We meet Victor Horcasitas, director of investor relations at Barcelona Ventures, a seed accelerator and resource platform that catapults European startups to access Silicon Valley.
Introducing Victor Horcasitas as a business angel investor with more than 20 years of international project management and consulting experience would be an excessively narrow approach. Born in Mexico City, raised in Washington DC, and now based in Barcelona for almost 20 years, he is also project manager at Confianz International, managing director at Trinity Advisers and president of the American Society of Barcelona.
But perhaps I should have begun this presentation stating that Victor is vice president of the Ronald McDonald House of Barcelona, where our interview takes place. The RMHB provides comfort and a sense of community in a “home away from home” to the families of sick children receiving care at the Vall d’Hebron Hospital and other local hospitals. Victor shows me the House with great pride, emphasizing that the work of the RMH of Barcelona should be more widely-known. You can learn more at www.rmhc.org
Sugoru: Tell me about your work at Barcelona Ventures
VH: There’s a thing called the “fifty-mile rule”. This basically means that investors want to live within fifty miles of the companies they’re investing in, which means that even people from Nevada, Nebraska or Florida are often not successful in getting capital from Northern California, and if you’re outside of the US it’s even more difficult.
So, at very high level, we do three things: We find Catalan, Spanish and European tech companies that would like to grow quickly and need access to capital. We fund them with 100,000 euros; 50,000 are for the entrepreneur and the other 50,000 are used for an acceleration program in Silicon Valley for four to six months with the idea to stay in California – we see a lot of really good companies but not all want to leave the beautiful weather, food or family of Catalonia.
Sugoru: In my interviews with startups I usually hear “we’re having a lot of problems to access capital in Spain, so we want to move to the US”. What should a startup that tells you “we want to go to Silicon Valley” have?
VH: Our ideal clients are those that already have some traction. What they need to have is a unique product that can either be disruptive or to have a very defensible competitive advantage. We are looking for companies that are going to grow quickly, have a fantastic team and, obviously, they have to speak English extremely well, because if they cannot close a sale they’re not going to succeed. Also the vision that we’re looking for is not a local one. They will have to adapt to a worldwide market and their business model commands a global perspective.
Local Startups will have to adapt to a worldwide market and their business model commands a global perspective.
Sugoru: What are you looking for in a startup? What do you value most?
VH: The first thing is the integrity of the team. They have to be ambitious and yet humble enough to take coaching and advice, because they’re going to an acceleration program. This is difficult because most entrepreneurs, by nature, are very confident in their own abilities. If they are not they’re in the wrong business and yet when they’re dealing with a new market that they don’t understand they need to be coachable. It’s a hard balance to achieve.
Also they need to be very strong technically because in California they’re going to find other entrepreneurs who are very strong both technically as well as business savvy. Some of the challenges that we’ve found is that they have an interesting product but they cannot articulate how this product is going to make money. It surprises me when entrepreneurs cannot explain succinctly how and why this is going to be a profitable project.
Sugoru: Which information should a startup pitch include?
VH: The main goal of a pitch is to develop an interest to learn more about their company and product or service. Honestly, they should probably achieve this in 30 seconds. It’s important to state what problem they’re solving and especially how the company is going make money. It’s less about the company’s performance, less about its prospects. The pitch is a clear demonstration of the team’s ability to sell. During a pitch don’t worry about listing all of the numbers, the financials, the mission statement, the team… Later on all that will be addressed in detail.
A pitch should state what problem you’re solving and especially how the company is going make money.
A pitch should always focus on generating enthusiasm, excitement and a lasting positive impression. If you make me want to know more about the company then I’ll ask you the questions that I need in order to decide if I’m going to invest. But if you’re so busy telling me everything about your company then maybe you’re losing the focus of convincing me that I want to learn more. Why is buying this product going to be good for me? How will this improve lives?
Sugoru: There have been projects that finally went wrong? What did they have in common?
VH: Many projects have failed. What they had in common depends on the sector, but in Spain there was an over-reliance on Government business, or segments that are regulated by the Government that were not able to receive the subsidies or the margins that had been promised. Some of the investors put the money in, they supported and were happy with the entrepreneurs, but the Government did not honor its agreement.
In Spain there’s also a lack of willingness to give exclusivity. It’s very frustrating dealing with people who don’t want to share information. There’s a culture here of not trusting advisors and a hypersensitivity to competition. This is a big error. They demand confidentiality agreements as a requirement to obtaining basic information and it’s funny because there’s so many people that tell me “I have this unique thing” and they want me to sign NDAs to give me more information. But they don’t know that I’ve already seen ten products exactly like theirs, quite often more effectively presented and usually better prepared.
Startups don’t understand that I’ve already seen ten products exactly like theirs, quite often more effectively presented and usually better prepared.
Other areas where we have failed are with engineers who start companies and do not understand why non-engineers don’t understand their product or service. There’s a lack of soft skills here and there’s a lack of vision.
Sugoru: From your experience, which are the main drawbacks of startups?
VH: The biggest drawback is when a startup is led by people who don’t know how to sell. That’s the biggest problem: when you have a director who is an engineer, who is wonderful technologically, has developed a great product, but doesn’t know how to close a deal… and the team does not know how to make a compelling case for investors to risk their capital. This happens both here and in the US.
Another challenge for local startups I find is poor awareness of global competition. Significant credibility is lost when it is evident a company is ignorant about their competitors. A frequent challenge is the enormous gulf between what entrepreneurs and investors believe the valuation of their company is.
Sugoru: And which are their main obstacles?
VH: In the US, it’s extremely competitive… and everything is so expensive. Well, it’s expensive because it’s so competitive. In Spain, access to capital is perhaps the biggest problem. Local entrepreneurs and shareholders commonly -and mistakenly- try to ascribe a value to their company as if they were already in Silicon Valley.
Sugoru: How do you detect that a startup has potential?
VH: The team. You see so many products that are similar… A team that really works together, that knows how to sell and that is able to answer the questions directly. This is perhaps a cultural thing. They sometimes answer questions saying what they think I want to hear. If you started a company and you failed or you went bankrupt, I want to hear this. I’m going to find it out anyway. If you failed, you probably have some very interesting lessons that you learned. If you failed but you didn’t learn from it, that’s a problem.
The most important is the team. A team that really works together and knows how sell. You see so many similar products…
I’m also refreshed when someone is able to tell me how to solve a problem that I have or I didn’t even know I had. Personally, I’m less interested in the technology. I’m interested in the solution.
Sugoru: Finally, have you seen some changes in the new generation of startups?
VH: In Barcelona, over the last ten years, there has been a dramatic improvement in a number of areas. The quality of the pitches is much better than it used to be, as are the level of English and the available supports. The infrastructure, the ecosystem, has many more resources than it used to have. There’s still so much to be improved, but you have to walk before you can run and here’s where we are.
Financial capital will always follow intellectual capital. Always. It’s not the other way around. Barcelona has plenty of local talent and this gives local startups a chance to offer “cheap equity” to financial sponsors versus what they would get at a comparable US company. Unfortunately, Barcelona is not on the radar screens of most VCs. Barcelona Ventures are constructing a bridge to Silicon Valley, so business angels in the US can at least see the value of our European tech entrepreneurs. ⚫