Something's happening in the Lisbon startup scene!

What a week it's been for Lisbon entrepreneurs and startups!

I've just left the Silicon Valley Comes to Lisbon (SVC2Lx) event, and unfortunately that's the only event that I was able to attend this week, but it was only one of the events that took place this week that was oriented towards promoting entrepreneurship and innovation, in the context of the Global Entrepreneurship Week. There was Seedcamp Lisbon, there was SAPO CodeBits, and there were the award ceremonies for the two main innovation competitions in Portugal - BES Inovação and EDP Inovação. For a great overview of what these events are all about, please go and read the latest blog post from my good friend Ricardo Diz.

But the key takeaway here, is something really is happening in the Lisbon startup scene! There is a buzz that didn't exist as such even a couple of years ago. There are impressive ideas coming to life, there are enthusiastic entrepreneurs putting their minds and their hearts into their new companies, there are great incubators doing an excellent job (Startup Lisboa is an excellent example) and there are international, experienced investors becoming curious about what's going on here. In fact, a recent European Commission report, the Regional Innovation Scoreboard 2012, shows the Lisbon region rising to be an "Innovation Leader", the highest performance group of the report which includes regions such as Paris, London, Copenhagen, Stockholm, Finland and most of Germany (see map below).

This study (full report can be found here) classifies European regions according to their ability to spawn quality innovation through variables such as higher education, R&D spending, innovative SMEs, collaboration between SMEs, knowledge-intensive employment and patents. While it is a subset of the variables used in the broader Innovation Union Scoreboard (which does the same classification at a country level and therefore with broader availability of data), it remains a good indicator as to the relative positions and the trends of the different regions. Each "Innovation Leader" region shows different flavours of these variables; the Portuguese Lisbon area shows a good balance of the key indicators used and shows a positive trend, having evolved from being an "Innovation Follower" in the 2009 version of this study.

Source: European Commission - Regional Innovation Scoreboard 2012

This is something that I've been having the privilege to witness regularly in my work: as venture capitalists, we look at literally many hundreds of young companies, yearly, in our global deal flow - which is industry jargon for the pipeline of investment opportunities. Now, there are not many Venture Capital investors active around here, and so I can confidently, and humbly, say that we look at the large majority of the young Portuguese startups that are looking for funding and support for growing their businesses. What we're seeing is a systematic growth in the number of these Portuguese companies. In fact, that number has multiplied practically seven-fold since 2008. That's something in itself, but what's even more remarkable is that the quality of the best opportunities and the preparedness of the entrepreneurs has been also increasing, and so it is not just an effect of many non-interesting companies being created at the bottom of the pile, just because it's cool now to be an entrepreneur. It's both a growth in numbers and a consistent evolution in terms of quality. And that is something!

Moreover, this transformation is happening, in my view (and some will hate me for saying that), not because of new policies that our government is implementing, but in spite of the lack thereof, at least until recently. Indeed, only very recently have there been important initiatives to make an entrepreneur's life a little easier (the very recent Passaporte para o Empreendedorismo, and the general +e+i Programa Estratégico para o Empreendedorismo e a Inovação are two examples), but they are mostly tactical to some extent. We're still lacking the more structural reforms that can transform the ecosystem, such as policies to attract and retain talent, or initiatives to create a real venture capital industry. I sincerely hope that the recent reform of the government venture capital does not miss a terrific opportunity to do the latter!

So, what's going on? Why is this happening? I don't have a categoric answer, and I think no-one really knows - it's still soon to draw conclusions and empirical evidence is still scarce - but a number of factors may be coming into play.

Portugal has not had a (recent) culture of entrepreneurship. Fear of failure has loomed for long, jobs for life and corporate careers have long been the standard. That is changing. The current economic downturn may have something to do with it, as more and more people see the need to create their own jobs. There is also some sort of a societal push: it has become clear that innovation and entrepreneurship are a critical requirement for economic development, in creating qualified jobs and exports, so both private and public entities have started promoting this type of activity, rewarding innovation, fostering a debate about the subject. And the social media had obviously picked it up - it's rare to find a business or a technical newspaper today that doesn't mention the words "entrepreneur" or "innovation". There's a whole hype around it, and being an entrepreneur has become really cool!

