2010 21
The Bikera, a simple public transportation concept
Published by MartinVarsavsky.net in Entrepreneurship with No Comments
So far this is just an idea. Indeed it is a dream that I had last night complemented with some dosage of reality added a few minutes as I woke up. So the whole concept is very fresh on this Sunday morning. I call it the Fon bikes and I call the Fon bicycles the Bikera (rhymes with Fonera). This is inspired on Fon, the company I started in which people share WiFi at home buying a router called the Fonera and roam the world for free and at close to 3 million hotspots it is by far the larges WiFi network in the world.
The Fon Bikes would be a project to implement in small cities first. Say the city of Lerida in Spain, or Geneva in Switzerland or the smaller cities of Japan which is Fon’s fastest growing country with over 100K new foneros getting Fon WiFi routers called Foneras every month. In another way Fon Bikes is a project similar to Velolib in Paris but simpler and better.
The idea is that Fon would go to one of those towns and buy 1000 bicycles. The bikes would be orange, the color of Fon, each one would have a unique identifier engraved in it and a simple lock mechanism that operates with a SIM card. Something like this bike that sells for only 99 pounds or this one which sells for the equivalent of 45 euros. So say for only €50,000 you could place 1000 bright orange bikes around a town. The unknown at this point is the SIM enabled lock. Let’s assume that we get it for €20. So for another €20,000 we get say Geneva to have 1000 bikes with those locks. 1000 BIKERAS 🙂
And then the fun starts. You tell everyone that they can use those bikes by making a payment with their smartphones of say 1 euro a ride, or they can buy a bike themselves for 70 euros and never pay again, all bikes are for free to those who donate a bike. Moreover you tell them as we tell in Fon that if they do buy a bike for 70 euros that they can amortize it with the first 70 rentals as Fon will give them the euro it collects per rental and that after that Fon keeps half of the rental fee for building the network and system, and the person another half. This means that you can enter the Fon Bike network, never pay again and make money with your bikera for only an initial €70 investment.
Now an obvious question is why would not just people pay €70 euros and get a bike for themselves and never be part of the system. Many answers come to mind. One is that by mass buying one model we can give people use of a better bike for less. Onother one is that many times it is inconvenient to own a bike. When you own a bike you cannot do one way trips. If you go to work during the day you have to return at night in your bike. If it starts raining you can’t switch to public transportation. This system is an ideal solution for one way trips, and then there’s the speed at which you dispose of the bike anywhere. In the Velolib system in Paris one of the biggest problems is to find one of those bike stations and if you don’t find one quickly they start charging you a lot of money for having the bike. Here there is no disposal of the bike problem. Lastly it is much better to be able to leave the bike in the street all the time. Many bike owners have to make room in small apartments for their bikes, carry them up the stairs, etc.
Anyway, as I said I just woke up. Dreamt this idea which is not a great start. And questions come to mind, like who will service the bikes or what if people just vandalize them or steal them. But even if they steal them they would have to dispose of them somewhere, and then somebody else would “steal” them without knowing. Because they would be public property in a way.
So instead of Fon’s “share a little wifi at home and roam the world for free” it would be “share your bike and any bike will be yours when you need it”. I know these projects sound like anarchist cooperativism of the 1920s but what makes them less utopic is that Fon is the largest WiFi network in the world. That Fon grows a T Mobile every month in terms of WiFi. It makes you think if there other ways to make people fitter, healthier, alleviate pollution and reduce private cars in circulation.
Added a bit later: two commentators have argued that if we have SIMs, we have a lock, we need electricity, why not also power a 3G to Wifi converter, charge it with a dinamo as we pedal and those bikes are also Foneras. Love this brainstormings!
Another commentator added that these bikes are also ad space, if they became say the Starbucks Bikes or something like that Starbucks may want to invest the initial money to get a city going.
And another idea that occured to me is that the homeless or unemployed could be trained on simple bike repairs and compensated for oiling the bikes, adjusting brakes, etc. Probably they would not have gears.
