Treat your investors as mentors

Tip for founders who are starting to build or nurturing relationships with potential investors: frame the conversation as if the investor was your mentor and ask for advice, being extremely open-minded, curious and ready to learn. Take notes and summarize the take-aways before closing the meeting.

Don’t expect straight-forward feedback as most investors won’t do it. Start the relationship-building process well ahead of fundraising and make the investor feel that she/he is adding so much value through the mentoring process that they’re willing to keep doing it. At the end of the first meeting, appreciate the insights and lessons learned and ask deliberately if she/he is willing to mentor you and meet again in the next 4-6 weeks.

As a founder, you want potential investors to be feel like partners who build together, not like critics who are distant and hands off.

Carbon credits in Brazil: I’d invest my own money

Yesterday I spoke with an investor focused in climate tech and once again I got highly excited with the sector. In particular, my eyes sparkled with the potential of carbon credits in our region. You may have already heard that carbon credits are the future and that Latin America and Brazil, in particular, have an enormous potential for it. If that’s the case, can cleantech and carbon credits lift Brazil’s relevance and positive impact in the world? I believe so, and have just prepared a basic download on the theme.

What are carbon credits?

Carbon credits are a type of tradable permit that allows organizations and countries to offset their greenhouse gas emissions by investing in carbon reduction projects. In recent years, Brazil has emerged as a key player in the global carbon credit market thanks to its large tracts of forested land and commitment to reducing deforestation rates.

Brazil’s potential

Brazil is home to the largest rainforest in the world, the Amazon, which covers around 60% of the country. Deforestation rates in the Amazon are a major issue with policies and their enforcement varying by the focus and philosophy of the federal government. Nonetheless, with its abundance of land Brazil has become one of the world’s leading producers of carbon credits, with the potential to generate billions of dollars in revenue. More specifically, according to the Brazilian government, the country’s forest conservation projects have the potential to generate up to $10 billion per year in carbon credit revenue.

Who buys it?

One of the main drivers of carbon credit demand in Brazil is the European Union’s emissions trading scheme, which allows European companies to offset their emissions by purchasing credits from eligible projects. Brazil’s forest conservation projects, which prevent deforestation and promote reforestation, are among the most popular types of carbon credits in the EU market. In 2020, Brazilian projects sold 27 million carbon credits to the EU, generating around $500 million in revenue. Other countries, such as China and the United States, are also emerging as significant buyers of Brazilian carbon credits.

How much?

The price of carbon credits can vary widely depending on market conditions and the type of project. Forest conservation projects, which are the most common type of carbon credit project in Brazil, typically sell for around $5 to $10 per ton of carbon dioxide equivalent. However, prices can be higher for projects that have additional benefits, such as promoting biodiversity or providing economic benefits to local communities.

Local benefits

The potential benefits of carbon credits in Brazil are many. Firstly, carbon credits provide a financial incentive for forest conservation and reforestation, which can help reduce deforestation rates and protect biodiversity. Carbon credits can also provide a source of income for local communities, who can sell their carbon credits to generate revenue.

Further, carbon credits can help Brazil meet its climate targets under the Paris Agreement. Brazil has committed to reducing greenhouse gas emissions by 37% by 2025, compared to 2005 levels, and carbon credits can play an important role in achieving this target. By generating carbon credits, Brazil can offset some of its own emissions, while also helping other countries meet their emissions targets through the purchase of credits.

Challenges

Despite the potential benefits, there are also challenges associated with carbon credits in Brazil. One major issue is the risk of fraud and double counting, which can occur when multiple parties claim the same carbon credit. Additionally, there is a risk that carbon credits can be used as a substitute for more comprehensive climate action, such as reducing fossil fuel use and promoting renewable energy.

I’d invest my own money

Overall, carbon credits have the potential to provide significant economic and environmental benefits in Brazil. Climate tech and clean tech are major investment trends and I am personally extremely bullish, meaning that I would bet my own money on it: on top of believing that I’ll generate strong financial returns I just love seeing the deployment of capital for the creation of shared value. I see more and more dedicated capital coming to the region and startups such as Mombak and Musa are inspiring examples of climate-focused startups.

What is product-market fit?

For early stage startups (pre-Seed and Seed) there is only one thing founders should obsess about: finding product-market fit (PMF). As the company gets started, it is much better to have a small group of customers (ideally acquired at a low cost) highly engaged with your product than a large audience that superficially engages. I am convinced that a company has achieved product-market fit when a relevant part of their users demonstrates to love the product so that they pay the right price, recommend it to other users and use it again. It’s important to highlight “paying the right price”, because constantly offering a product or service subsidized leads to a false positive result. It’s better not to deceive oneself and to look at the data in a cold and objective manner, practicing the right price (meaning a healthy contribution margin, ideally above 50% for software).

A clear example is iFood: back in 2017 I was the Chief Strategist when we analyzed our customer cohorts and it was evident that for every 100 customers who ordered food for the first time, 30 would keep purchasing at least once a month for the next 30 months (that was the cut for life time value (LTV) back then). This, combined with data on user and restaurant profiles in most Brazilian cities, made internal investment decisions easy: we knew the LTV of each customer and were willing to invest up to 30% of that amount to acquire new users, understanding that the untapped market was huge (back then most people were still ordering food through the phone). The internal data on customer behavior (retention and reorder rate) proved product-market fit, which combined with the external data on the size of the opportunity made it obvious for investors that the company would turn investors’ money into valuable customers who would stick around for the long-run and pay for their service. A company with clear PMF and a large, fragmented, addressable market is an amazing asset to investors as it can leverage capital to create a dominant player that at some point will generate handsome cashflows. Of course markets are smart and there are competitive pressures in industries that grow fast and with margins, so innovation, focus and execution ability are key to win. Here we know the story of intense competition with UberEats and Rappi.

The goal of a pre-Series A company is to prove PMF, so all company resources should be dedicated to it. The CEO should do all sales in the beginning, the CTO should be talking to customers frequently to understand user pain points directly, marketing should be hyper segmented to understand the messages that resonate the best with different target audiences that may best engage with the product. Raising a Series A without PMF should be interpreted as a sign of “the market is giving us a second chance to prove PMF”, and not as if the company is all set to grow doing more of the same and there’s only reason to celebrate.

Below is a dummy example of a beautiful cohort analysis showing the percentage of users who remain active since account creation, using the product with a minimum frequency to be defined as “active” (can vary from daily to monthly use). How do your cohorts compare?

Finding PMF is difficult, and only a few companies achieve it with their initial product. After pre-Seed and Seed rounds of fundraising, I have seen teams pivoting and eventually finding something that works, but the reality is: the more knowledge you have about the problem you want to solve, who your customer is, and the solution you want to offer, the greater the chances of hitting the target and starting your company off on the right foot. It’s much cheaper to test the actual size of the problem, the ideal user, and the attractiveness of your solution before raising a hefty investment round.

Leading with less: the benefits of executing with scarcity

Nobody wants to go through it, but when we’re forced to, it turns out to be for the better. The reality is that, for the venture world, most of the new generation of entrepreneurs and investors have been educated in a time of abundance, with easy access to capital.

Raising round after round within six to nine-month windows became the norm. When money is easily found, it is also easily spent. During times like these, offices became nicer, overhiring was a common practice, and there was little concern over customer acquisition costs. Incentives were used to retain customers, as we know from the large number of coupons offered by companies like Rappi and Uber. Have you heard of the term VC2C? Well, it stands for Venture Capital to Consumers, which reflects the scenario I just described.

Now, the tide has changed dramatically, and those who can adjust with speed and a positive attitude will benefit the most. If you’re starting afresh, it’s easier because you won’t have to change habits. If you’ve raised in 2019-21, it will require more effort, but it should pay off. It’s important to keep in mind that Venture Capital money only came into place in the 1960s in the US and became more popular in Latin America around 2010. Before then, companies were created out of founders’ capital and with a lot of sweat. Entrepreneurship has always been a reference to hardship, resilience, and resourcefulness. Today, I spoke with a founder who is going through this process, and in her words, “We now have the mindset we had prior to fundraising. We’re doing a lot with very little.” Now that she has a plan in place and has accepted that she will not raise any time soon, she is energized and driven to make her company happen (this was not the case when she was trying to fundraise unsuccessfully). So, let’s go to the quick list of benefits of executing with scarcity:

Resourcefulness and creativity: This means finding creative ways to stretch your budget and make the most out of every opportunity. You will have to learn how to prioritize your spending and focus on the areas that will generate the most significant return on investment. By doing so, you will develop a keen sense of resourcefulness that will serve you well throughout your business journey. My recommendation is always the same: for early-stage startups, the goal should be finding product-market fit, which stands for having growing customers who are consistently engaged and paying for a product or service.

Agility: When you don’t have the luxury of a large budget, you have to be nimble and adaptable. This means being able to pivot quickly when a product or service is not performing as expected or when the market shifts. This also means making adjustments to team size and profiles quickly. With limited capital, your decisions must be swift. This will create a culture of strong performance that, if well-managed, will retain and attract those who are willing to fight with you over the long run. Of course, always communicate candidly and warmly.

Focus: Running a startup with little capital can help you maintain focus on what is truly important. When you have limited resources, you must prioritize what is essential to the success of your business. This means focusing on your core business model and avoiding distractions that can lead you astray. Priorities should be discussed on a weekly basis with the leadership team and on a monthly basis with the company at large. I recommend following the funnel model: start with the purpose of the organization, go to values, dive into goals, and then highlight the priorities needed to achieve these goals. People need to be reminded again and again why they’re there, what they’re trying to accomplish, and how to do it.

Let’s end with an old and reassuring note:

“A smooth sea never made a skilled sailor.”

Franklyn Roosevelt

5 thoughts on how to go about fundraising and valuation these days

These are tough times. The collapse of SVB reflects the hype that took over the venture world in the past three years. I won’t discuss what brought us here because it has been well discussed, and it is mostly a consequence of the tragic pandemic that hit us all in 2020. It is also very difficult to forecast the future and put a timeline on when this winter will pass, or if there will be an even stronger winter around the corner, perhaps a nuclear winter? I am an optimist by nature and want to believe that global inflation will be under control within the next 6-9 months, lowering interest rates and increasing risk appetites for public equities first, which should then flow into the venture world in the next 12-18 months. But, of course, I can be completely wrong.

For startup founders who will be running out of capital in the next 6-12 months, the relevant question is “when should I go to market, and how should I think about valuations?” Here are my five thoughts:

  1. Extend your runway as much as possible. Work hard to transform 9 months of runway at current cash burn into 15 months. Do it by focusing obsessively on proving product-market fit (PMF). Growth alone won’t do it; it has to be sticky, and the unit economics need to make sense now (or with an obvious scalability lever that will be reached soon and that is easy to be believed by investors). If you have conviction that you’re on the path to product-market fit, ignore distractions such as new product development, events, travel, etc. Trim areas and functions that are not relevant for proving product-market fit, even if they may be relevant in the future. Now it’s time to focus heavily on doing one single thing well, so having less pressure on the funding side by extending your runway will payback handsomely if done well.
  2. Cultivate investors’ relationships. Investing in early-stage startups is an exercise in futurology. Simplistically speaking, investors need to believe in the problem you’re trying to solve (the easiest part as you’re solving a pain that exists today), in the solution you’re building for this problem (more difficult as likely your product is not mature enough yet), and that there will be a large enough market for it (the most difficult as this is long-run, and many factors can influence your growth and future market share). Getting to believe that these three pieces will come together takes time, and good founders invest in educating investors that seem interested in learning more. Investors also need to develop a sense of trust in the founding team, which does not happen overnight. Your credentials and background checks will help, but nothing substitutes a relationship built over several interactions. I always recommend that entrepreneurs use investors as mentors prior to fundraising: when you meet with investors, don’t only pitch but use your meeting to ask smart, specific questions that that particular investor will be able to provide perspective on.
  3. The best time to go to market is now. The best way to get a sense of how difficult it will be to raise capital is to actually be open to accepting term sheets. Many founders are delusional in their ability to raise, especially if they first raised in the boom years of 2020-21, and believe that with them it will be different. In these cases, I encourage founders to softly communicate to select investors that they would be OK to raise a bit more. The market will quickly let you know if your pitch and business is investment-grade or not. Of course, be prepared and show your best – you don’t need to have a data room ready or a super updated pitch deck, but the narrative needs to be compelling and the numbers must be in place. Once the feedback has been received, please be open and egoless about interpreting the messages as many funds will not be 100% transparent because they have no incentive to do so. It’s only by being realistic about your ability to sustain your company in the long-run that you will be able to make the necessary adjustments on time.
  4. Expect a flat or down round. Publicly listed tech companies that had their IPO in 2020 have lost ~60% of value. Why should your company that is probably further to finding product-market fit and has a lot more risk be valued more than what it was marked at the peak of the market? Be ready to accept more dilution and maximize your ability to create long-term value. I guarantee that for companies that have found PMF and are on the path to generating cashflows, the way your cap table was impacted during the current crisis won’t be a problem. I have seen stock options being refreshed multiple times, but it only happens when investors are bullish that the company is on the right path to value creation (which is not short term valuations, it’s about generating future cashflows consistently).
  5. Overcommunicate with your teams. The importance of culture is shown and perceived in tough times. The challenges and the problem solving that the company is going through should be shared with at least your leadership team on a consistent basis. I actually believe it’s positive to share it with the whole organization, making everybody feel part of the same boat and bonding people as a real community. People don’t like to be surprised and you, as a leader, should avoid gossips and create an environment of transparent and objective communication. Now, more than ever, it’s time to put the company values in practice and to practice storytelling every week: where you’re coming from, where you’re right now, where you’re heading to, and how to get there.

Overall, I am optimistic about the future of the Latin American tech ecosystem. I joined it 10 years ago and it has dramatically matured, expanded and proven itself during this time. We’re going through a global economic cycle that will end at some point, so let’s be quick and effective in the short-term, making the hard decisions now to celebrate in the future.

Get out of your comfort zone before you get kicked out of it!

It’s a fact, our primitive brain seeks stability, predictability, and minimal energy expenditure to keep it safe, nourished, and alive. Interestingly, this same organ sometimes gives a nudge and provokes us to leave the place, to unveil the unknown, to question this much sought after stability and — oops! — including risking it in pursuit of something greater. The human mind is indeed confused, and luckily there is philosophy, therapy, meditation, running, surfing, beer, wine and friendly shoulders to alleviate our permanent conflicts. Even so, one cannot ignore the fact that whether or not the desired stability is increasingly far from the vast majority of mortals, especially us here in this Tupiniquim land in this year of 2015.

In the corporate world, hierarchical layers are being cut from all sides, accumulation of responsibilities, increasingly distant goals and the growing insecurity that your chair can rotate. In the creative and entrepreneurial universe, professionals of all ages seek to launch the next blockbuster application, create the new and most efficient productivity tool and find the long-awaited autonomy and financial independence — attitudes that we personally admire, but inserted in a context with demand exponential investment and limited capital availability. On the educational agenda, there are criticisms and provocations of changes communicated daily, coming from researchers, specialists and, notably, from civil society itself. In the vast majority, they are initiatives that aspire to take us to a scenario closer to true learning, which is very good. Even so, it only reinforces the feeling that the world and the way we live is being disrupted, having its structures dramatically shaken. Even the dreamed world of public tenders, the emblem of the search for stability and with more and more aspirants, samba to unpredictable rhythms masterfully led by tight public accounts and macroeconomic instability.

Thus, the question arises: what can be done to better navigate this galaxy of uncertainties and ambiguities? How not to despair with the expectation that we can, at any moment, be kicked far from our comfort zone?

The proactive path is to deliberately leave that comfort zone, consciously deciding and against the will of that primitive brain to provoke and challenge it. Over time, these exercises result in stronger, more defined muscles, and a body and mind ready to fight and even have fun when that kick comes. After all, a kick hurts much less in an athlete’s body, muscular and well trained, than in a skinny and sedentary body.

But, and how to take the first step out of the bubble that constitutes our routine? We risk here some logical ideas and concrete actions, which have been tested and proven in our past experiences, as managers or coaches.

1. Recognize where you are today: What industry, role, and geography do you find yourself in? What is your career progression to date and the prospect of growth in your current job? In what areas, competitors and industries do you see yourself adding value and delivering impact — or in other words, what skills from your current job can you easily apply in other contexts? Before starting any challenging sport, it is important to have a medical evaluation in order to diagnose your current physical condition and design a healthy and robust training plan. With your career, it works the same way: an honest and concrete diagnosis, based on facts of where you are today is a fundamental step to guarantee the solidity of your future roadmap.

2. Making an analogy to the financial investment strategy, diversify your portfolio of professional skills: an investor reduces his risk by investing in a varied portfolio of companies (read geography and sector). So, when one goes wrong, there’s probably another one to balance the equation. Why not do the same with your skills? It is important to know how to navigate and communicate with different functional areas (marketing, finance, operations, HR), to develop skills that allow you to easily be relocated to other areas and geographies and feel ready to quickly make things happen beyond your own bubble.

3. Challenge yourself in your spare time: But life is not just work and everything we do outside of it impacts our perception of it. The people we interact with and the activities that occupy our time away from the office influence how we see ourselves as individuals and professionals. Thus, it is worth reflecting on how we spend, or invest, our spare time: (1) sleeping, (2) in front of the TV, (3) exploring a book, a new concept, and provoking the mind to learn something different, (4 ) playing or experiencing a physically challenging sport, (5) traveling and exploring unknown territories that challenge our perception of how the world works and what is right and wrong? The list is long, and the important thing is to mix rest and challenges, aware that the brain is plastic and, if we do our part, new synapses will continue to happen.

4. Discover and explore personal passions (which may eventually turn into professional ones): It’s not easy to know what our true passions are. It is not an intellectual, rational process; on the contrary, it is something organic, practical, that happens as we explore and experience possibilities. Example: I (Alex) only discovered that running was a passion after 3 months of continuous practice 3 times a week. Once the first phase of euphoria, fatigue and adaptation had been overcome, I could see after 3 months how much my life had improved due to the exercise. Likewise, release curiosity and explore new sources of energy: crafts, volunteering, extreme sports, nature walks,
conscious eating, meditation, music, independent travel through inhospitable and little-explored places. Dedicate time and energy to exploring dormant interests and needs, opening up new avenues of possibility.

5. Experience transition possibilities and greater learning: Taking a broader step, why not invest in more radical transformations, such as preparing for a change in sector or even country? Here, the investment of time, energy and money is much greater, and therefore decisions must be weighed according to your financial and family situation. We are talking about Masters, MBAs or PhDs abroad, in top schools, which can open up previously unimaginable personal and professional possibilities. Without having to go that far and with a much more modest investment, professionals interested in changing the world through social entrepreneurship have the possibility of learning in practice by engaging with institutions that propose innovative learning models. Why not look for solutions to social challenges and problems without making radical career changes, experimenting and learning little by little? Graduate programs with this purpose, for example, can function as a career transition platform and a bridge to a world with potentially different and revealing people, values and definitions of success.

By recognizing that your professional value is not just limited to a position in sector X at company Y, possibilities increase, as well as your (emotional) dependence on what is written on your badge decreases. Many of the professionals who seek the services of a career coach only see a linear evolution for their careers. For example, a finance analyst in the consumer goods industry can see only one evolution to a management in the same area and sector. The secret lies in the intersection of skills, experiences, passions and talents, and when people can connect these dots, they unlock a universe of possibilities.

Finally, everything that challenges us and forces us to rethink the world and our role in it results in strengthening our ability to reinvent ourselves in times of crisis and face unexpected situations. It results in greater resilience, self-knowledge and self-leadership, fundamental elements of professionals who bring a positive impact to the world and, not least, live an integrated personal and professional life, full of meaning and happiness.

Article originally written by Alex Anton and Rajesh Rani, published in Harvard Business Review Brasil in June 2015.

Want to make a difference? Don’t be afraid of losing your job

Economic crisis. Instability. Insecurity. Fear.

These are just some of the key words we’ve heard (and felt) in recent times. Naturally, being exposed to all of this reflects the fear of losing your job. It’s a natural fear. However, science knows that fear blocks risk, and in times of crisis perhaps what you most need to do is take risks: by being brutally honest with others and yourself about past decisions and their impact on the present and future; testing new ways to sell, relate or perform everyday tasks; and saying no to what is pleasurable but irrelevant.

The unemployment rate in Brazil stood at 11.2% in the quarter ended in May this year, the highest result in the historical series started in March 2012, according to the National Household Sample Survey (Pnad). Naturally, the fear of Brazilians of losing their jobs accompanies the numbers. In December 2015, this fear had grown by 36.8% compared to 2014, according to a survey by CNI (National Confederation of Industry). The phenomenon is not exclusive to Brazil. A survey published in January 2016 and conducted by the agency ICM Unlimited with 9,000 workers (16 to 25 years old) from countries such as Australia, South Africa, the United States, Brazil and also from Europe shows that 50% of these young people believe that their training it did not prepare them for the job market, which is reflected in the fear of stopping on the street.

Eager to explore this theme, we conducted a study on success, fears and values with approximately 200 people, mostly between 25 and 35 years old from the Southeast region of Brazil between June and July of this year. Among other concerns such as health and family problems, 46% of respondents associated their greatest fears with their professional life. In response to the question “What are you most afraid of?”, 25% associated it with stagnation and professional failure, 16% with instability or financial failure, and 5% directly mentioned unemployment. In contrast, 42% of respondents demonstrated a negative degree of career satisfaction (on a scale of 1 to 6, up to 3 points). Of this portion of dissatisfied people, 26% linked their fears to professional failure, 18% to financial issues and 4% to being unemployed. This same group of people stated that, if they were not afraid, they would take more risks such as traveling or leaving the country (32%), would change careers or open their own business (28%) and would hesitate less in their decisions and actions in general ( 22%). Basically, those most dissatisfied with their careers are the same ones who are most afraid of losing the career they don’t like. Curious, isn’t it?

Fear is part of the human essence and guarantees our survival in risky situations. It allows you to analyze scenarios and assess consequences, but it must be managed consciously. Practicing self-awareness and understanding our real fears is the starting point for identifying situations in which fear inhibits our actions at times when we should be guided by caution — fear is a primitive and often irrational response, while caution is rational and logical . By focusing our perceptions and energy on what we don’t want, we end up running away from our real essence and our dreams and enter a vicious cycle of failures.

It’s easy to criticize. But the fear of success is a problem that affects many people. In a study published in February of this year in the journal Frontiers in Psychology, Neureiter and Traut-Mattausch address the Impostor Syndrome, defined as the state of perceived intellectual and professional disability, despite evidence to the contrary. This condition affects approximately 70% of people at some point in their lives and is related to fear of failure and fear of success, as well as low self-esteem. The study points out that these feelings are proven to reduce career planning, ambition and motivation to lead.

