Uppercase Innovation

Isaac de la Peña
Nov 4 · 10 min read

There are times when I hate my job. Those days when nothing goes seems to work, that you feel that progress in a company has stagnated and you must dedicate a tremendous effort to recover the momentum, or worse yet that a certain operation to which you have devoted months of love, personal relationships and financial engineering tanks in just a few hours like a house of cards facing a gust of wind.

I guess it happens to all of us. Perhaps in our sector this feeling is a bit more pronounced since, as my friend Roger Piqué well describes, “we are in the business of saying no.” Our daily routine consists for a sizable part in having a series of individuals share their hopes for the future, their intimate dreams and in the end respond, for almost all cases, in a polite but firm way: no. No. No. Sorry, but no.

And then there are those other days, fortunately most of them, in which I laugh at my own narrow-mindedness and I become aware of the great privilege that represents being able to work alongside some of the brightest minds on the planet, who devote all their energy and passion to make ours a better world tomorrow than it was yesterday. In this or that field, having an impact on one audience or another, but certainly Innovating with Capital Letters.

Aspiritech is redefining the meaning of the sentence “social inclusion”

Going beyond our portfolio of companies (so you don’t accuse me of blatant self-promotion) three brief and recent instances that I loved are Listo! Finance, Sam Ulloa’s new project that uses data science to develop workable risk models for the USA Hispanic community, mostly unbanked and therefore out of the system, to provide them with access to credit that can change their lives. Or Aspiritech, a company that reinvents the meaning of social inclusion by employing individuals with autism (who have problems operating in social contexts but superhuman abilities to concentrate on procedural tasks) to perform software QA testing with excellent results. Or When & Where, an app that enables women to return home without fear of being assaulted and has had an amazing viral success, created by a Spanish team of teenagers with an unusual talent and so young that they can’t even legally incorporate their company.

How to Start

They may not have the legal age to innovate, but they are already doing so and as such they demonstrate the distinctive features that an entrepreneur must cultivate to succeed. These are patterns that are repeated regardless of their age, origin, country or economic sector.

The first is nonconformity. An entrepreneur must have the curiosity to pose uncomfortable questions and the courage not to settle for a simple “well, that’s the way it is”; not accept reality “as is” but being able to turn a problem into the opportunity to find new and original solutions, however crazy they may seem to be at the outset.

This leads us to creativity and the ability for rapid experimentation, to check if our assumptions are correct or not. Because most likely, the first idea you have will be an utter failure. And the second. And the third. But if you execute this iterative process long enough you will refine your initial hypotheses and most likely will eventually discover a fantastic niche with a compelling need to cover that is desperate to have your product.

Surviving until then is paramount, and therefore it becomes is imperative to move fast and being able to learn quicker than your competitors. Above all acquiring practical knowledge, in close contact with those who may be your potential customers.

In a recent meeting with Spanish entrepreneurs in Silicon Valley, Steve Hoffman from Founders Space, as picturesque as bright and known in Silicon Valley as “Captain Hoff”, expressed this in an excellent way stating that the worst thing you can do is keeping your speculations in secrecy for fear of having a great idea stolen. Because it most likely is a mediocre idea, and acting that way you will only realize it when it is too late and valuable time and resources have been wasted. Steve reminded the audience that Twitter started as an audio website, and YouTube as a video dating service. Luckily they iterated quickly until they found the gold reef quite far from the trail in which they opened the first mine shaft.

“Captain Hoff” talks about entrepreneurship in Silicon Valley

Equally important will be your ability to assemble around a team with lots of talent and motivation; first because it will allow you to accelerate that phase of progressive discovery, but also because at the time of implementing your product you will not be able to do it all by yourself. This implies that you must acquire good leadership skills in order to give a mission and a sense of direction to the entire company.

That’s why it is better to bet on a mediocre idea but with a great leader behind, because eventually he will be able to galvanize a team with the experience needed to find the winning angle in a given market. In fact, we investors tend to pay a lot of attention to the team that the CEO was able to attract in the initial stages, when he had little money and only his ability to inspire with a shared dream or with equity, which at that time was not worth anything either.

Undoubtedly our list could go on with other attributes that will make your journey easier, but above all we must emphasize perseverance. Because at some point, most likely at many points along the way, your company will fail. You will go through very hard times, with enormous ups and downs, and it is rare the company that does not suffer several “near death experiences” before finding its market fit and the path of sustained growth. You have to be able to continue pushing forward even when things are extremely difficult.

This is important. I often hear entrepreneurs who complain about how scarce financing is, thinking that their problem is the lack of money. But in the initial stages that is usually wrong and even harmful thinking. I know many companies for which raising too much money at the beginning was the cause of their downfall, because the excessive expectations of return prevented them from experimenting enough when it was reasonable to do so. Money is not the solution to your problems. First validate if your product solves a real and compelling problem for which some people are willing to pay, ideally with their wallets, otherwise at least with their time and attention.

How to Scale Up

Once you have found your market fit, then yes, to attain a position of dominance before your competitors do so you must grow fast, and for this you will need money. Sometimes tons of money, commensurate with the greatness of the opportunity upfront.