One thing Portugal has had also for long is a strong technical knowledge base. The country has excellent engineering and science schools, some of which are of the oldest European universities. However, the universities and their students have had their backs turned to the business world. The best would do research and stay for ever in academia, the more restless would go do R&D in large multinationals (most often located abroad), most of everyone else would look for a good stable corporate job. Now, as the mentality begins to shift, restlessness grows among the ranks of students, and that strong technical background is extremely valuable, and it's being put to good use.

Finally, we have historically lacked strong management skills. That too is beginning to shift. Many Portuguese students, from diverse backgrounds, attend some of the best international business schools every year and return to their home country. The Portuguese business schools have significantly raised in international recognition. Professionals who were on the first waves of that have now gathered a significant practical management experience working for large corporations. The great management schools that the big consulting firms are have now collected a large army of alumni. All that knowledge and experience is now starting to be put to good use at some of the best start ups.

This is just the beginning, and a lot needs to be done. Namely, the financing side of it still needs to be greatly developed. Among other things, we need a much more active and well financed VC industry to make whole the ecosystem. Hopefully, this buzz that is growing in Lisbon will be able to attract some international investors, who will like to co-invest along local partners that they trust, and events such as SVC2Lx are an excellent showcase for that.

On their part, the entrepreneurs will need to show a great level of resilience and resourcefulness to thrive in this nascent environment. This is a wave, potentially a large wave, and many of these promising young companies will fail. Since they are mostly all on the same first wave, that can be a harsh thing to witness, but that's just the nature of the business and it's no reason to give up. As more waves are created, waves will turn into a constant flow of exciting companies, of which some succeed to become large, successful global companies, and some don't - and that hopefully becomes a normal thing for everyone, failures become just as important as successes in an entrepreneur's life experience, and innovative companies become a driver for our economy. Something's happening in Lisbon... Surf's up! Let's keep paddling!

Thanks for reading.

US – going greener or browner?

Okay, so I've been away from this blog for a long time, and I'm yet to finish the "what I like about Venture Capital" series. But this one is just really timely, and I'd either do it today or not do it at all!

I've just been reading a piece from Scientific American in which they asked the two US presidential candidates where they stood on topics such as Innovation and Entrepreneurship, Scientific education and R&D, Energy, Water and other environmental concerns. And the candidates answered. Or at least their staff did. Interesting reading – find it here.

Now, to some extent, it's what you might expect from two campaigning candidates. The answers from the President in office tend to be shorter and in praise of the accomplishments of the current term, and how those good deeds will be continued and strengthened in the next one. The replies from the defying candidate tend to be longer and more elaborate, as they first have to deal with how bad the current policies have been, and then describe what the new presidency would, or will, do differently. And frankly, to the vast majority of us used to more diverse and sometimes extreme multipartidarism, it's not always easy to discern very dissenting points of view between the two.

A good example is their answer to a topic as important as the role of innovation and entrepreneurship. Both candidates agree that it plays a critical role in economic development, which is not surprising in a country that has historically spawned so many large and successful companies from their founders' garages; Romney's side does give a more articulate description of measures that would contribute to making the US regaining its edge – some of which are good practices that some countries could learn from, and some actually have, such as fostering the immigration of talent. I don't know enough about the candidates' programmes to state that Obama's does not contain equivalently important measures, but the fact is that his answer is not as rich as his competitor's.

However, there is one aspect, or one set of aspects, in which the two candidates differ significantly, and that is climate change and energy.

Let me first say that, while I naturally have my own personal preference – as a non-voting, non-American citizen – on the next US president, it's not my intent to represent that or take sides in here. Let me also say that I'm not an environmentalist. But bear with me, specifically on the topic at hand.

Romney's side accuses Obama's of blindly trying to slash carbon dioxide emissions through various mechanisms. Specifically, it accuses Obama's administration of "playing the role of venture capitalist, pick winners and losers" and unwisely spend the US taxpayers' money in the investments made – in a clear reference to mediatically-failed "green" companies such as Solyndra and A123 – with a questionable impact on the environment. In their view, the "lack of scientific consensus on the extent of the warming, the extent of the human contribution, and the severity of the risk" does not justify the investment in clean energy and the type of green innovation that puts at risk the large industries of oil, gas and coal, as well as new investments in nuclear energy. Moreover, the defying candidate contends that "the problem is called Global Warming, not America Warming" and hence it is not America's duty to take action when developing countries are responsible for a larger and growing portion of the world's emissions.