Although a biological process, fear is not an insurmountable phenomenon. Our brain is in continuous evolution due to the experiences we live and, therefore, it is possible to reconfigure it (cerebral neuroplasticity phenomenon). This requires knowing your strengths and using them to gain self-confidence as your exposure to what you fear grows. The greater the exposure to conflicting and challenging situations, the easier it will be to face and overcome anxieties. The psychological foundation is in exposure therapy: exposing yourself gradually and repeatedly and, with a rational perspective, getting out of mental exercises like “oh if I had…” and actually living new experiences in a practical and visceral way. Afraid to fail? To change? From stepping out of the comfort zone? Not taking initiatives and defending yourself with shallow arguments is always the easiest way. However, if you don’t risk it, you certainly won’t know your limits and you won’t experience transformative experiences. Staying conformed and choosing to remain in “standby” will only make you stop embracing new opportunities and watch time pass without any initiative. Is this really your profile and how do you expect to trace your trajectory?

To answer this question, we suggest a simple and useful diagnostic exercise. Answer the questions: In the past year, how many times did I:

(1) Did I accept a wrong answer or poor work from my team and stay quiet so as not to “create a fuss”?

(2) Did I fail to give honest feedback to my boss and colleagues because I feared their reactions?

(3) Did I not position myself firmly and convincingly in a debate in which I dominated the subject in order to save energy and not confront?

(4) Was I not interested and determined to embrace a new project in the company for fear of failing and not delivering?

Difficult and uncertain times are great opportunities to review where we are coming from, where (in fact) we are and where we want to go. Of course, it’s not easy and help from colleagues and professional coaches can be welcome.

People who make a difference are dreamers and visionaries, but above all, courageous. Tracing a unique and non-linear trajectory in which we reach our maximum potential implies taking risks and escaping mediocrity. Don’t reduce your dreams out of fear. The failure of extremely daring goals is even more enriching than the success of mediocre dreams. Mistakes and failures are part of the learning process and a successful career. Change your mindset, have positive attitudes, work hard and take risks.

What gets me excited in a startup pitch

I have now seen nearly 1,000 startup pitches, and unfortunately only a few of them are memorable. To get me fully present, the entrepreneur needs to catch me in the first 5-minutes.

I need to sense the excitement, presence and cohesiveness between what that entrepreneur is building and her personal narrative. That’s what gets me curious to learn more, to ask provoking questions and to mentor that founder and team in their next steps.

Nonetheless, as a professional investor, I need to work with a clear framework to analyze early stage startups to maintain consistency and avoid, as much as possible, biases that impact my judgement (i.e. affinity with the founder story). This framework, or scorecard, is structured to allow me to collect the relevant data points and criteria to later discuss the startup with my investment team and to help me build enough conviction to make decisions faster, either to advance it or to drop the deal.

Note: In this post I am focusing on early stage startups because when I analyze later stage companies (series B+) the data should tell the story better than the entrepreneurs, and the relevance of the initial narrative is diminished in comparison.

So here we go with the framework. After listening to the entrepreneurs introduction, which I expect to be brief but full of life, I need to be able to quickly put on paper what the company does: the problem it is solving, who it is solving for and how is that specific market. This comes in text format in the Description, as seen below.

Also relevant to my analysis of the model is to understand whether that startup is inspired by an international successful company. This is important for what I will do after the first interaction, which is to enrich my analysis by double-checking all the critical data-points that were sold to me during the pitch (i.e. market size, why benchmark model was successful elsewhere, etc). This comes into Model/ International benchmarks.

Round/ Fundraising allows me to detail what’s the company funding history and what the entrepreneur is looking for in this round. I have always tried to be honest and upfront with founders if I find that their funding expectations are unrealistic, but in reality most founders are stubborn by nature and need to go to market and test waters before adjusting round size and price. I also always highlight that the price is set by the market, and is determined by how much investors are willing to pay. On the other hand, it’s important to be careful and to not burn bridges. Investors will find strange if you show up today asking for a $3M seed round at $15M pre-money in your pre-operational startup, and next month decide to raise “only” $1M at $8M post-money as you want to “close the fundraising process to get back to operations”. Listening to an independent advisor can be helpful as most investors won’t be as honest and direct as I typically am.

Then we move to mostly qualitative criteria that reflect the strength of the (1) Team, (2) Market, (3) Model and (4) Deal attractiveness.

1. Team: As most investors will agree with me, the Team is always the most critical element. We are investing for the long-run, a lot will happen until then and we expect teams to reinvent themselves, their teams and their businesses multiple times. As noticed below, a complete management team with a solid CTO is much preferred than a one-man show. Credentials will serve as a reference of an entrepreneur’s ambition, work ethic and IQ. The ability to pitch well and charm the investor is also extremely important as the entrepreneur will likely have to raise multiple rounds in the future. Having the skill to sell the entrepreneur’s story and dreams in an objective yet passionate fashion will highly impact the speed and terms of future rounds (is that founder good at creating FOMO among investors?).

