Ignacio Santamartina is the Financial Director de Berkeley Minerva Spain, Project Manager at IDIMAS Gestión and the Director of the Fundación Bases, as well as the Director of EAE’s Master in Entrepreneurship. Fernando Moroy is the President of the Madrid Chapter of the Keiretsu Business Angels based in San Francisco, a Member of the Top Ten Management Spain ranking and a lecturer on EAE’s Master in Entrepreneurship.
The two experts analyse the world of investment in startups and the role played by investors such as Business Angels, combining their role as new business project facilitators and as agents of large international venture capitals and new crowdfunding platforms.
During the dialogue between the lecturers on the Master in Entrepreneurship and Innovation at EAE, they analysed aspects such as the maturity of the investor ecosystem in Spain, the impact on the market of the participation of new investment players, how Business Angels work in Spain and elsewhere, how they invest, and the most common errors and the latest trends in investment.
In Fernando Moroy’s opinion, in Spain, things have evolved quite a lot over the last 7 years, with interesting developments in the world of entrepreneurship, new financing alternatives for entrepreneurs and tax deductions for investments in startups (20% of a maximum of 50,000 euros per year). Ignacio Santamartina emphasized that progress is required in the legislation to ensure that it reflects reality. Moreover, education is needed in the entrepreneurship sector. “The economic crisis was a real trigger in terms of the public sector realising that we have to support entrepreneurs”.
The President of the Madrid Chapter of Keiretsu added that, “in Spain, there are interesting networks” of Business Angels, giving the example of EAE Business School “and its international vision, with 52 chapters around the world”. These connections enable startups make the leap to other countries. The Director of EAE’s Master in Entrepreneurship went on to explain the factors that Business Angels focus on when investing, highlighting above all other aspects “skilled people with initiative” and the good relationship between the members of the team.
Fernando Moroy then analysed the criteria required of entrepreneurial ventures looking for financing to attract Business Angels, explaining that the investors are more demanding because there is greater supply. He also explained that investors focus on projects with a lower level of risk, as well as the equilibrium between the valuation price and the risk involved. Lastly, he emphasized the importance of the team because “the rider is just as important as the horse”.
The Director of EAE’s Master in Entrepreneurship explained that, after the people, the next aspect to evaluate is whether the project forms part of a new niche. When it comes to investing, Fernando Moroy underlined the importance of trying to optimize the entry point. “it is far better to invest when there is already a business model with customers than based on a PowerPoint”. With respect to jumping the gun, he recommends refraining from investing until you have seen lots of projects, getting to know the ecosystem, diversifying and investing in sectors that the Business Angels know well.
“The biggest mistake is not putting yourself in the other person’s shoes”, explained Ignacio Santamartina, who considers it a big error not to get to know the entrepreneurs well or the project you are investing in. However, in his opinion, Business Angels are becoming increasingly professional and make fewer mistakes because they are risking their own money. These investors see a lot of projects, study them carefully, observe the team’s capacity and, if they think they are technically and financially viable, “they then have to focus on what they know best, on the sector they are most interested in, because they have greater insight in it”.
Trends in entrepreneurship investment
Fernando Moroy advocated projects that are innovative, “when technology is introduced in the offline world”. Ignacio Santamartina highlighted the growth in the environmental and agri-food sectors, as well as sectors related to biotechnology, fintech and health tech. Moreover, Santamartina emphasized that funds with a large investment capacity are going to differentiate themselves more and, at the same time, there will be more democratization in relation to investments thanks to crowdfunding platforms and their power to reach more people. Therefore, aspects such as bureaucracy and legislation must be improved.
The Keiretsu investor raised other unanswered questions in relation to the evolution of equity crowdfunding platforms, particularly if they corner the financing market currently catered for by Business Angels in more traditional networks.
The two Business Angels taking part in the Dialogues section agreed that the entry of agents such as family offices in the world of investment is a positive thing. Ignacio Santamartina added that the more players there are on the field, the more projects will gain financing and playing field will be bigger for everyone, both for the entrepreneurs looking for financing and the Business Angels looking for startups. Fernando Moroy agreed with him on this point and welcomed the arrival of individual investments and family structures keen to finance entrepreneurial ventures. “The combination of different agents makes the market bigger and more liquid”.
Read the original version of the section in the EAE Talent Alumni Review 6