That, to me, is hard to understand. Firstly, it is a fact that there is no scientific consensus on the causes and effects of Global Warming. But is that cause for inaction? Isn't the mere hypothesis of Global Warming a good enough reason to take preventive measures and adopt a more sustainable way of life while we're at it? If the defendants of the Global Warming theories are right (and frankly it's hard to believe in a concerted conspiracy theory or in global paranoia on this one) the costs of doing nothing are just too high. No doubt, continued debate and investigation is required to truly identify the magnitude, the timing, and the addressable causes of global warming, but I for one think it's madness to sit on our hands and continue doing what we've been doing when there is a possibility that that has a direct impact on the quality of life of the next few generations. Now, whose responsibility is it to take the initiative to address this possibility? Well, there is a reason why developed countries are developed and that's partly because they underwent tremendous industrial development stages, that the developing countries are still going through, and need to go through if they are to become developed. So the mentality of "not our problem" from one of the more developed countries in the world, and one of those with the more adequate resources to tackle the issue just strikes me as short-sighted and self-serving.

It is understandable that the argument from a candidate to the US presidency needs to take into account the interests of the American economy in the first place, and Romney does build a sound and very articulate argument in defense of the jobs associated with fossil fuel energy. He defends a view that "economic growth and technological innovation [...] is the key to environmental protection in the long run", which is reasonable, but the key difference between the two candidates in this respect, I guess, is on where that innovation needs to take place. Innovation in more efficient consumption of fossil fuel is, by all means, very important as it will certainly minimize and postpone the problem, an that is unquestionably important; but innovation in clean energies is critical in the long run, and if the more developed and capable countries don't want to play a role in it, then who will?

Like I said, I am not an environmentalist. But I like technology and I'm a defender of the power of innovation and entrepreneurship in economic development. And Clean Tech has been an important engine of innovation and scientific development and its application to the real world. Backtracking on that trend would be, well, ... the opposite of progress.

True, the choices of the green technology companies that were backed by the federal government have had some spectacular failures that cost money to US taxpayers. I have no idea on what were the criteria behind those choices, and whether there were some self-serving interests behind them, as the opposition seems to suggest. No doubt that the large media coverage they received because they had received government money was harmful for their respective industries as a whole. At the very least, the whole thing begs the question as to whether governments should indeed have a direct investment responsibility in companies, or whether they should rely on private professional investors to deploy government money, matched by private funds. But if indeed the Obama administration took a VC approach in its direct money deployments, then we must not forget that a significant portion of VC investments are bound for failure. It's the nature of the business and moreover, failures do tend to be known sooner than the few successes that make a good Venture Capital fund. So it's really hard to say, without a lot more information, that the very visible failures of those direct investments represent a failure of the policy of investments in clean energy. Aren't there other companies out there, that have received those investments, that are doing ok, with the potential to become successful, and more importantly, impactful companies?

Anyway, tomorrow is Election Day in the US, and we'll see how it turns out. Right or wrong, a victory from the Republican candidate has the potential to be detrimental to the progress of Clean Tech development in one of the countries that has historically been more active at it, and hence an important change of direction in how the world sees and addresses this important issue. 

Thanks for reading.

Scared of Facebook

I have a Facebook account. Chances are, so do you.

But I'm probably not your typical Facebook user. The truth is, I rarely go there anymore, or at least not nearly as often as I did in the past. I don't have too many "friends", I don't have much information in there that my "friends" can see, and I don't allow all those that aren't my "friends" to see any of it. The truth is, it kind of scares me.

I consider myself to be a tech-savvy person. I love technology, I love gadgets, I am part of the generation that had the privilege of watching the digital age come to life – unlike my kid who was born already onto it and for whom it will be a great generation-divide to know that her parents had no internet when they were growing up. I never think twice about using online services, doing my shopping, or filing my taxes online. I don't have nightmares about "Big Brother" or conspiracy theories. When Facebook started to grow, I thought – and still think – that it is a great idea and that it is very useful. It allowed me, and others, to find and re-connect to friends whom I had lost track of; it allowed me to make more tangible and permanent contacts that I had had sporadically with a person in the physical world, that would otherwise simply have been dissolved by time; it allowed me to, very easily, publicize and assemble friends for my 40th birthday party; it also allowed a lot of situation and mood sharing...