2. Market: You may have heard “An amazing team in a shitty market? Market wins“. This is true, unless founders pivot to a completely different model with plenty of cash available, but this is not what investors are betting at when they make an investment decision. The market size — to be clear, not the larger addressable market, but the specific market for the specific problem you’re trying to solve — matters a lot as investors need to predict how big can that company be in the next 5–10 years. Specifically, I will look into market size, homogeneity of the solution (highly scalable or needs customization to each customer?), maturity of the model, defensibility (what is defensible about the model for this particular team? what assets are hard to copy?) and competition.

3. Model: Double-clicking on the model, I will look into monetization, unit economics and need of additional capital. In today’s world investors are shying away from models that are capital intensive and that need scale to bloom. A great read that illustrates the importance of working with a model that resonates with the current economic and funding environment is Neta’s post-mortem. What I will have to understand is how this business gets easier to run and more capital efficient at scale.

4. Deal: Lastly, I will judge how attractive are the deal terms of that particular pitch: is the valuation reasonable, given what we are seeing the market, or is it crazy? Investors need to be realistic about how that company could exit the portfolio 7–10 years down the road. In general, I need to believe that I will have at least a 10X return on that early stage investment, and I have a good sense of how much most VC-backed companies are sold for at exit point (and it is not anything close to what we’ve seen with the likes of Nubank).

Sample, sanitized Framework

All these points should allow me to highlight Key Reasons to Invest and Key Risks, which should give me the conviction to (a) drop it, (b) introduce it to more people in the team to enrich my initial analysis or (c) push it forward to investment committee. By the end of the day, I am asking myself “would I invest my own money?“. If I am advancing, the answer should always be a clear YES. Asking myself this question allows me to also feel in my guts how much I like that team, company and deal, complementing my intellectual analysis with my gut instinct. In fact, I have co-invested as an angel with GFC in more than 10 companies. If I believe in my work, I should put my money where my mouth is, right?

My personal narrative, the longer format

Backpacking in Vang Vieng, Laos, 2008

This writing is an exercize in connecting the dots, which we should all do from time to time. It’s a journey through memory lane as well as a recollection of moments registered through journalling, which I have been practicing for more than 20 years (everybody should do it too, it’s like doing therapy for free).

As a Brazilian, being born in a working-class family basically means that you are fated to have your life pre-designed. Typically, you follow the steps of your parents, beginning with standard education, heavy pressure to get into a public university, some odd jobs to raise all the pocket money possible and, after graduation, facing the usual battle to get the first job. Once you have made it, you are supposed to consider yourself happy, get married, and enjoy life playing soccer and drinking beer with your best friends. That was all, my mom had thought, until early 2003 when I took the initiative to apply for a traineeship program in Potsdam, Germany. Enthusiastically and doubtful, I put all my efforts into that application. Two months had passed, and the German-stamped envelope finally arrived; it was a “yes”, and that was the beginning of a series of events that led me to found HIKE today.

Following that amazingly surprising outcome, many beer cans were opened, numerous cheers celebrated, smiles, good laughing, and some tears at my hometown’s airport. Suddenly I was hit with different feelings, assorted faces, and an odd language; I had arrived in Berlin. Back then I hardly spoke any English, and my German was non-existent. Now I realize how pretentious I was in expecting that a place would be exactly as my mind had projected. From Berlin’s airport to Potsdam’s train station, I realized that some feelings are simply so profound that they belong only to the ones who’ve been through them, and alone, during those 65 minutes, I experienced scents, temperatures and emotions that would seem silly if written here. They were mine, and if translated into one word, that would be “discovery”.

Since then, my journey has been illustrated with significant independent-driven discoveries. It hasn’t always been easy or romantic, but by walking off the beaten path I could experiment things that otherwise would never have come across my way. Essentially, in my past 20 years I have witnessed that it’s out of your comfort zone that you truly become aware of your inner soul, beliefs, fears, dreams, passions, prejudices, and everything related to self-awareness. I have been fortunate to allow myself the freedom to explore the beauty of self-awareness; consequently, I have realized that I want to drive my existence towards something meaningful and tangible.

I have always been curious and passionate about designing products and services that have the power to add real value to people’s lives by offering solutions to their physiological and psychological needs. Consequently, today I am glad to introduce myself professionally as a scientist, turned entrepreneur, investor, coach, mentor; above all, I am and have always been a strong people-person. As you can see through my Linkedin, I have been fortunate to work with world class people and companies, having excelled on the startup and scale up world, where I deeply connect with the culture of pragmatism, dynamism and purpose-driven leadership. Despite all the good-looking brands on my CV, these are external metrics; on the other hand, the experiences I had through all the amazing people I’ve met are all internal and there’s no dollar sign I can put on them. I feel grateful and privileged for the journey so far.

Through the Jungfrau mountains in Switzerland, 2009

I learned that I thrive when working with people who are curious, open-minded and ambitious on their own terms; through authentic conversations, I feel the power and joy of inspiring and getting others to reach their potential. This is my calling and what I want to deploy, develop and grow at HIKE.

