Welcome to the Innovation Conversation, a podcast
about innovators, both in business and real life.
Hosted by myself, Ricardo Rescual and Harry McCona.
This podcast is also sponsored by ODEV Tech.
ODEV Tech is your premier software development
partner. Make sure you check them out at odev
.tech. The podcast is also sponsored by Notion
.so. Notion is offering six months for free for
new users. Make sure you check out our website,
thestoreofevents .co .uk to read in the software.
Hi, and welcome to another episode of the Innovation
Conversation. Today we are joined by Azzy Veracobos.
Azzy, welcome to the podcast. Thank you. Thank
you very much for having me. Azzy, would you
like to introduce yourself to the audience, please?
Yes, of course. So my actual name is Azza Ara,
but everyone calls me Azzy. I am the head of
scouting and programs at Startupwise, guys. Startup
with Guys is a global funds accelerator that
invests in B2B startups all over the world. We
have more than 440 startups invested in our portfolio.
And we have very recently closed our exit number
20. And we work with startups all around the
world. We specifically have people living, mostly
living in Europe. So we are basically around
the world working mostly remotely. We have our
hometown home in Dali and then other places where
we feel like it's home as well, like here in
Malaga where I am. So there is no connection
with the Mafia whatsoever? No, not indeed. It's
like Ricardo, don't make that joke. No, but I
absolutely love the name. You mentioned something
quite fascinating, which is you've had a lot
of successful exits, which is not I think it's
always a really good way of evaluating things
because 20 is a really high number, so it's an
excellent number to have. Why do you think that
is? What makes it so successful? Is there any
type of philosophy your company follows to make
that happen? Yeah, that's a great question. I
think it comes to a combination of several things.
We've been in the market for 12 years now and
we started in Estonia. We obviously have a very,
we know that country is a small country, but
with lots of very promising, amazing founders.
So I think we started by connecting with really
great founders in that country. And I strongly
believe in great founders actually connecting
to other great founders. So I think that we,
we started building that network very well 12
years ago. And from there, we of course expanding
to other countries. And I think we managed to
keep doing that work that we started in Estonia
with kind of an overlooked markets. And then
we kept doing that in other markets as well.
And I also think that not only we are good at
making those connections and networks, we're
also good at nurturing those startups. So we
select. great founders, but then we also like
to work very closely with them so that we can
help them grow and succeed in whatever they're
doing. We work with them in the accelerator programs,
but then we also keep very close to them after
the program ends. So I think that's mainly part
of the success. Is there any vertical you focus
on or is it agnostic? We have multiple verticals
that we focus on. We have accelerator programs
that are focused on SaaS, which is the most generic
one. We also have PropTech, Web3, cybersecurity,
defense, sustainability. So we do have lots of
verticals. But I would also say that we are mainly
open to any really great B2B early stage startup.
When you're looking at all these founders, all
these ideas for startups, I'm sure you've managed
to identify trends in the sense that you kind
of know who's going to make it or not. Yes, I
wish I could say we have the secret sauce, but
no, I think I would lie if I say that we know
what makes a startup great. I don't think anyone
has that really secret sauce. I think that basically
if you ask my personal point of view, I like
very much founders that obsess over solving problems
rather than obsessed with the products that they
are building. And I think that's a, I basically
see that very easily when we start talking to
founders and you see that very quickly when they
are really good at explaining why they want to
solve the problem that they want to solve and
how big that market is. and how ambitious they
are to make that a reality and to fix that challenge
or problem they have identified. Usually, I don't
think that's a secret sauce, but that is one
thing that we look at a lot when we select startups.
How does the process look like for a startup
that wants to join? The easiest way is to apply
to one of the programs that we are running across
the year. We have multiple programs running all
year long. And that will be the easiest one.
And then once they apply through the program,
we basically screen them and we invite them into
our scouting process. Another way, of course,
is to connect directly with someone from Startupwise
Guys. Of course, because of that, we have that
network of founders, but also mentors in our
network, of course, the investors from our funds
as well. Basically, almost anyone from the Startupwise
Guys team, we are always open to meet great founders.
I would say, yeah, any way, anywhere to connect
with us directly. And that can be through LinkedIn.
It can be if you see us in an event or of course,
if you apply directly through a program, which
is obviously also an easy way. Interesting. You
know, as a lot of these startups exit and 20
is a really good number to have, you know, as
a successful exit. Have you managed to identify
whether that, how should I put this? Have you
managed to identify what actually makes or break
a startup? and it's always the same thing or
actually does it vary dramatically depending
on the startup? Yeah, that's a great question.
It's funny because it's kind of linked to the
first answer that I gave you. So I think most
of the times what breaks a startup is the team.