The sharing is obviously a big part of Facebook. The sharing and the instant gratification of having someone acknowledge your sharing, if only by "Liking" your post. I personally feel that this is somewhat gratuitous and of questionable social value (it's just too easy to "Like" something – does it actually mean anything? An interesting exercise: request "friendships" from a few people that are in no way connected to you, and see how many accept... I think you'll be surprised), with a strong risk of creating addiction which, as all addictions, can be dangerous. But I don't think I am even qualified to evaluate Facebook from a social perspective, so I'll leave that to others. It's way too novel and complex as a social phenomena, and it's not what really bothers me.

What truly bothers me is something much more practical, pragmatical, down to earth. What bothers me is the information. The incredible amount and richness of data that Facebook has of its users. And the mechanisms that it finds to get its users to confidently give them more and more detailed information, both structured, and unstructured. And the value attributed to that information, even though it does not yet have a defined purpose.

Just think about it. 800 million active users, growing by the day. More than one account for every 10 living persons on Earth. Each one will have fed in his basic personal information: name, age, address. Then some more information: education, professional experience. Then preferences: sexual, musical, ideological,... Then the geo-referencing. This is the structured part of a user's profile. Then the unstructured. With each post, Facebook compiles information on where the user is, with whom, what he is doing, how he feels. Through a user's history of posts, Facebook can construct each user's profile to the finest detail. What he thinks about each subject, be it of a social, political, religious, scientific or any other nature, his opinions and positions, his actual preferences. Naturally, also, the characterization of each relation between "friends": the type of tie (family, friendship, professional, ...), the frequency of interaction, the nature of the relation. With each photo, additional information on a user, and on each of the users "tagged" in it. More recently, with the introduction of "Timeline" Facebook also started to compile data on the part of people's life's on which it hadn't any: their pasts, before Facebook even existed. Nevermind the fact that each user can decide what gets shared, and I don't have any particular opinion on how well Facebook respects those preferences. The fact is that they have the information, and it's massive. It just blows my mind!

But the really scary part is not that they have it, it's the value that is attributed to that information.

Facebook's IPO is one on the most anticipated in history, and is expected to value the company above USD 100 billion. That's a little less than half of the Portuguese GDP, half the valuation of the likes of Google. And that's not accounting for the money that an IPO is supposed to leave on the table for investors. We don't know that that's going to happen, but it's a lot of money, on any account. And what supports that? There are many opinions being voiced on the business media. I argue that it is the sheer volume and richness of information that sits on Facebook's servers, of which we can only imagine the uses. Yes, that, to me, is the scary part. No-one knows what it is actually good for, but everyone knows it will somehow be worth a whole lot of money.

Some will argue that this is not new: we've seen it happen with Google. To a certain extent that is true: Google has indeed found ways to capture data from its users by offering services, such as GMail, that make it worth for users to be logged in when they perform their searches. E-mail messages through GMail, it can be argued, can be seen as information of the un-structured kind that allows Google to fine-tune its advertising to its users. But at least, as far as we know, that's what Google is: a giant advertising machine. We know that every bit of data that goes through its servers – and there's unquestionably gigantic volumes of it – will be used to target its ads, and the result of that is visible each time you perform a search, or each time you access your free GMail account. And there are a lot of people and companies willing to pay for such a richly targeted advertising, which justifies the valuation of Google. But that's not Facebook. Sure enough, there is advertising in Facebook. In fact (have you noticed?) the far right of a Facebook web page is populated by ads, and it is unquestionable that they have enough data for those to be very well targeted, assuming they have built the right algorithms for their selection. But come on, how many of you have even bothered to look at them? When people do a search on Google, there is some likelihood that they are looking for a service, for a product that they want to buy; resulting ads appear at the top of a list that the user asked for and at which it is certain he will look. When people navigate on Facebook's pages, they are focused on its functionality and specific content, they are there for the social interaction with their friends; they will not be bothered by a blur of unsolicited information appearing on a part of the page that they programmed themselves not even to look at. Moreover, Facebook ads have not, so far, been present on the mobile world, rightly choosing not to clutter a smaller screen with unsolicited information, despite the fact that more and more users transition every day from the desktop-bound to the more spontaneous and free mobile access. So, I am not convinced that the value of Facebook's big data resides solely on its advertising potential. I think that investors are betting on the value of the information itself while the full extent of its usage is not yet known, by anyone. It is just so rich and big, that it must be worth a lot, right? And you and I, as Facebook users, are giving it away for free. Isn't that something?