I am always driven to walk the talk, and I love talking to strangers. I am not afraid of initiating new ventures and am passionate about entering new territories. Through my own initiative, I have lived and worked in Germany, UK, Canada, Switzerland, USA, China, and Malaysia. I truly embrace diversity and I like to think I was born to be a citizen of the world. As a good citizen, I have independently — and with very limited resources — explored more than 60 countries. I am also a father of two, a marathon runner, surfer, and a lover of the world and all its nuances.

With the iconic Jack Welch, in Harvard Business School, 2012

I truly believe that authentic leadership — learned through intense and multiple experiences driven by your own initiative and with the support of strong communities — is the key to making this world a more tolerant, accessible, real, and possible place. I work to empower and cultivate more of such leaders.

Mindfulness for leadership, focus and creativity

According to Wikipedia, mindfulness, translates as full attention, alert mind or full awareness. If we are strict about the origin of the word, mindfulness means the essence of the Vipassana measurement stream. Whereas other types of Buddhist measurement aim to empty the mind of any conscious reasoning or direct attention to a single image or idea, Vipassana practitioners seek to uncritically gain awareness of all thoughts and emotions experienced in the moment.

Attention: this rich and delicate philosophy cannot be explained in detail in just a few lines. The objective here is just to expose the concept to those who are interested in the subject or have heard about it but do not know what mindfulness means in practice. Personally, I believe that the frequent practice of Vipassana meditation can bring more focus, calm and energy to the mind and body. Specifically, Vipassana followers believe that our minds are constantly busy re-processing the past or anticipating the future, allowing little time and energy to truly live in the present. Theory comes to practice through simple exercises that can be practiced by anyone, anywhere. The principle is to focus on the breath, for example, and indirectly increase awareness of what goes through the mind, always in a non-critical and detached way.

Although a monastic life dedicated exclusively to the contemplation of the moment is light years away from the world most of us live in – that is to say the rush, the hustle, the emails, the pressure (external and internal) – there is a growing interest in how the principles of this practice can be applied to our lives in a pragmatic and realistic way. American psychologist and professor Ellen Langer has been studying mindfulness for a number of years, and her main theory is that practice plays an important role in the learning process. For her, meditating often increases her ability to see the world through constantly new angles. New angles, of course, require curiosity and commitment, as well as letting go of past concepts.

Letting go of old ideas, she warns, is especially difficult because possibly these “ideas” are already part of our DNA and we are not aware of them. With greater awareness of what we know and what we don’t know, we become more open and creative to new solutions.

Meditation & Leadership

In March of 2013, an important American newspaper dedicated a page to this topic: what is the interface between mindfulness and leadership? Who responded was Bill George, professor at Harvard Business School, former CEO of a billion-dollar company, and strong advocate of a productive, creative and authentic lifestyle. Bill argues that the subject is so much in evidence that at the last World Economic Forum in Davos the most attended lecture was given by the Buddhist monk Matthieu Ricard. The latter, French and scientist with a doctorate in the West, is a scientific adviser to the Dalai Lama and author of the book Art of Meditating.

What is causing this dramatic shift in the way we think about what it takes to be an effective leader today? Well, it starts with the changes taking place in the world. We live in an era where globalization and advancing technological change create volatility, uncertainty, chaos and ambiguity. This impact grows exponentially through a job market in constant transformation and the new world where communication is present 24 hours a day. Seven days a week.

See how interesting: companies like Google, General Mills, Genentech, Target and Cargill, for example, have developed training programs for their employees focusing on mindfulness and leadership. The expected (and achieved) benefits are summarized in more creative, focused and determined managers. The correct word is resilience, but other adjectives help color the impact of meditation practice.

Following Professor George, practicing meditation for 20 minutes a day (I practice 10 and I believe it already has an effect) is essential to increase your effectiveness and sense of well-being. He has been doing it since 1975, and the result can be measured through his resume.

“Meditation allows me to forget about unimportant things and focus clearly on the important matters. My most creative ideas come from meditation. Also, meditation improves my energy level and allows me to have more compassion for others”, says Bill.

You see, it’s not just sitting down for 10-20 minutes a day, every day, that brings you the benefit of mindfulness. Praying regularly, keeping a journal, interesting and intimate discussions with people close to you, and solitary exercises such as running, walking, or swimming make us live in the present. The most important thing is to have a form of introspective practice that allows you to calm your mind and focus on what really matters.

Advancing towards the “what can I do?”, is the suggestion, scientifically proven, to practice meditation for 10 minutes daily. The important thing is to have discipline and follow the plan regardless of the context. Establish your routine as you see fit. Personally, it works well in the morning, after showering and before breakfast. Having a dedicated chair or cushion for practice also helps. And for beginners, guided meditation is an excellent tool to help “tame” the mind.

Article originally written in December 2013