And then it's also very hard for some startups
to raise funds. So they managed to raise the
first, sometimes they managed to raise that first
round of investment, but then they struggle for
the second round because they don't They don't
manage to get to that point where they can raise
money again. So I'd say first is the team to
actually break through and resist through the
highs and lows, especially the lows. The market
constraints and actually making the first sales
and not only those first sales, but being consistent
in growing those sales. Usually that's also a
thing that breaks startups is where they don't
manage to get that done well, which is also something
that we help in our programs. We help them with
their sales development and their sales marketing
approach. So I think I would say basically those
are the two key points. Three, so team, sales
and investment. So let's focus on the investment
for now because I'm always curious. I'm sure
you get a lot of very cold emails asking for
money straight away, right? So what do you think
it's the best way for a startup, and I know I
have a lot of startups listening to this, to
actually go out and raise capital? You mean when
it's a cold outreach? When it's a cold outreach,
because what I find is it's easy for you to raise
capital if you have already a gigantic network
of people that have the availability to lend
you the money or invest in your company. However,
it doesn't always happen that way. And especially
when you're creating a new product that might
not be the right product for your specific market,
that might be the right product. Let's say in
Spain, you might be building something that works
really well in the UK, but you won't find investors
in Spain willing to stake that leap. So how do
you manage that? That's a great question. I agree
that, of course, it's easier to raise funds when
you have that network or when you have someone
connected to the person that you need to talk
to. But when it's a cold outreach, for me, usually
What helps is when that email that you send out
or that message that you send out through LinkedIn
actually has something that really makes me want
to know more. So you can usually, sometimes startups,
what happened with them is they tend to send
really long emails with everything they want
to achieve and their dreams and everything. Most
of the times we don't have time to read really
long emails with all the startups that approach
to us. So I would say usually what helps me is
when you are very straight, you reached out to
me very straightforward with what you offer.
So usually you should know who you are talking
to. So if you know that we are looking for B2B
early stage startups that invest in these specific
verticals and you know, if you know what we do,
you should be able to tailor that message accordingly
as well. So, Hey, we are a B2B SaaS startups.
We've started. doing this, these are the kind
of, this is the kind of traction that we've achieved
so far, which means you can either have, you
know, revenues or if you don't have revenues,
what kind of metrics you have to demonstrate
that you have something that is already kind
of validating in the market. And then just leave
me hanging there, leave me wanting to really
know more about you. So if you've managed to,
you know, if you are raising funds, but you've
already started raising part of those funds and
you have maybe 20 % of the total investment closed
or something that says to me that, you know,
that there might be something appealing there.
Sometimes some people also attach like a short
video with their product demo. That's fine. But
what I would say is just make sure that in a
few bullet points, you tell the key things that
are going to leave me wanting to meet you and
wanting to know. Interesting. So it's all about
delivering. A message that, you know, it's captivating,
isn't it? Yeah. Yeah. And yeah, and making sure
that if you, if you have, this is funny because
sometimes startups have metrics that they've
started collecting, but sometimes they don't
share them straight away. And for me, sometimes
it's funny because I, I always tell them, just
tell me, tell me, you know, everything that you've
achieved so far, because that's how I know if
you have something that is appealing in the market,
because We don't invest in the idea stage. We
invest when they already have an MVP or an idea
that it's already started to be validated in
the market. So if you are the point, you should
have something to show me. Yeah, exactly. Yeah.
And I think it's really hard to invest in just
an idea, isn't it? I mean, you must really believe
strongly in that founder or that team to just
say, hey, here's my money. Go and create something,
build an MVP with just an idea. Like, well, hold
on. I've seen it. Most of, I mean, sometimes
it's because that founder is a second time founder.
Okay. And then you already know that he's already
done it one time and either he did, you know,
for successful exit or he just was very good
building product. But that first trial didn't,
you know, make through because it wasn't the
right time. It wasn't the right market, whatever
that is. So I've seen it. I think right now it's
way more rare than a few years ago. when it was
much easier to raise money that way. Right now,
I think you need to be, yeah, you need to show
that you have really an amazing idea or you're
really great building products and you have that
track record and you can tell others, hey, I'm
building this. I'm about to build this. If you're
jumping now, it's, you know, perfect timing.
But it's, I would say that that is a very rare.
Very rare. At least in our case, it's definitely
very rare. But in general, in the industry, I've
seen that that is less and less common than it
used to be five or years ago. Interesting. What
do you think, you know, we mentioned team and
sales, two things that I'm quite passionate about.
You know, when it comes to team, is there any
tips or tricks you have that, you know, make
it work better? Because ultimately, at least
when you have two founding members, it comes
down to it actually being a relationship. and
you end up spending more time with that person
than you spend with your loved ones, especially
when you're building stuff. So how do you manage
that? Have you found the magical formula that
kind of works or it's like any relationship?
Yeah, I don't think there's a magic formula.
What I usually see working very well is when
those two people, assuming there are two, they
know each other for a very long time either from,
you know, they've studied together, they've worked
together. They've done other projects, not even
related to startup. Well, together they've gone
through, the important thing is that they have
had arguments before, so they know how to get
through that. And also they've gone through tough
times together. Ideally, that's usually something
that helps because it's going to happen eventually
in a startup as well. And also having complementary
skills really helps. I've seen many times. And
it doesn't mean that it can't work because of
course you can have a team of two engineers that
make it through amazingly. But usually the great
combination is when you have one very good tech
one, and then when you have someone really good
in sales and business. Usually that combination
is the best. Of course, it's a very difficult
combination. Sometimes it doesn't happen both
at the same time, but ideally you should have
someone very good building the product. and someone
very good at selling the product. Which brings
me to my next topic, which is actually sales.
I actually have a sales background and I think
what always impresses me is how some founders
are unable to sell their idea themselves and
they go on to hire other people to sell their
idea. And for me, it's always been a pet peeve
and I always know if there's a sales position
open and the founder is asking, can you come
and sell my idea? It's not going to work. What's
your take on this? What do you think? Yeah, it's
interesting because that's also something that
I've seen happening a lot. Startups struggling
to explain what they do. It doesn't mean that
they're not a good startup, but it's usually
not a good sign because if they are unable to
explain to an investor what they are doing, I
think... Sorry. That's completely fine. It's
actually, I think it adds a very nice element
to the podcast. So for our listeners, Ezzy Sun
is actually on the back on singing, which is
great. I think he's calling me, but if we can
hold. Okay. So for our listeners, we just had
a little break. So as you can check on our son,
we're back on. So we're talking about sales team
and also actually reaching out to investors.
I'm curious about what you think about what's
actually happening right now. No interest rates
are going down as we speak. there's always a
lot of conversations about how hard it's actually
to raise funds. From your side, from your perspective,
what do you think? Is this a good moment or a
bad moment? It's a difficult moment. I wouldn't
say it's bad because I think it was worse before.
I think it's getting better but it's still very
hard. We see in the market overall that a lot
of people are really struggling to raise these
funds. But I think it's going to eventually get
better. It was way worse one year. So I think
it's going to get better eventually. I'm curious
on something else, which is, you mentioned that
you were founded in Estonia. Now you also have
offices in Spain. I mean, you have a pretty big
European network of startups coming your way.
How relevant is it for a startup to actually
think outside of the box or outside of their
specific country? and go elsewhere. Also, do
you think that's easy to do or not so much? Yeah,
that's a good question. It's fine. I've seen
trends. So for some countries, they always start
with their own country. And then eventually when
they've managed to break through in their country,
then they think, you know, to go outside of their
country. For other countries, it's the opposite.
They always think outside of their country first.
So for example, for really small countries like
say, Lithuania, Estonia, they usually think outside
of their country first. And they're kind of more,
they usually have a more global mindset first.
And I think it's because of the size of the country.
Whereas for example, countries like Spain or
France or Turkey, they usually always think of
local first. And then, you know, if they break
through, then they think about going outside
other countries. As an investor, when you look
at Spanish startups, would that be a criteria,
for example? Because I ended up talking with
a lot of startups because obviously we run a
lot of events in Spain. And they always, I think
they're kind of struggling to break away from
the Spanish market. What do you think? Well,
for us, we are global. We look for scalability.
So if you start, if you... don't have a global
mindset to, you know, to go outside of your country,
then we are not going to invest essentially.
But I would say it's not just us. Overall, I
see that they usually struggle to find investment
if they don't have a global mindset. Interesting.
Interesting. So it's all about thinking globally
yet locally type of thing, right? Yeah. I mean,
it's fine to start in your own country. I think
it makes sense. But you should have, if you are
a startup with ambition to grow, you should have
a plan to go beyond your country. You know, when
you see all these founders and they're kind of
struggling, what do you tell them? Cause I'm
most curious, cause you know, startup life is
crazy. You have really good moments and everything
is amazing. And then you have a horrible week.
The world's going to fall apart. Oh my God. I
don't know if I can live another day. So how
do you, how do you, what do you tell people when
that happens? I feel their pain because I understand
how hard it must be, you know, to go through
those highs and lows. We, I feel proud of our
team because we are very much very well connected
to our startups. I would say our CEO, Cristóbal,
like talks on WhatsApp with so many of them,
startups from our portfolio that have been invested.
for with us since the first year. So, and they
feel, you know, if they are feeling like they
need help or they need someone to help them with
a specific challenge with whatever that may be,
it might be for an investment round, but it can
also be for, you know, I need an intro with a
client or, and I feel specifically proud that
our founders feel that we are very close to them.
So if they need our help. we are there to help
them basically. Interesting, which brings me
to my next question. As a founder, and this is
a bit of a tricky question for you to answer,
but as a founder, let's say you have a lot of
opportunities on the table in terms of VCs would
pick. So what do you think should be the criteria
for a founder and the questions they should ask
from a VC fund to understand actually, is this
a good partner to work with or not? Yeah, yes.
I personally think that a relationship with an
investor is It's going to be potentially longer
than any other personal relationship. Longer
or stronger, should I say. So you probably are
going to have to have really tough conversations
with that person. You're going to have to report
to that person on a monthly basis. So I think
in some occasions it can be tougher than your
own personal relationship with your partner.
So I think it's important that you choose if
it's important for your personal life to, you
know, who you want to partner with in your personal
life. In this case, I think it's the same. It's
as important as that because for most founders,
their startups is their own dream. So I think
for me and everyone talks about this, but I think
it's the way it should be is you look out there
for smart money and smart money is not just money.
How can these people help me? In which way? And
it can be in many ways. It can be because they
have a strong network in a specific industry
that I need, or it can be because they're going
to help me with the next round of investment
as well, or they're going to be available for
me when I need help and I need support. It needs
to be something beyond the money itself, because
the money phase. Once you've already requested
it, then that's it. That's all you get. I think
founders should basically think a lot about who
they put in their cap table, and they should
ask many questions before accepting who they
add in their cap table. They should also ask
around, ask other founders from that network,
how is your relationship with these people? How
was the whole investment deal? How did they treat
you in the process? How are they treating you
now? We, for example, when we get startups to
join us in our programs, we always ask them to
talk to other founders that are in our portfolio
network so they can firsthand hear from those
people how they went through the program, but
also how they are right now after this program.
And I think that's important. I would do it as
a founder and talk to people around the investors.
Because it's always matchmaking, isn't it? It
goes both ways. Yes. Because a character cannot
be just give me money and then magic happens.
It needs to be the way like are you the right
type of money for my company? Yeah, exactly.
Because I know a couple of people, what they
do is they actually they take 50 % of the company
and then say here you go, here's the money. And
I'm just thinking that's crazy. They don't want
to have to do that. Especially at seed stage
because... No, it's terrible. Yeah. Yeah, there's
nothing you can do afterwards. Something that
I... I have seen a couple of times already is
in our, in Startup Wise Guides, is startups that
come to us and their cap table is absolutely
broken, hard at a very early stage. And we know
we can't invest with that kind of cap table,
but because the cap table was so broken, we felt
so bad for those founders. We actually had a
few conversations with them to show them and
to explain why their cap table was broken. We
were not going to invest, but at least we felt
like these guys deserve to know what's happening
with their cap table. And even if we are not
going to invest, so they know in which state
they are, because they obviously haven't been
very well, you know, advised. So I think we,
we placed, I placed pride in that, that we always
think founder first. And even if we are not going
to invest, if we can help. you know, and you
are in the process with us, we are going to fail.
And what does a healthy cap table looks like?
It definitely doesn't look like 50 % of the...
I imagine so. ...of our control. I mean, obviously
the healthiest cap tables is when the founders
have the equity shared proportionally, when if
they have investors already in the cap table.
that they haven't lost, of course, control of
their own company. So obviously, definitely owning
way more than 50 % of your company when you are
at an early stage. And not having a ridiculous
amount of investors in that cap table from the
very beginning. I've seen cap tables with a very,
very long list of investors, which basically
means When it comes to a point where you have
to have board meetings or when you have to make
decisions, I mean, those things obviously can
be legally bound in contracts, in the agreements
that you sign, but it usually makes it messy.
In terms of the legal standings, do you think
there's a, I know you have multiple operations
in Europe, but is there a better geography to
run the start than the other one or it's all
pretty much the same? I mean, there are countries
where they have more help. you know, from government
side to build and to create startups. So I know
Estonia is a great example of a country where
you can very easily set up a startup and set
up a business. Other countries are more difficult.
I'm aware there. I don't want to get in trouble,
but I know that other countries are not as easy.
What I always say to startup is once you know
you are building a startup and once you have
your team that you want to do it with, Just get
a lawyer first. Go to a lawyer and make sure
that you sign that agreement with your co -founders
and that you have a lawyer who is an expert who
can help you assess once you have your first
investors on board as well. I think a lot of
founders underestimate the importance of having
legal help from the very beginning because I
think it can save you from a lot of issues in
the future. Yeah, I agree 100 % because that
makes a huge difference, doesn't it? Because
at the end of the day, You're building your dream,
but your dream needs to be legally protected.
Especially when different money comes in. It's
a big thing. As we're reaching the end of the
podcast, if people want to reach out to you,
how can they do so? Please, you can find me on
LinkedIn and also you can find me on Twitter.
I can send you the handle if you wish, Ricardo.
I can put it on the description of the podcast.
So yeah, I think LinkedIn and Twitter will probably
be the easiest way. The podcast is also sponsored
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