A friend has recently commented that he thinks we will one day regret having shared so much personal information. I share that view. Don't get me wrong, I am not paranoid, I am all in favor of the speeding evolution of the digital age, I see that it does enable a lot of sharing that was otherwise impossible, and I recognize that there is tremendous value in that, in social terms, in creating better bridges between people and between organizations, in disseminating and democratizing knowledge – today, I wouldn't know what to do without the likes of Wikipedia... Indeed, I even go to the extent of investing in companies in that space. I also know that we are only now scratching the surface of what that revolution can be in the future. But I am just weary that maybe we're not yet conscious of how all that information we're casually giving away can actually be put to use, and that maybe we're not yet equipped to ensure it is put to the most productive use.

Now I'll hit the "Publish" button for this blog post, and then go share it on Facebook...

Thanks for reading.

What I like about Venture Capital - part II

Ok, so I've briefly introduced what Venture Capital is, in the previous post.

Now, on to more interesting stuff: what's so special about it?

Well, a number of things, really, but let me start by one aspect that is rarely discussed: VC deals, once they are consummated, are one of the very rare occasions in business where interests are fully aligned for all the stakeholders. All share the same ultimate goal of building a big and valuable company. That means, very objectively, that the value of the shares of the company becomes higher than what each party paid for them, or put into them. Both success and failure are truly shared. Let's look into that in some detail.

First, the entrepreneur, and the team that he chose. Unlike other types of investment logics, the VC will not be looking to replace the incumbent management team. Indeed, the VC will steer away from an investment opportunity if he is not impressed with the people behind it. In fact, most VC investors will put that at the top of their investment criteria, and will investigate it in depth – there needs to be evidence of competence, of great resilience, of unquestionable integrity, of leadership skills and of a strong will to take the company forward, and there needs to be a good level of "chemistry" between the team and the VC. So, the VC will be backing not just the company, but the team itself. At times, there may be competency gaps that need to be covered as part of the development process of the company (the most typical example is the entrepreneur with a solid scientific background but who lacks management skills); these gaps are usually openly identified and discussed, and, for the good of the company, the means and timing to overcome them are agreed, usually finding mechanisms to keep the founding entrepreneurs adequately involved and rewarded. At the end of the day, the entrepreneur's reward is being a shareholder in a valuable company that he created – and deciding whether or not (or when), he will be cashing it in.

The same goes for the rest of the company's employees. In a well managed venture-backed company, a significant amount of shares will have been reserved for, and distributed among, the key staff. Throughout the life of the investment, that stake in the company works not just as a retention mechanism, but also in ensuring, once again, the employees are fully committed to the development of the company.

At the other end of the investing value chain, are the entities that invested in the Venture Capital fund that subsequently invested in the company. Individuals, family offices, institutional and corporate investors, pension funds, economic development funds. Many of them look for a purely financial return on their investment; some of them aim for local economic development; all of them benefit from the positive development of the companies in the VC fund's portfolio, and will be incentivized, if called on it (albeit perhaps somewhat rarely), to help in the process – for example, by opening doors for commercialization of a given product that is more closely related to their core activity.

In the middle, the VC investor. He chose the company in which to invest their investors' money. He chose it over other investment opportunities that he had. He did so at a time when the company was very young and the investment very risky. He invested in a very illiquid asset, because he believed in its potential for a high reward. So, he will be in it for the long run, not seeking quick returns. He will want to take the company to a stage where he can exit from the investment with a significant return, but he is ready to wait for the right time, and to contribute actively.

Most importantly, he's got skin in the game: firstly he has the obligation to provide strong returns on the capital invested to his own fund investors – if he does not, then those investors will not be coming back, and his ability to raise more funds to invest is at risk, and so is his activity as a VC; secondly, the VC investor will usually take a share of the gains above a certain level of return to his investors, so no return means no bonus – and that is typically a very heavy component of his pay. So, the VC investor's interests are fully in sync with everyone else's: to turn the startup into a big, successful, valuable company. For that, he will be allocating a significant portion of the time of one of its most senior people to help develop those companies, and more often than not, share in on the accountability by occupying a position in the company's Board of Directors. That person is fully motivated to carefully monitor and contribute very actively in the company's development. 

Surely enough, different VCs will have invested in a given company at different times and with different valuations, and that does tweak each one's expectations: those that came in earlier will want to exit earlier; those that invested at a lower valuation will have good returns from lower exit valuations; the dilution suffered by each will also play a role in its motivation. But ultimately, they will all benefit from the most successful development of the company.