Now I have to see who can make a SIM based locked managed with Smartphones or a SIM based lock Fonera 3G to WiFi.
I should add that I am a cycling fanatic ever since I was a bike messenger when studying at NYU. And that right now…I am going biking in the Sierra outside of Madrid.
Ok, back from cycling I see somebody points a similar idea from a start up called SoBi. I lived in NYC for 18 years and think NYC is the wrong town for something like this. Also $500 per bike is totally out of budget. I am thinking more like $50 bikes that nobody will want to steal because there will be so many of them that it will be worthless to steal them. I am thinking very simple SIM based locks that could cost $20 that nobody would want to steal either. But most of all I am thinking of places where people are educated and honest without being policed. Places like Japan, Scandinavia, Germany, Holland, Denmark. Interestingly in India, the country with the most poor people in the world vandalism is rare. Vandalism is not about poverty, is about culture. The guys at SoBi, who look like a great group btw, have to spend $500 so people don’t steal a $50 bike. I don’t want the bikeras to be locked. I want there to be so many of them in a town that they just don’t have scarcity value.
In general I don’t see this system as a good one for USA. People are too far apart from each other to cycle, NYC is an exception not a rule. I also don’t see it for my native Argentina because of a general lack of civic culture, and not for my Spain where I live either except maybe in smaller cities like Zaragoza for the same reasons.
I like the idea of the commentator who says that bikes can save themselves all the electronics, that it’s the users who have the electronics. So if the bike simply has a lock with a combination and it has a unique identifier the person emails/sms bike identifier and gets combination. The locks can be changed around occasionally.
When I left the USA in 1995 and moved to Europe, the start-up scene on the Continent was pretty dead. But a lot has changed since then, and events like TechTour 09 are further proof that there is great talent, capital and great ideas in Europe too. And in a crisis, surprisingly, these three elements are more likely to ignite into a successful start-up.
Last night I spoke at the TechTour dinner thanks to a kind invitation by fomer Fon European, MD Robert Lang, now at Result (disclosure: I am an investor in Result). Nina and I left Madrid around 4pm and arrived in Lausanne at 7pm, stayed until 10pm and then flew back to Madrid. It was a short stay but in those 3 hours we had enough time both to speak and to learn from some of the 150 entrepreneurs and VCs gathered at the event.
My speech was about how the crisis is negative for most but a boom for entrepreneurs. More concretely, it was about how the unique European system of high severance pay and welfare payments (in Europe stock options are not common but extremely large severance pay packages are) constitute a source of capital that can allow a former executive to become an entrepreneur. Many unemployed European executives find themselves unemployed with enough money to devote, say, a year of their lives to a start up without additional compensation. Also in Europe, some very talented people get laid off because it is cheaper to fire them than less talented but older colleagues. And those people are exactly the ones who may be needed in a start up. Lastly, the crisis reduces the difference between large companies, as providers of stable employment and start ups. As people realize that there’s risk anywhere, being the master of their own destinies becomes more attractive.
After my speech I was able to speak with some VCs and entrepreneurs that make the European start up ecosystem very lively. There were many VCs of small funds, funds of say less than 100 million euros, generally funded by Family Offices or holding companies of wealthy European families. What distinguishes Europe from America is that institutional funds are less into start-ups, but fortunately wealthy families whose fortunes came from start ups are more active investors in the area. I end with Poken, a Lausanne based start-up that deserves special mention. Poken is a little device that “shakes hands” with other like devices and in so doing exchanges information about their respective owners. Pokens are great for conferences and events as they are time savers for people exchanging information.
Here are some pictures of the event.
