Venture Capital vs Bootstrapping: Mathieu Carenzo On How To Determine If Fundraising Or Bootstrapping
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?
It took me time to find my place in the entrepreneurial ecosystem. Becoming a business angel is the result of my virtues and my flaws. As an entrepreneur I do not enjoy the responsibility of managing teams (and consequently, I am not good at it); nevertheless, I want to be part of the growth and scale of great startups…
There is no better way for me to do that than bringing my best skills to it: commitment, experience, and a good eye for new business.
I bring more value as an enabler through teaching and investing than if I was a founder.
Can you share a story with us about the most humorous mistake you made when you were first starting? What lesson or takeaway did you learn from that?
My major mistake as a business leader was to believe I could define competition based on my product and its characteristics… if nobody does it the way I do it… then I have no competition! BIG misunderstanding… you do not decide who you are competing with… the client decides based on what seems to solve their problem.
When I was 25; my first job (it was a great one) was to sale helicopters for Airbus helicopters in Mexico… and the first helicopter I sold was for a company managing the whole process of bottling and marketing Coca Cola… I had a revealing chat with the CEO the day we delivered the aircraft.
Disagreeing with all my beliefs, he explained to me that he was not competing with just Pepsi or any other sugary soda but with any drink a customer would choose to buy when thirsty… and that includes beer, water, etc. And you know why?
Because it costs the same and it solves the same need: Not being thirsty anymore… and it does not matter if all these beverages are crafted differently… the customer is the one to decide how to spend its 10 pesos.
You do not decide who you are competing with; your customer does! Always. I learnt 3 important conclusions from this mistake:
- Technology is an enabler, not an end. It is irrelevant to be innovative if your solution does not bring a clear, robust value proposition to your customer.
- Competition is never limited to firms that solve (or could solve…) market issues the same way you do.
- Consequently, your accessible market maybe bigger than you think…
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each? Altruism, Trust and Transparency.
I think that Altruism is the most important of all the character traits that bring to success. People are focusing too much on transactional relationships. Short term gains are regularly counterproductive on the long term. That way you do not build trust.
You need to be trustable and trusted. What I mean here is: “you do what you say, you say what you do”. Do not try to outsmart people; just pursue excellence knowing and assuming your limitations (we are no supermen o superwomen, but it does not prevent us to try our best).
Additionally, you need to be transparent; I do not believe in that assertion that I have heard so many times: “information is power”. We are in the XXIst century; building power on managing and manipulating information to your interest is a short-term play that does not make any sense anymore. It is a loser play.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Are there takeaways or lessons that others can learn from that?
One day; I came back home late from work (a job I was doing for the money, the status and the short-term security it gave me…) and I felt miserable. That evening I was not nice to my family and…I did not like the example I was setting to my kids.
I did a “projection”. Something I do quite often when I must take decisions… I picture myself as an old-grandpa in the morning… (sun is always shining… who knows why…!) and I am shaving (complete incoherence because when I picture myself old… I have a white beard…) … and I looked back on my life and it was clear: I’d rather be free and in control of my own life hence an entrepreneur and a business angel (assuming the high probability of failure) than a employee from any organization. That was the beginning of the success that makes me proud…
But it is me; not better or worse than anybody else. I value freedom over security… it is not a choice…it is a matter of happiness and alignment of behavior and values. Success does not lie just in the number of Unicorns I invest in as a business angel… it lies mostly in the fact that I am happy to invest in start-ups because it is aligned with my beliefs.
None of us can achieve success without some help along the way. Is there a particular person or mentor to whom you are grateful who helped get you to where you are? Can you share a story about that?
A former boss that later became a friend fired me (gently but still…he did not do it from one day to another but told me he would do it and gave me a deadline) as he could see I was not happy in my job. Best decision he could have taken… for me AND for him!
You have been blessed with great success in a career path that many have attempted, but eventually gave up on. Do you have any words of advice for others who may want to embark on this career path but are afraid of the prospect of failure?
Churchill said: “Success is not final; failure is not fatal: it is the courage to continue that counts” and I could not agree more.
