Investor Tips for Mature Startups

There are also startups that disappear after getting several rounds of financing. The investor Mark Kavelaars talks about some of the factors that, in his opinion, should be monitored in phases of maturity.

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The usual thing is to talk about more than 90% of startups that fall into the ‘valley of death’ during the first years of their career. But there are also examples of startups that disappear after having achieved several rounds of funding and seem already on track in the market. In this stage of the scale-up we do not have official percentages of mortality but surely we all have more than one case at the helm.

Mark Erik Kavelaars, CEO and founder of Swanlaab Venture Factory, a Spanish-Israeli venture capital fund, provides some recommendations to help those entrepreneurs who have already brought their company to the maturity stage but who are not. free of risks.


Of course, a future business project must be scalable. However, Kavelaars understands that it is important to prioritize the concept of sustainability rather than the concept of scalability.

“Beyond luck and improvisation a company is something that is created as any project and, if things are done right from the beginning, that company can grow solidly and sustainably, that is, get it to take each time greater dimension and endure over time. When you get a sustainable project, the company is worth much more. It is not just investing in something that will double your turnover in a year, it is investing in a company capable of growing 20% ​​each year. That means that the investor, whom I represent, bets on something that gives guarantees of generation of wealth in the future.”

He also points out that one of the differences that separate the Spanish business park from that of other neighboring countries, such as Germany, France or Italy, is the robustness of its SMEs “that’s why we have lower average wages and lower productivity, because the dimension is also connected with efficiency. That’s my vision … I call it a process of creating value because the company takes dimension and generates sustainable growth, not just scalable. “


Some say that there are only two types of startups: the fast ones and the dead ones. A statement that does not share Kavelaars, who is inclined to more conservative thesis. “We must understand that, no matter how hard we try to run, companies have some time in terms of market connection, learning the team that promotes it, natural times of product development or adaptation processes. When we strive to shorten the times and speed up the fulfillment of objectives, tensions arise. ” Add to this the existence of entrepreneurial teams that are sometimes born with the expectations of being the next Facebook and investors who want to capitalize their money fast. “In circumstances of pressure like these, it is when those two unique exits occur: shine or death.”


Inflating the expectations generated is another of the errors that, according to Kavelaars is “very dangerous for the survival of a company.” He explains it with a football simile. “It’s like when you identify a kid in the quarry who plays very well and it soon begins to be said about him that he will be the next Ronaldo or Messi. Expectations could be fulfilled, but the truth is that even that kid does not allow you to evolve at your own pace or so many Ronaldos arise. In the end, when you do the autopsy on many successful startups that have died, you find causes such as that the process was accelerated, expectations were inflated or the company was overcapitalized. ” Another example of overvaluation and inflated expectations is found in the case of Tesla. “No matter how good an entrepreneur you are, nobody sets up a car company in 5 years competing with others who have been making cars successfully for 100 years.”


“If your thing is programming, look for someone who knows numbers and lets you pull miles.” It is another of the indications of the CEO of Swanlaab convinced that “numbers are the main levers” of an entrepreneur to take the pulse of his business in all areas. “You can delegate marketing, sales, finances … but numbers is something that no entrepreneur should ignore or delegate. It’s the steering wheel of the car you drive. “


In the case of Kavelaars, there is the circumstance, as in many other current investors that, before opting for this route, they have gone through the experience of setting up their own company and bringing it to fruition. However, from their point of view, they are two very different professional careers. “Not all those who have been great players in football have developed then a brilliant role as coaches,” he argues against those who think that the entrepreneur / investor binomial is the desirable one.

“It’s true that most entrepreneurs who go after investors want to give the former the same thing that they were deprived of, or think that their angle and understanding of the world of entrepreneurs is an asset. It is true and it is a reference factor, but many more elements are needed to help another startup.”

The solution to these shortcomings would be to surround yourself with profiles that complement you in the role of investor, as he claims to have done in his fund. “The wisdom is in assembling teams with talents capable of doing the whole journey.”


Also in this option observe certain risks for startups. The first of these is that the corporates tend to advance to steps that the startups, many times, can not continue given the magnitude of their clients. The other, more serious, is the resignation of entrepreneurs to the knowledge of customers and their data. His opinion, a priori, is that “a startup must be able to demonstrate that it grows in the market of its own muscle and an organization that relies too soon on its go to market and the acquisition of clients to a corporate becomes dependent and fails to comply promise of value creation. You have to do the complete tour. If you get off the train without having reached the finish line, you will be equal, but you do not complete the creation process. The goal will no longer be to make a good sustainable company, it will be enough for the bug to stay alive and for money.”


Another risky practice that Mark Kavelaars appreciates in many startups is to set up the initial teams offering shares in the company in exchange for talent. He knows that this is due to the scarcity of resources, but recommends linking these incentives to longer yields and terms. “I meet many startups where they add people and give them participation for things that I call circumstantial, that is, that has a start date and an end date. For example, they hire a professional who will solve marketing for the first year and, in exchange, give a 5% of the startup. But when you ask them if that same person will be able to evolve with the company and solve marketing with other very different dimensions, the answer is ‘I do not know’. Well if you’re not sure, then do not give him 5%.”

The same advice is transferred to investors.

“If the investor can only solve the first round, it determines how much, how and in what conditions it enters. But if you see that it is an investor that can accompany you throughout the trip, with enough know-how, then it is different. When choosing who you share your shareholding with, do not take into account where the shoe squeezes you at that moment, try to be a guarantor of medium and long-term vision and team up with people who can make the complete journey with you.”