Together with Jazztel, Eolia Renovables
is another remarkable Spanish start up story. Started five years ago by Miguel Salis, Eolia Renovables is one of the leading European operators in clean energy generation with a first half of 09 EBITDA of $64 million dollars. There are very few companies in the world, never mind just in Spain, that achieve these results in such a short time. Eolia´s estimated market cap is now around $1.5bn but it was built with only $148 million in equity plus a large amount of project financing. Eolia grew through a combination of organic growth, namely wind and solar farms built by Eolia and acquisitions. My holding company Jazzya developed some wind and solar farm projects that were sold to Eolia, with the most relevant being El Moralejo near Albacete.
The story of Eolia shows that not everyone is born an entrepreneur. Indeed I have two good friends who got most of their training as executives and then went on to found their own start ups. Marc Benioff of Salesforce.com, whose remarkable story is very well known, and Miguel Salis, whose trajectory is practically unknown. This is probably the case because, in Spain, entrepreneurial success stories are seldom shared for an unreasonable fear of generating envy in a society that has very confused feelings towards successful people.
Miguel and I were at Columbia University together in the 80s. While after graduation I became an entrepreneur, Miguel had a 20 year career before becoming an entrepreneur as Founder and CEO of Eolia Renovables. First, he became a banker at Lehman, then Salomon, then CFO at Jazztel, the telecom operator I founded in 1999 (now also worth over a billion dollars), then Ya.com (which I also founded together with an amazing team of ex Telefonica managers and we sold for $800 million dollars), then he managed my family office known as Jazzya and only in 2004, 20 years after graduating from business school, Miguel became an entrepreneur on his own. In order to raise the funds needed to build Eolia, Miguel became partners with one of Spain´s most creative investment banks, N+1. Here are the bios of the team that Miguel put together.
Here are Eolia´s latest results. They speak for themselves.
And to top it all, Miguel Salis is also a great jazz musician 🙂
This weekend Nina and I were in Rome. Original plans were just to hang out and enjoy what possibly is the most beautiful city in the world but a fortuitous encounter led me to give a talk to a group of techies in Trastevere on Sunday. The talk was very interactive, with me presenting but mostly asking questions about the Italian start up scene. The event was organised by Johanna of Frestyl, which is a website that brings fans and amateur bands together. Freestyl is currently under development and it is one of the investments of my friend Joichi Ito.
If you have read my article about creating businesses Europe you can probably imagine what I spoke about. It´s a mixed picture. The European scene for start ups is better because there is less competition, salaries are lower and medical and legal costs are much lower but it is worse because VCs are rare, markets are fragmented by language and labor laws make failure, common in start ups, extremely costly. But what I found in Italy was discouraging because, as opposed to Spain, where I live, labor laws are even worse, VCs are even rarer, Internet success stories are few, and the Italian language market is much smaller than the Spanish language market. After asking many questions about the Italian startup scene I reached the conclusion that, even though Spain’s economy is doing worse than Italy’s in general, our technology startup ecosystem is doing better. When we built Ya.com, for example, we invested 38 million euros, and sold it for 550 million. Of those 550 million euros, 70 went to 50 employees thanks to our stock option plans. Jazztel was a similar story depending on when employees cashed stock options after IPO, some did very well some didn´t. But out of all of those who did well many new angels emerged. Jon Berrojalbiz is one great example of a successful entrepreneur who came out of Ya.com. He is currently CEO of the very successful Trading Motion and an investor in other strat ups like Isolee. There is also the case of Miguel Salis, who was CFO at Jazztel and is today CEO of Eolia Renovables. Eolia, which was started when Miguel was the MD of my family office in 2004, is now the biggest independent alternative energy company in Spain. Over $1bn was invested, EBITDA is now over $120M and up 110% from a year ago and many jobs were created tons of carbon emissions saved. There are also many cases of companies that were sold successfully in Spain which had nothing to do with me. In Italy, however, I did not hear stories of 70 million euro stock option plans or cases in which wealth was created and distributed in a way that would create an angel network. As a result, the culture for small investors in Italy is lacking and entrepreneurs have to ask their parents or family for money which I consider in general a very bad idea. The only way to do well in VC type investing is to have a diversified portfolio, asking your parents to invest with you is contrary to that.
