denmark.

In the field of

start-ups

, where the risk is assumed to be higher because they are more disruptive in the market, 9 out of 10 companies close before three years, according to the entrepreneurship map of the South Summit start-ups platform.

But if 90% of start-ups fail and end up in any web graveyard raising digital hollyhocks, why are there more and more entrepreneurs, more accelerators and incubators for

start-ups

, more large corporations that decide to open divisions to capture this type of business?

companies and, above all, more investment?

The short answer given by all the experts consulted for this report: because by increasing investment and strengthening the ecosystem, the entrepreneur in general no longer takes on debt to carry out his idea, so failure is no longer seen as a taboo and happens to be a form of learning;

And because, no matter how much the new entrepreneur studies the mistakes of his predecessors, it is likely that he will commit at least one.

One who knows this dynamic well is Bernat Farrero, co-founder of one of the most successful

start-ups

of the moment, Factorial, which, reaching a valuation of 1,000 million dollars last October, became what is known in the sector as a Unicorn.

Farrero, who is also the founder and CEO of Itnig, a fund that invests in

start-ups

In initial phases, he has been at different levels of direct management in 12 companies: of these, seven have closed and five have functioned well.

There is Factorial, which is now the one that has full dedication, but also Quipu, Parkimeter, Playfulbet or GymForLess;

these four considered success stories because they were sold.

Of those that had to close, Camaloon, an e-commerce company that allowed custom design of all kinds of products, stands out.

“It is the company that has taught me the most, it had a very large but also very aggressive development, and it was not very financially solid, so the covid killed it.

He ran out of gasoline”, explains Farrero.

start-up

has no market.

hit the moment

"This is the first reason why a company doesn't work: although it has a cheat, because sometimes there are things that didn't have a market before that now do, so on many occasions it's a matter of getting the moment right" explains Farrero.

This professional believes that finding that fit and allowing yourself to fail is part of the process.

“Failure is lived in a very personal way, I think it is an interactive path in which you are looking for direction, and in which everything can change”, he relates.

Carlos Blanco, an entrepreneur with a long history, investor and founder of the Nuclio incubator, agrees that all new entrepreneurs make the same mistakes, but he highlights the mistake of choosing founding partners: "In many successful companies, if you realize account, some of the initial founders are missing.

You have to find the right partners for each stage”.

Blanco also admits that there are "many stubborn entrepreneurs" and that "not everyone is prepared to be one."

“There has been some social and political pressure for people to start a business, especially with the previous crisis, and that has led to failures, also because the founders wanted to grow very quickly and sell.

Now this is changing and companies that bill are increasingly valued, they tend to be profitable and even pay dividends”, he explains.

The legal aspect is also essential to guarantee success.

Ignasi Costas, partner in charge of the Innovation and Entrepreneurship area of ​​the DWF-RCD law firm, stresses that entrepreneurs "must be aware of the importance of legal aspects from the start, as they may end up compromising the viability of the project", and points out two Keys: carefully study the regulatory framework where the company will operate and "from the very beginning, clearly delimit the rules of the game between the development team and existing investors, through a partners' agreement".

Josep Maria Casas, an investor in more than 25 projects, president of the Spanish Association of Business Angels and professor at the IESE business school, sums up this ability to turn around until you find what works: “Fail fast, and fail cheap. , this is the philosophy that all entrepreneurs should follow”.

Casas explains that, before, everything involved creating a good business plan, with the risk that it would not find a market.

“The model now is: I have an idea, I make a small model and I test it in the market, to fail fast.

This process of quickly testing the idea is the great issue for which no one is trained," says Casas, who recommends the book

El mom test

(the mother's test), which explores formulas for talking to consumers and finding out exactly what market exists.

The expert gives two examples of entrepreneurs who have carried out this strategy and have done well: one is Peloton, a company that makes exercise bikes with which you can exercise at home and connect with teachers in the United States.