The day you will quit your job and become an entrepreneur; that same day I can promise you 3 things: 1) you will work more, 2) you will make less money 3) you will lose sleep. And those 3 qualities may last forever.
So do not take the decision to invest in start-up if you are not ready to lose the money and do not become an entrepreneur because your boss is hard on you or you did not get that promotion you were ambitioning. Do it because it is important for you in the long term.
Ok, thank you for that. Let’s now jump to the main part of our discussion. Can you share a story with us about your most successful Angel or VC investment? Or an investment that you are most proud of? What was its lesson?
My most successful Angel investment is called Glovo; the first Spanish startup to reach €2B valuation … and the next €10B European tech company. I invested when the company was really in its early days as a pre-seed and seed investor. What impressed me at this stage was that the founders knew what they knew but also knew what they didn’t know and they were quite honest about it… that is the power of “I don’t know but I will make my best to answer your question as soon as I can”.
What is also very important for me is the Founder’s moderation. I like founders who can lead with sobriety. Of course, the life of an entrepreneur is full of ups and downs, but it is important that founders show calm and drive. It is “easy” to be super brilliant and show a high level of positive energy when everything is shinny… it is so much more difficult to handle the recurrent back draws and failures that set the path to success.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
I have many stories of failure… but the most important failures are almost always related to your own growth path. You can always blame somebody else for your failures… it is the easiest way. But the truth is that my biggest failure is that a few years ago, I decided to accept the offer to join a VC Fund as a GP for poor reasons. I did it for greed and vanity. Consequently, I overlooked the evidence that I was not aligned in values with the other GP’s, and it ended badly. Lesson? Values come first. It is not negotiable.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
I did. And no regret because this is the game. I turned down the most successful Spanish startup of the 2005/2015 years…. Privalia (it was later sold to the big Tech Fashion Player Vente Privée). Any Business Angel that says that he is always right is a liar. Great Angel investing is based on mastering uncertainty; we constantly take decisions with a lack of information… hence sometimes you are in front of a gold mine, and you do not see it.
You must take it. The idea is not to be always right; you cannot. The goal is to be good more times than you are not… and work on your % of victory. Super. Here is the main question of this interview. Let’s imagine that a young founder comes to you and asks your advice about whether Venture Capital or Bootstrapping is best for them? What would you advise them? Can you kindly share “5 things a founder should look at to determine if fundraising or bootstrapping is the right choice”? If you can, please share a story or example for each.
1.) If you build a company for the long term; you should bootstrap, if you build the company thinking of selling it in the future… Go VC. Most founders do not remain as CEOs after C series rounds.
- Long term control — Bootstrap
- Short term Financial goal — VC
2.) If your company sells a service… you can probably build a revenue model that allows you to grow fast enough organically with generated income from sales… if it is product business; you will probably go for VC to start strong.
3.) The later you open the equity, the longer you will keep majority of the Cap table. What is more important? The absolute value of your shares or the % of shareholding you want to retain.
- Relative value — Bootstrap
- Absolute value- VC
4.) Why did you decide to build the company? Was it the pursuit of freedom and control of your own life, ie not feeling that your fate is controlled by your N+1 or the search of a big impact…assuming the possibility (probability) to lose the company?
- Impact — VC
- Freedom and control — Bootstrap
5.) If you want to Grow Fast, have a strong Impact ASAP… go VC… your ambition is aligned with VC interests in that case.
- Scale — VC
- Organic Growth — Bootstrap
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
That’s very nice of you, not so sure of that but thanks…
I am a strong believer in education (I spend 50% of my time teaching entrepreneurship and angel investing around the world) and the growth of middle class. I think that an educated middle class with entrepreneurial mindset is the right tool for our society to be successful in our pursuit of happiness. Any initiative leading to this goal… will find me available to help.
We are very blessed that a lot of amazing founders and social impact organizations read this column. Is there a person in the world with whom you’d like to have a private breakfast or lunch, and why? He or she might just see this. :-)
First, I would go for lunch… (not a fan of Breakfast…!) and I would probably go for Philippe Jaenada; he is the fiction writer I love the most.
How can our readers further follow your work online?
Thank you so much for this. This was very inspirational, and we wish you only continued success and good health!