And then there is the cost of failure. Most start ups fail and that is true anywhere in the world, but in Italy the cost of failure is enormous. If a company shuts down because, for instance, their product had no demand and this company has say 100 employees, the costs for the entrepreneur can be brutal. In Fon, for example, we began with many employees. Unfortunately we had to lay off half of the team at one point and now that we are profitable we have started hiring again. This situation would have ruined us in Italy, because there they have different laws of forced severance payments for companies under 15 employees and over 15 employees. Significant startups can’t exist in this environment since they never know with certainty how many people they are going to need. On top of this, entrepreneurs who fail are seen as crooks. Not as people who tried to create a good product and create jobs but simply failed. Having an entrepreneur president who has barely escaped jail for many years now has given Italian entrepreneurs a bad name and that is not fair. So, on top of everything, I said before up and coming Italian entrepreneurs confront a mood very different to those of say Dutch entrepreneurs, Netherlands being the European country which in my view respects entrepreneurship the most. Now, to end on a positive mood, Italians are still very creative and have many SMEs who thrive on a European and sometimes global basis and hopefully this will soon also be the case of Italian Tech Companies.
And, in closing, here are some pictures of Rome.
2009 27
Entrepreneurs have a great sense of orientation
Published by MartinVarsavsky.net in Entrepreneurship with No Comments
In Spanish, we use the phrase “sentido de la orientación” all the time. In English, you can speak about a sense of direction or my preferred, though rarely used term, “sense of orientation.” Being an entrepreneur, I think that what is most needed, is a sense of orientation…in business. It is interesting that now researchers are finding out how the sense of orientation works.
Here´s a summary:
To orient ourselves, we mainly need two pieces of information: where am I and in which direction am I heading? Experiments in the rat have shown that these types of information are directly accessible and independently coded in the brain. When the rat explores a new territory, so-called place cells and head direction cells form within only a few minutes. Place cells are active when the rat visits a particular area, no matter which direction it is facing. In contrast, head direction cells code the direction the rat is heading, independent of where it is. Also humans presumably have these and other types of cells which specifically instruct its sense of orientation. Scientists around Mathias Franzius and Laurenz Wiskott from the Humboldt-University and Bernstein Center for Computational Neuroscience Berlin (Germany) have now developed a theoretical model that can explain the emergence of all orientation-specific cells that are known in rats and primates to date.
Now my personal experience is that most successful entrepreneurs I know have a very good sense of orientation. Many are pilots, skippers, mountain bikers. When I have gone cycling in the mountains with top entrepreneurs like Sergey Brin, Niklas Zennstrom, Michael Dell and others, I have found that they are all very aware of the two key variables that manage orientation: knowing where you are and knowing where you are headed. Loic LeMeur, founder of Seesmic, is an amazing pilot. Needless to say that, in business, knowing where you are and knowing were you are headed is essential.
Moreover, I am convinced that the sense of orientation is not equally divided among men and women and, since I don´t run Harvard University, I can say so. The women entrepreneurs that I know, though, do seem to have a great sense of orientation. I know that there´s nothing scientific about commenting on my life experience and coming to conclusions but for whatever is worth it is what I observe. Emily Cinader, founder of J Crew for example, who was my girlfriend in the 80s when I was at Columbia University, is not only an outstanding entrepreneur, but she definitely knows her way around.
At the same time, there seems to be a genetic component to the sense of orientation. I have a good sense of orientation and so do my four children. The two boys and the two girls. Recently I have been observing the sense of orientation of Leo, my two year old son and it is uncanny. Leo can barely talk, but he can walk, find a water fountain that he saw in a park the previous week, which is out of sight and 200 meters away from him. He just says agua and goes for it. I follow.
I hope one day we understand much more about how we orient ourselves.