Ok, so interests are aligned. So what? Well, this little fact makes things a whole lot easier for everyone. There's virtually no politics, there's no hidden agendas, no bullshit. Sure, there will always be exceptions to this. It is a business dealing with many variables, and it does involve money, so let me know when you find a system that is immune to being corrupted if it gets contaminated by external or crossed interests. But the point that I'm trying to make is that that's what they are: exceptions to a model that, by design, is efficient. This may not mean much for everyone. In fact, some would miss the complexity of a more politicized game where you play with other parties without necessarily knowing their hand nor, more importantly, their overarching objective – that is a discipline in itself and there is undoubtfully merit to those that truly master that art. Me, I like the transparency that is inherent to VC, and I'm truly happy to work in an industry with this feature.

While this is, to me, a key characteristic, it is hardly the only one that I like about VC. For my next post on this topic, I will dig into a few other aspects that make this such an appealing activity.

Thanks for reading.

In it for the long run...

What I like about Venture Capital - part I

Have you ever had a moment in your professional (or, for that matter, personal) life in which you feel like you've lost touch with the reasons that made you make that career (or other) choice in the first place? Or worse, like you've forgotten what they were? There is nothing unusual about that – it's only human nature never to be satisfied with what you have. But those are the moments in which you will need to reassess your choices and make new decisions or renew old ones. A good recollection of what those reasons were will be an invaluable help...

For my first series of posts in this blog, I chose to write about what I do for a living, and what I find about it that makes it very special for me. Hopefully, this will serve two purposes: that of sharing something that is meaningful to me with anyone that is willing to read, and as a personal record for me to check back into in the future, if and whenever I feel that I need to remind myself of a few important things...

I'm a Venture Capitalist.

I haven't been one for a very long time – I have only started it a little over two years ago – (so if you're an experienced VC reading this post, feel free to drop off now... or read on for a possibly naïve, but maybe refreshing, and surely honest, view on what we do), and it's not even something I planned to do, but it's been extremely rewarding. We all try to do what we love best or do best for a living. Every voluntary job/career/life change brings with it a certain enchantment for the novelty, and a sense of pursuit of an ideal. More often than not, however, the novelty quickly wears off, and the pursuit of something (even) better goes on. Again, that's human nature, and it's healthy. Like I said, I'm relatively new to Venture Capital. Yet, I find that it's being fulfilling in more ways than I had imagined, and the enchantment for the novelty hasn't worn off. I'm finding myself thinking that that pursuit can be continued within this line of work. That, to me, is a first. So, I've been putting some thinking into this. Into what I'm finding in it that is so gratifying for me, personally. That's what I intend to share in these lines.

I hope to do that in a way that is readable and understandable by those who don't have any knowledge about Venture Capital. In doing so, I've come to realize that I need to write more lines than what I initially thought I would, so I will be splitting this post into a few separate posts. Whatever your views and opinions, I welcome your comments.

