Marta Cruz: “Latin American entrepreneurs have great workability”
Marta Cruz: “Latin American entrepreneurs have great workability”
NXTP Labs is an accelerator of technological projects based in Argentina but focused in Latin American Spanish speaking countries. Since its foundation in 2011 it has supported the growth of hundreds of startups that have to do with digital technology through seed capital financing, consulting services and access to mentorships.
Annually it analyzes between 1200 and 1600 entrepreneurial projects that look for investment, knowledge and a network of contacts that can help the business grow. Those recruited have to meet three essential parameters: a solid team, a functional demo and a solvent size of opportunity.
Marta Cruz, co-founder and director of NXTP Labs, will be one of the speakers at the Latam Startups Conference, celebrated in Santiago, Chile the 26th and 27th of September. Cruz, a very experienced professional in the field of marketing, speaks about the difficulties entrepreneurs are facing and the risks of accelerating artificially growth processes.
What type of companies are you looking to invest in?
Since the beginning we have looked for projects in early stages that have a team (not just one person), from which at least one of the members is focusing in technology and another one in business. They were generally startups based in digital technology. The areas are mainly social media, software in the cloud, mobile, Internet, education… but always with a base in digital technology.
What Characteristics must they have?
Another determinant factor is that they must have a functional MVP (Minimum Viable Product) and based on this we have to determine whether the team has the capacity to work on it further more. To us, ideas are worth nothing, what we focus on are the implementations. They have had to give the step from having a power point presentation to something that works.
We also value the size of the opportunity: it has to be regional at least and if it’s a worldwide opportunity even better. If a project intends to be successful it can’t be developed for a small or very specific community, for example a city. It is true that there are some countries in Latin America that because of their history or even because of their geography they are really closed. Part of our job is to get those entrepreneurs that we consider valuable to expand their project and their business ambition. But, all in all, the three parameters we follow are the Team (which represents 50% of the value we give to each company), the MVP and the size of each opportunity.
We don’t care if entrepreneurs come to us telling us they tried and failed before. This is important because it means they have learned something and they will know what things not to do, even if they continue to make different mistakes later on, because this is an on going learning process. But this is part of entrepreneurship.
Have you noticed any change in the Startups’ ecosystem since you started working in mid 2011?
When we presented the first batch of investment of 15 companies between June and December of 2011 there were a lot focused on games, entertainment and Social Media, but as the market has grown we have started to see that digital technology is transforming people’s lives and what was done before in a certain way is now done in differently.
It is at that point when we see that we need to find good startups in areas such as health, agro-business, and finances for agriculture…
Very important industries that are going to need to incorporate new technologies to their work processes in order to improve their productivity and results. At the beginning we were more focused on the B to C (Business to Consumer) and we weren’t very interested in companies focused on the B to B (Business to Business) but in these last two years we have focused on the B to B because we started to see a change in the market around the world with the purchases that Google did for example, of companies that could solve things quickly for them, like Samsung.
How is the Latin American ecosystem in the digital field?
You could say it grows evenly. There are many countries that have good role models created at the beginning of the century, as it is the case with Argentina. Here we have had the luck of having a founder such as Marcos Galperín, from Mercado libre; or the founder of Despegar, OLX or Global, a company that recently began trading on the stock market. There are many role models that have pushed many young and not so young people towards entrepreneurship because they think they can do the same as they did.
In Argentina we are also looking outside of the country because of political and economic reasons; that’s why entrepreneurs here generally have a global view of projects since the beginning. Uruguay doesn’t stay behind and with such a small population it can offer a good handful of digital companies that are trying to solve daily life problems. In the rest of the countries public policies are being implemented to help entrepreneurs but now we need investors so that the digital ecosystem can develop even further. Besides it is a field that doesn’t need much money to start with but a lot of support at the beginning.
What is the Latin American entrepreneur prototype?
It has different characteristics. Many have parents who were entrepreneurs too; but I don’t mean “fashionable” entrepreneurs, I mean shop, small stores and restaurant owners… generally either the mom or the dad had entrepreneurial experience at some point of their lives.
But for what we can see most of them think “I’d rather ask for forgiveness than for permission”. They don’t have any issues in finding the way to get in contact with a person that they might think can be interesting, taking a flight and getting to where that person is. They are very resilient, they can say: “today I am the worst of the worst” and then at the next day they get up and change their app’s code in the application part and realize it works better this way and dream about selling their startup for 100 million dollars.
They have great workability and they don’t think of what they do as work because they enjoy it. Besides they can learn a lot in a very short amount of time, at least in the field of digitally based technology.
I would like to explain that in the last year we have incorporated to the program of mentorship a psychologist specialized in psychodrama and she is doing psychometric tests on entrepreneurs. With these tests you can see the profile each of them has, their resilience, their capacity to deal with conflicts, and their capacity to absorb frustration…
Who is investing nowadays in Latin American startups?
To begin with I must say it is very hard to get money in Latin America. But we could say there are three profiles: a 10% are founders of companies that 10 or 15 years ago succeeded in the area of technology, but not precisely digital. They become angel investors and they do it first in a private way and then through companies like ours.
Another small percentage is of professionals that went through different technologies companies and got to see what success is like. They also share some knowledge. And finally there are traditional investors of real state, mines, heavy industry, and big investing families interested in broadening their investments.
People talk a lot lately about the risk we have of facing a bubble of Startups in Latin America. What do you think about this?
We talk a lot about this topic. I think there is no such bubble; if there were, it would mean companies would have started to get funded by the government. But the evaluations of companies are done by qualitative concepts and we don’t take into account the fact that they have institutional money but that they have opportunity, a size of the market and viability.
This being said, it is true that entrepreneurs in early stages don’t need the money the government offers, and this is very harmful. Most of them don’t know how to use the money. Giving 150,000 dollars to a kid that seems brilliant because he made a brilliant app could be one of the worst things you can do. They don’t know what they can accomplish with that amount of money.
Another issue that would send angel investors away and companies like us was supporting entrepreneurs with a great potential but that don’t need money just support. Don’t forget that getting these grants takes hours and hours of paper work and procedures that are work taken away from the Startup. Once you have the money you have to report all you do, which takes attention away from what’s truly important, the company.
When we get involved we offer them 25,000 dollars in exchange for 7% of their company because we like their team and we can offer them an acceleration process, exchange knowledge and our network; the generally say the government gives them more money without asking for anything in return. Luckily procedures are changing now and the money is given to them through an institution that administers it, although the real paper and the work of these companies need to be watched.