“They applied the test, and they saw that in the US the clients were not only people who were fit and wanted to exercise at home, but many overweight people who did not want to go to the gym because they were embarrassed.

So they took the camera off the bike because they didn't want to be seen.

They led the sector and it has been a case of absolute success ”, he points out.

Another example is in the Barcelonans who founded Edpuzzle, about videos from the educational field.

They currently have a valuation of around 400 million euros, but at the beginning they also went around several times and used the test with the teachers, their potential consumers: they decided that the teachers themselves would give voice to the videos to capture the attention of the student.

Casas values ​​the ability to make mistakes: “When one comes along and says that he has launched many projects and that they have all gone well, you disconnect.

If he has failed quickly and cheaply several times, that really matters ”.

The figure of an entrepreneur who starts several projects in a row, although some are successful and others are not, is gaining more and more weight.

The South Summit Entrepreneurship Map 2022 indicates that 62% of the projects received in this annual competition were from serial entrepreneurs, that is, they had already started another project before.

This percentage is increasing every year, and María Benjumea, president and founder of this platform, attributes it to a change in mentality: "When I started to start a business, with the boom of the internet, the thing was to create something, generate volume and sell quickly and for a lot of money.

Now the mentality is that of an entrepreneur who is very good at starting projects and associating well with others, and when he leaves one he continues to undertake or becomes an investor ”.

Stefano Scardia, at the Valencia headquarters of Colibid, the fourth company he has created.

Monica Torres

A case that synthesizes this journey well is that of Stefano Scardia, 46 years old.

He started his first project 14 years ago, when he lived in Sweden.

“At first you have an idea, a dream, and many times you do it out of ego, not because there is a real problem.

My first company was not digital, it was a business with

made in Italy

design products such as shoes or bags.

I ran it for four years, but I wasn't really satisfying any demand, rather I was trying to promote a need that the market didn't have”, he explains.

fall and get up

With the financial crisis, Scardia closed and suffered a lot of failure: "It took me a year to start again, but in the meantime, they hired me as head of the Decathlon

online

section for northern Europe and I fell in love with digital."

The second company was set up three years later in Hong Kong, where he went to live, and he did so after realizing that many of the expatriates, like him, had problems renting the flats they had left in their home cities.

He created Renthia, which was his great success, since he made it grow and in 2021 he sold 90% of the capital.

Before this operation, he set up a third company, called Itsju, with five other entrepreneurs from different countries.

“They asked me to lead it, the idea was a fashion design program that analyzed the client's body and created custom dresses.

It was a good idea, we had the capital and the technology, but it didn't go well: there were too many of us to make decisions, and after a year, when the money ran out, we hadn't done anything”, he explains.

The fourth

start-up

that he founded with three other entrepreneurs, called Colibid, he created it after introducing himself to the Demium incubator in Valencia, where he now lives, and it is an aggregator of banks that auction the mortgage that the user needs, with which they have already obtained 1 3 million euros of financing in the first year.

Scardia assures that from this process, with two failures, one success and another on the way, she has learned a lot: “The first thing is not to fall in love with the idea.

And the second thing is to have a good team, to divide the tasks well”.

But not everyone has the ability to undertake several times or can afford to fail.

The GEM Spain 2021-2022 report on the profile of the entrepreneur indicates that in 60% of cases the initial capital comes from own savings and that the percentage of entrepreneurs who are located in the third of the population with the highest income is higher than the one that is located in the third with less income.

Thus, as much as there is more and more private investment and less need to borrow, undertaking is still a matter of people with economic possibilities, and it is not always enough to have a good idea.

The Oryon fund has focused on this, which has launched a foundation that accompanies projects or entrepreneurs with difficulties.

The general manager of the fund is Víctor Giné, who launched his

start-up

, Musicaclick, in 2007.

He had to close it in 2012 because the business model did not come together, especially in the midst of the crisis.

"That marked me a lot," he explains.

