Against common knowledge Francisco Santolo´s Startup Accelerator [Scalabl] does not believe in Business Plans.
“The current Startup ecosystem is one in which Entrepreneurs always lose”
Forbes Argentina — March Edition 2017 — by Santiago Casanello
“The current Startup development model is one in which Entrepreneurs always lose” fires Francisco Santolo, an economist who left an important position with fabulous benefits at Dubai, where he worked for a multinational company, to found Scalabl, a [Company Builder &] Startup Accelerator, which works under bold premises he is absolutely convinced about.
At Scalabl they don´t believe in Business Plans; they even affirm that you don´t need money to build a company, and it works virtuously not to have it at first; they consider that before investing one dollar you should prove 100% that it will become more than one; and they teach you that to be successful, the entrepreneur should not fall in love with his idea, instead, he should iterate and pivot continuously, sometimes changing to a totally different one, until it really resonates with customers.
In a sense, they add to their Startup methodology, the logic of a scientific experiment: to confirm an hypothesis (in this case a business model one), they need to prove it first in the “lab” (out of the building, with real clients). In only one year of existence Scalabl seems to be validating their model with more than 39 incubated companies.
Santolo firmly insists on the belief that the “entrepreneur who reads is in a huge advantage”. He refers to the work of important business professors who are burying all the previous entrepreneurship literature and replacing it with new and controversial ideas. They consider that the majority of what´s taught in prestigious universities around the world is mistaken, and the main reason why 9 over 10 ventures fail. Geoffrey Moore, Eric Ries (bestseller “Lean Startup”), Ash Maurya and Alexander Osterwalder are some of this authors. But specially, and above them all is Steve Blank, a Silicon Valley serial entrepeneur (4 of his tech companies had an IPO), creator of the Customer Development methodology and now professor at Stanford, Columbia and Berkeley. Today, companies like Google and Amazon apply his ideas.
“I really admire Blank. His book `The Startup Owner´s Manual´, [is life changing] and extremely powerful for business: he changed the startup creation process completely, and transformed the world [this disruptive change is just starting]. He taught us that we entrepreneurs do not have any certainties, only hypotheses or guesses and we need to test them `out of the building´”, explains Santolo, who decided to come back to Argentina in 2015 to found Scalabl.
“Steve Blank (…) changed the Startup Creation process completely, and transformed the world [this disruptive change is just starting] “
Before, he had been two years living in Dubai, where he was Regional Manager for 15 Middle East and Africa countries, working for the Brazilian food giant BRF (5th biggest food company in the world, owner of Paty and Sadia brands within others). His corporative career had started when he was 23 years old at Natura, also a Brazilian company, where he was named Marketing Manager for Argentina at 26, and then Marketing & Commercial Planning Manager for Latin America. Besides graduating as an economist from UCEMA and holding a Master in Economics from Universidad de San Andrés, [and an MBA from UCEMA], he holds an Innovation and Entrepreneurship certificate from Stanford and a General Management course at Kellogg. Scalabl was not his first venture: in 1995, at 14 years old, he created HoCuS PoCuS, which became the leading spanish MIRC script (with over 50.000 unique visits a day) when the internet was just starting.
Why do you affirm entrepreneurs don´t need money to start a venture?
The first step to build a Startup only requires paper, pen, and a group of commited people sketching ideas and hypotheses [on a Business Model Canvas]. The second step is interviewing potential customers to understand which problems they do have and which solutions they need, the only cost involved being inviting a nice cup [of tea] or coffee. And the third step, designing the MVP, should tend to be at 0 cost [you need to get creative, and think what you are trying to prove]. You only need money when you get into a Sales Roadmap in which 1 US$ in investment becomes more than 1US$ in profit.
“The first step to build a Startup only requires paper, pen, and a group of commited people sketching ideas and hypotheses [on a Business Model Canvas]”
You also say you do not believe in Business Plans.
Exactly, I don´t believe they work at all. This concept begins with Steve Blank: [“a Startup is not a small version of a big company”, “No Business plan survives the first contact with a customer”]. Business plans work for big companies that know their customers and know how to sell their products. But when you are an entrepreneur, every plan diverges from what you discover in reality. That´s why if you develop a Business Plan [inside of the building] and then you raise money to execute it, you will fail 99% of the times. Rigid Business models do not allow you to iterate, to change, to transform your original idea to become a profitable business.
Santolo thinks this two principles, even if they are stated clearly within the most advanced entrepreneurship literature, are not taught regularly because they interfere with some stakeholders that benefit from lending large sums of money to Startups that haven´t proved their scalability yet (say Accelerators and Venture Capitals). “If they already keep a fee on the initial funds [2–3% over millions of US$), why should they care about the entrepreneur´s well being?” “But for sure they need a Business Plan to report the “rationale” of the investment to the original investor and explain why did they loose the money there”, fires Santolo.
Other reason why Santolo does not recommend to raise money on the initial phase of a Startup is of psychological nature: the trap of Ego. When you receive money from the start you enter a terrible game, friends and family initially assume you are already successful and your goal becomes raising more money in future rounds [and avoiding cash burn], instead of building a profitable and sustainable business. In the end you become prisoner of a company that isn´t sustainable.
“Other reason why Santolo does not recommend to raise money on the initial phase of a Startup is of psychological nature: the trap of Ego.”
People at Scalabl assure that none of the incubated companies have losses, and that most of them are reaching the scalable point in which 1US$ becomes predictably more than 1 US$. And they incubate almost everything: Fumigapp, a pest control company with a cool brand and lots of online presence (something new to the industry); Mavericks Co, with premium sunglasses produced in Argentina; Precios Ninja, where you can get the lowest price on technology products; Digital Doctor, that facilitates the relationship within doctors and patients; Roomie, that groups independent designers and organizes secret fashion events; Brasup, that allows to barbecue in an instant; and Les Croquants, a french style Pastry chain specialized in Macarons and Cupcakes.
Everything lets us think that if Francisco had been in class with his admired Steve Blank, he would have approved his course with honors.
More about Scalabl
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