First, for those who are are less familiar with what VC is all about, let me try to de-construct the myth and explain it, in very simple terms (if you're the experienced VC who decided to read on, go ahead and skip this paragraph). A "Venture Capitalist" (more accurately, – generally and most certainly in my case – a "Venture Capital funds manager", in the sense that the people who do it don't usually actually own the capital that they manage – and I'll leave it to you to dwell into what the term "Capitalist" and its declinations actually mean) is an investor who will invest in very risky companies in a very early stage of their development, and then actively help in building them up, trying to make very successful companies out of them. So, imagine you are the inventor of a new technology that has the potential to change the world in some way, and that you are also an entrepreneur, eager to take that invention and turn it into something big. You have assembled a small and strongly motivated team, created your start-up with a cool name and logo and are ready to go. But you still need a couple of things. First, you need money to really get things going. Maybe your technology still needs some development, like needing to build a prototype that will demonstrate to others that your invention will do as well as you are certain that it will. Maybe you need to build your first small plant. Maybe you need to go out and hire a sales team that will get your product to the market. The money from that research grant was critical to get you to where you are now, but is now long gone. You've convinced your family and your friends to chip in, but you understand that is hardly enough. You turn to the more traditional means of financing, such as banks, but only to find out that those guys kick you out the door when you explain to them what you intend to do, and they perceive it as too risky for them – banks will only loan money to people they feel that they can collect from, or they have something tangible to secure the loan (such as a mortgage when you seek credit for your house); such is their business and it's unreasonable to expect them to see it any other way; your start-up – let's face it – may not be here tomorrow... Second, you need someone with some experience that will help you in overcoming many of the challenges and hurdles that you will face in turning your company into something really significant. Maybe you simply don't have the required management skills. Maybe you need help in understanding and navigating the complex web of relationships in the industry that you need to develop. Maybe you need someone that will challenge your ideas and with whom you can discuss alternative strategies for your company, who will keep you focused and motivated to pursue only the best options, because it gets quite lonely at the top. In other words, in what has become quite a cliché in the industry, you need "smart money". That's where a VC comes in. He will study your ideas, your technology and your team in depth and with great care, and if he believes strongly enough in them, he will want to invest in your company. That means he will be willing to take the risk. He will provide financing in exchange for an equity position in your company, and he will become your partner for the next few years in the life of your start-up, actively contributing and putting his experience and his network to work for its development. Naturally, he will not do this out of altruism: his ultimate goal is to provide a financial return for the people who actually provided the money for the investment, which also means he will be in it for a given amount of time (sometimes up to 10 years) and need a way to "exit", to transform his position in the company back into actual money (hopefully worth much more than what he initially invested) after that period. But while he is riding with you, he will be looking for ways to help you build something big and valuable. That, in a nutshell, is Venture Capital.

In the next post on this subject, I will start to dwell on the reasons why I find VC to be such a positively engaging activity, starting with a key characteristic that is not usually very discussed in the literature: the full alignment of interests among everyone involved.

Thanks for reading. 

Risk and reward... (Mação, Portugal, 2004)

What this blog is all about

This is a blog. Not a journal, not a publicity stunt, not an ad in disguise, not a leaflet for ideological propaganda, not an exercise of self-promotion. Just a blog.

By this, I mean that this is a place where, once in a while, I will come to write about whatever is on my mind. I will write about work, about play, about people, about ideas, about cool stuff or about stuff that makes me angry. I don't mean this blog to follow any particular theme. I don't know where it will take me. I'm starting this just as a way to put down some of the things that go through my mind and my life, instead of just letting them get lost in time.

But this is also not a replacement for Facebook. I don't intend to post that I've just checked in at the local groceries store. I intend to put some thought into whatever I end up posting here. I am not the most well-educated, the smartest, the most travelled, the most experienced, the most charming or the funniest person I know – for each of those characteristics I can think of a dozen people that are one-hundred-fold what I am. But I've lived a fair share, collected a few different personal and professional experiences, and at the age of 40 I feel, without any presumption of the ability to teach anyone about anything, that I have something to share about stuff that I learn (more on this later) – about Venture Capital, about technology, about music and other stuff that moves me. This blog is a way for me to do this.

It will start unstructured, and hopefully gain some sort of shape. It will be intermittent or erratic, and always casual, as I don't intend to make this an obligation – I will spend as much or as little time on it as I please, and as my work- and personal-life permits. As such, I have no expectation to attract any number of regular followers. However, I do hope to be thought-provoking to those few that, for whatever reason, choose to follow my posts, and I will welcome any comments. I hope you will find something in it for you.

A word about the title. Learning to Fly.

If I had to pick one theme, one common-thread to what I intend to do here, it's "Learning". For me, learning is a key driver in life. From learning what a hand looks like to learning how the Universe works (or at least trying to...), learning is what makes us rich, learning is what makes us human. We all spend our lives learning, and indeed some risk their lives to learn. And we've all experienced the joy of understanding what we've learnt, and of sharing that with others. That's what I hope to do. About flying. Flying is probably something we would all like to learn. We have learnt a lot about it and engineered ways to do it. This goes back to my paragliding days and the joy of actually taking off and flying for a few hours, free from all other concerns. Yet, we are clumsy at it, and unless evolution leads us to grow wings in a few million years, we will most likely never fully comprehend flying. That doesn't keep us from trying. "Learning to Fly" thus represents our continuous will to learn. Oh, and it's also the title of a song by one of the most important bands of all times, Pink Floyd – granted, not at their best, and those of you who know me will know that it's not the sort of tune that plays in repeat mode in my iPod, but still, a cool title and a nice song.

I'm the guy on the upper right. (Sagres, Portugal, 2004)