Projects have passed through its foundation, such as that of an entrepreneur who was stagnant professionally, who was helped to launch a platform of well-being and health services for small and medium-sized companies, or the MeWell project, a virtual clinic created by a 60-year-old man. years that he went bankrupt and fell into a depression after having to close his previous business.

The

start-ups

that come out of the foundation can receive investment of up to 20,000 euros from the Oryon fund, which for its part has its regular activity, has invested in companies such as Founderz, by Pau Garcia-Milà, which in turn also went through a failure, that of the Bananity social network.

“What you have to understand is that neither when you succeed are you so good, nor when you fail are you so bad”, says Giné.

new formulas

Oryon has also invested in a

start-up

that is just starting, Yummin, an application that allows you to pay the bill from your mobile without having to ask the waiter for it.

Its founder, Christian Campillo, invested 100,000 euros of his own savings, after his time in a position of responsibility in the L'Oréal group, and is now in the process of discovering if the market accepts his idea, after closing a round of 1.4 million.

“I had never started an entrepreneurship, and I developed many tests, I read a lot about the culture of entrepreneurship.

I have thought about failing a thousand times, but I always look for a way to motivate myself, ”says Campillo, who admits that it is difficult to combine his work with being a new father, and whose mobile phone has a screen saver with a motivating message.

But there are other ways to fail in this world and one is before you start, with the gender gap: according to the Entrepreneurship Map, 8 out of 10 new entrepreneurs are men.

“When we did the analysis I didn't believe it.

I think that investors don't care about the genre, but about having a good project, but it is true that we come from a culture of many centuries and there are things that we have to work on”, says Benjumea.

For Carmen Ríos, 45, the entrepreneurial process was very natural: “At 26 I signed for a

start-up

games, and there I realized that I could undertake by myself, so I have started several projects.

What motivates me to continue is having fun and being the owner of my life”.

She is now in charge of Doctomatic, a health tool for remote monitoring of chronic patients.

She admits that in this world you have to be "self-motivated in life" to face difficulties: "It is difficult to demonstrate your idea and pick up speed."

Closing ceremony of the 2022 edition of the South Summit in Madrid. 

Judit Camargo is another entrepreneur, who in 2019 founded her first chemical company, Roka Furadada, based on active ingredients that absorb solar radiation.

Her entrepreneurial experience has counted more surely because she started thinking about it in her previous job in research at a big pharma.

“I had a lot of support from the beginning, and when I could, I capitalized on the strike and signed up for various acceleration programs,” she explains.

Between public and private financing, she has received 5.6 million, although she admits that "at the beginning it cost a lot, we had to test the idea, go to fairs..., until we found the investors."

This formula of undertaking under the umbrella of a large company is the one used by Ferran Navarro, founder of Siocast, a spin-off from the Coniex group, which manufactures silicone products.

“We did it because

start-ups

have the ability to grow faster with external financial or industrial support.

And we continue to have the support of the big company, ”he explains.

These companies that are born alongside large groups are proliferating, and renowned corporations have launched their own incubators to invest in innovation, such as Telefónica with Wayra.

Marta Antúnez, her director in Barcelona, ​​explains that they have 500

start-ups

in the portfolio and that in 2022 they invested 5.7 million in 40 companies.

“Many come to us, and we see which ones make sense in the Telefónica sphere, but the good thing is that in Spain the ecosystem of investors has evolved a lot,” he explains.

Finding the right investor is also a key to success.

Ernest Sánchez, managing partner of Nuclio, explains that entrepreneurs tend to want to go quickly to large international funds.

"Spending a year trying to convince them can lead to failure, it is important to have a clear financing strategy."

Investment in Spain, in fact, is in record volumes, as explained by Miguel Vicente, president of Tech Barcelona.

“In 2021, 4,000 million in venture capital were raised, and last year 3,500 million, due to the context of the war.

They have also increased the valuations of the companies a lot, ”he explains.

It will be necessary to see now if the increase in interest rates closes the faucet of financing for entrepreneurs or not.


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Source: elparis

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