If your company does not exploit a mere local idiosyncrasy, or copy a third party idea, or tropicalize a previously implemented business model, then you should seriously consider if you want to dedicate yourself to Uppercase Innovation and seek not only customers but also financing in the United States, the deepest and most fertile capital market in the world.

In that case, be clear that if you come to the United States it is to create a unicorn. That is, to build a company that has to be worth a billion dollars in a few years. Why? Because this is how an investor manages to maximize IRR. In ecosystems as vibrant as Boston or Silicon Valley, a less ambitious proposal disappears submerged in a sea of better alternative options. You cannot be conservative: you have to think big and be willing to take risks of equal size. Above all you cannot be worried about the fact that your company may die. If you do, you will kill it yourself because when you erase the risk in a startup you are also immediately eliminate its capacity for innovation.

We were precisely discussing these issues during the last edition of the South Summit, offering recommendations for companies in Southern Europe that want to land in the United States. We mentioned how often in our lands we have plenty of talent yet we lack ambition. The proper ambition, not understood as the quest for power and wealth but the confidence in one’s own abilities and the absolute determination to achieve the goals you set for yourself. Because no unicorn was created following the norms designed to protect established corporations: they had to blaze their own trail without fear of breaking the rules. Is Paypal a bank? Is Facebook a newspaper? Is Airbnb a hotel? Is Uber a taxi company? Redefining the rules all of them created new and extremely lucrative businesses, but not without a lot of confrontation.

Talking about how to bring startups to the USA at the South Summit

During the talk I also shared my conviction, based on personal experience, that getting into the United States is a task that is too complex and critical to delegate. On the contrary, in order to have any chance of success, it requires the full involvement of the founders of the company. On several occasions I have seen how a local “USA CEO” was employed who, although coming in with fantastic credentials and the best of intentions, a year later had achieved few results that paled in comparison to the costs of operating in a market as expensive as the North American.

No one like the founders to convey that vision of a better future that led them to be entrepreneurs in the first place. No one like them to inspire a group of clients or investors and create the bond of trust that is a precondition for closing any business, especially if it is something as sensitive as participating in the capital of a foreign firm.

Of course, the trip is much easier if you have the right partners on board, who have already walked the trail and can accelerate the journey by highlighting opportunities and avoiding errors that are only obvious the second time over. Surely the message needs to be adapted to the audience in another culture, the product has to be optimized for a market with different dynamics, and there are alien regulations, uses and customs to which attention must be paid. But nothing can replace the passion of a founder.

Therefore, it is a journey that should only be initiated when the founders can devote due focus to it. Trying to internationalize too soon can be very counterproductive, because the absence of the leadership team will cause operations to fall apart in the native market. The company needs to have a certain degree of maturity, a critical mass of employees and, above all, established processes and corporate culture so that it can continue chugging along at a healthy pace while top executives focus on opening up these new avenues of exponential growth.

Even so, there are ways in which companies can start preparing in the previous phases so that it does not become a traumatic event. Things that may seem small at first but eventually have important consequences, such as writing the technical and commercial documentation of the product in English. Sometimes they are brought by such casual situations as having Anglo-Saxon employees from the beginning, which forces that language to be adopted for internal communications, or having engineers who work remotely, so that the corporate culture is already adapted from the get go to distributed team dynamics. I like to call it “avoiding growth debt” as there is talk of “avoiding technological debt” in the operations of the engineering department.

On other occasions these measures are taken explicitly, well aware of the journey to come. For example, in the rounds that we lead at Conexo Ventures we require shareholders’ agreements and all corresponding legal documentation to be made in English, with standard terms that are well known and accepted by US venture capital funds, and additional conditions whose main objective is to build trust in the critical moment when we are going to look for co-investors to further finance the startup’s growth, showing that we have thought and cared for their interests from the beginning.

“Are you ready for the USA?” at the South Summit

The Uppercase Innovation route is not easy at all, but rather full of challenges and it adds a dimension of additional complexity that can scare many. However the rewards that await the other side of the Atlantic are equally enormous. And there are other good news, too.

When we started in this business, about ten years ago, it was very difficult just getting the attention of a Silicon Valley investor for a company that was not located between San Francisco and San Jose, no matter how fantastic the underlying technology was. And once they listened to you, the usual response was “great … redomicile to Delaware, open an office around here — do not make me drive to far— and then we can talk details.”

Luckily over the years, after several international companies reaped great success in establishing themselves locally despite all the obstacles, and we managed to build the necessary trust bridges, we have perceived their views remarkably opening up outwards, to the point that this year in the Series A of one of our portfolio companies a tier-one Silicon Valley fund has agreed to join their capital while still based in Madrid to afterwards redomicile it into USA, sharing efforts and risks with us and thus making the journey much more pleasant. Something unthinkable just a few years back and, hopefully, a growing trend that will bring the opportunity of the United States’ market to a growing number of innovative startups from Southern Europe.

Conexo Ventures

We invest in exceptional individuals with passion for solving hard challenges and bringing disruptive innovation to high growth markets

Isaac de la Peña

Written by

Investor @Conexo_vc and formerly @Inveready. Partner @AgoraEAFI & @Alt_Insights. MIT technologist. Finance, algorithmic trading, AI, big data, mobile, web.

Conexo Ventures

We invest in exceptional individuals with passion for solving hard challenges and bringing disruptive innovation to high growth markets

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade