Your first investors are in your community

Visualise the triumphant story that has been told to you: a startup raising venture capital to finance its project. However, “this only happens in 1% of cases. 9% of ideas receive some form of external investment. And the remaining 90% never receive it: they self-finance or fail.” These are the words of Adriana Tortajada, guest at our first TalkX of the year and CEO and managing partner of venture capital firm Twelve Hundred VC (1200vc). “Those of us who get through the day-to-day and survive are the ones who should be heroes, not the anomaly,” she adds.

Let’s talk about funding (and its stages)

Adriana, one of the biggest drivers of the Mexican entrepreneurial ecosystem, knows very well what she is talking about and speaks with contagious enthusiasm. It was easy to follow her as she explained the different types of funding. “Each one is designed to correspond to the specific stages of a project,” she said. They are as follows:

1. Self-financing (bootstrapping).
2. Friends, Family, and Fans (traditionally called Friends, Family and Fools, but Adriana prefers the term ‘Fan’, which is much kinder).
3. Institutional support.
4. Angel investors (business angels).
5. Accelerators/Incubators.
6.  Venture capital.

What’s the most common scenario? Seeking funding becomes a priority from the beginning, and that’s a mistake. “Be patient. There are stages, and it’s important not to burn through your contacts too early. Trust the process, there is time for everything,” emphasised Patricia Araque, Executive Director of Santander X Explorer and host of the TalkX. It was during her insightful conversation with Adriana that she highlighted bootstrapping as the formula projects entering the programme should explore, as most are at very early stages.

What you should never say to a potential investor

“I never trust people who say, ‘If I had the money, I’d have done this by now’,” says the CEO of Twelve Hundred VC. “I focus more on whether there’s already initial validation with a basic MVP, that’s the first thing that needs to be done,” she adds. So, we must ensure that the need we are addressing exists.

In fact, even if you’ve already passed that stage, it’s important to remember that “raising funding doesn’t have to be synonymous with success. You need to differentiate between an ‘investable’ project and a viable project: not all profitable ideas are attractive for investment,” Adriana comments. Why? There may be a lack of scalability, for example. But if you’re willing to pivot, you’ll find a solution.

Community: look for your own fans

Before reaching that stage, there are many others: one of the initial investments is in your community. With crowdfunding, for example, you not only gain resources but also “the validation of your idea within a community. The one generated in Santander X Explorer is the first one where you will do this.” Within it, you can “look for your own fans. Find allies; sometimes investment consists of intangible things,” but equally valuable, as Adriana and Patricia remind us. “Ideas are nurtured by the community they surround themselves with,” adds the Mexican.

However, sometimes it’s hard to trust that close group; often, Explorers ask whether it’s dangerous to share their projects: there is fear they will be stolen. In this TalkX, the doubt came up again in the chat on our Twitch channel. Adriana reassured the audience: “You never invest in ideas, as they are nothing without execution. If you’re the person who is going to execute that project best, no one will steal it from you because, quite simply, no one else will develop it like you,” she told us.

Moral? “At early stages, it’s worth trusting and collaborating. Financial resources can be replaced by working with other people for the common good,” said Patricia before announcing the giveaway of her new book, ‘Emprender con calma’.

The TalkX gave way to the private session, where selected Explorers could ask Adriana and Patricia their questions. Want the opportunity to do the same? Pre-register for Santander X Explorer and we’ll let you know when the new call opens: we’re waiting for your idea!