Continuing our “Investment series”, I talked with Walter Palma, Investment Manager at Caixa Capital. We discussed the role of investors, the traits startups and founders should have, and how the Portuguese ecosystem can compete, among other topics. Enjoy.
What’s the best way an investor can help a new company?
There are several ways and investor can help a company, depending on what their specific skill set is and what stage the company finds itself at. Aside from money, some investors may bring specific technical and domain expertise whereas others can help by providing access to their extended networks. Sometimes the best help an investor can provide is to just act as a sounding board for the founding team and help them avoid making fatal mistakes.
What are the three main traits you look for in a startup?
(i) Validated business model/science/technology with distinct competitive advantages (ii) global market potential and (iii) dedicated founding team.
Do the founders need special traits as well?
Above all founders need to be resilient and willing to learn. Although founders need to be relentless in the pursuit of their vision, this sometimes can be a liability if they lose objectivity and resist changing course when the evidence demonstrates they are wrong. The path to founder success is riddled with extreme challenges and difficulties and the ability to pick themselves up and learn from their experience is critical to their ultimate survival.
There is a quote from Churchill that I read in Fred Wilson’s blog (avc.com) the other day that I think sums it up pretty well : “Success is not final, failure is not fatal: it is the courage to continue that counts”.
Do founders make good CEOs?
Not all founders are cut out for the CEO role. It’s natural at some point, as a start-up migrates from the innovation/product phase towards a more execution-based focus, that there may be a need to bring in a more seasoned CEO to help scale the company.
Most founders, especially those coming from a scientific or engineering background, have never received any formal management training, never mind had a previous job outside their start-up. They have no examples to cling to when starting their journey. There’s a very steep learning curve in going from a highly technical role to becoming a manager where you have to focus on finding customers, building a team and wooing investors. They’re essentially learning by doing, so having someone with relevant experience to help them along the way can be critical to future success.
That said, it’s worth noting that my most successful portfolio companies to date have been those where the founder CEO has been able to grow into the role through the various funding stages, so there is a lot that can be said about the virtues of the founder-CEO.
Can you name your most successful investment to date?
I don’t like to pick favorites, because you never what’s going to happen tomorrow. The Portuguese early stage investment market is still in its infancy and has yet to achieve the maturity necessary to provide the liquidity we would like to see as investors.
I am very enthusiastic about those companies in our portfolio, like Unbabel and Codacy, just to name a few, that have gone on to raise international Series A rounds and continue to grow like crazy. It gives you a real sense of accomplishment when you see a company that you helped fund when it was little more than a basic product and watch it become something substantial and of value in the global marketplace.
Although London, Berlin and Silicon Valley have much denser ecosystems with greater access to capital and talent, no one has the monopoly on good ideas or resilience. I think in Portugal we have an abundance of both and Portuguese entrepreneurs are renowned for their adaptability and resilience in the face of adversity. We even have a word for it, desenrasca, so in a certain way it’s baked into our cultural DNA.
The earliest stages are usually the most difficult when trying to break out and this is where pure grit and resilience make all the difference. Once a Portuguese-based start-up is able to attract international investors and implant itself in other markets, the differences tend to level out and competitiveness becomes more a question of execution ability than from where the startup came from.
More about Caixa Capital at http://caixacapital.pt