This December I finished my entrepreneurship class, which I have been teaching for 11 years at the IE Business School, and it was without a doubt the toughest one I’ve ever had to give. How am I supposed to inspire students to go out and get funding in this market if businesses like Apple and Dell, which generate cash – which have a lot of cash and profit – are seeing their shares hit rock bottom?
Dell’s situation is incredible. A business with more than 20 years of experience that has just earned $700 million this past quarter, with an invoice of $55 billion throughout the world, with no debt and, on the contrary, $10 billion in the bank, is somehow worth only $20 billion: $10 billion more than the cash it has on hand. Right now, the market is only betting against Michael Dell, whom I consider to be one of the best entrepreneurs in the world. Practically the same thing is happening to Apple: it has only $24 billion dollars in cash. If the markets don’t have faith in Steve Jobs or Michael Dell, how in the world are they going to have faith in a recent IE graduate? Right now it’s almost impossible to get anything financed, so teaching entrepreneurship is like giving ocean navigation classes… in Kansas.
Although it’s something that can be learned, that knowledge simply can’t be put to use in these conditions. But I did what I could: I tried to give them the best ideas, to tell them the anecdotes that could best inspire these future entrepreneurs. I tried to be positive, but without straying too far from reality. But it is hard, very hard, to teach entrepreneurship in the current conditions. Especially to students that dipped into their savings or went into debt in order to be able to pay for the Masters offered by IE and get started on something that is almost impossible to finance. Okay. Digg, Facebookand the Huffington Post have managed to obtain funds. Maybe it’s not impossible, but it’s much more difficult. At any rate, whoever manages to grow when there is such little water available…will become king of the desert.
2008 9
US entrepreneurs in Europe beware!
Published by MartinVarsavsky.net in Entrepreneurship with No Comments
While not all Americans love Europe, many, mostly from the Blue States, do. People in San Francisco or New York City dream of spending part of their life in Italy, France, UK or Spain, and some do make it over. Not many go to the extreme of moving over here and giving up their US nationalities as I did. But after 9 years of being a tech entrepreneur in Europe and being forced to choose between Spanish or US citizenship, I chose Spanish and stayed in Madrid. As a tech entrepreneur, I found Europe, in general, and Spain, in particular, to be a fertile ground for me. The European market is huge, bigger actually than the US market. And over here, I built Viatel in the UK, Jazztel and Ya.com in Spain, Einsteinet in Germany (the only company that I sold at a big loss) and now Fon.
Europe is great for an American tech entrepreneur because wealth here is better distributed, people are more educated and there are less competitors. Since being an entrepreneur is not very well regarded over here, US entrepreneurs find more open niches; but on the negative side, the market in Europe is much less homogeneous than in USA, local cultures make it hard to launch pan European products and there are all sorts of taxes, market distorsions and restrictions that surprise a US entrepreneur.
So let´s go over the caveats. The first one that I would like to focus on, one that is particularly brutal, is the issue of unlimited personal liability of the entrepreneur. On the rest of the article I will refer to laws in Spain, but I do believe that what I am about to tell you about Spain applies to most of the rest of Continental Europe as well.
USA has a lenient view of failure. Failure in America is not seen as a lifelong chronic disease but as a test of character. VCs in the States look for people who have had a combination of successes and failures, as they are more prepared to deal with the tough realities of business life. In Europe, however, failure is seen as just that, failure, a stigma that stays with you for the rest of your life. So far, I have never managed a business that had to liquidate. In all cases, even during the crash of 2002, I was able to refinance, renegotiate and keep companies going. Even at Einsteinet we were able to preserve most of the jobs. We sold the company at a loss, but the loss was limited to the capital invested by myself and my partners mostly at Goldman Sachs. Recently, thanks to the crisis, I have been hearing horror stories of what happens to entrepreneurs who fail in this Continent vis a vis personal liability. It is not nice.
The basic problem for start up entrepreneurs in Spain (and probably most Continental European countries) is that there is no such thing as “bankruptcy”, in the legal sense of the word. This is a huge problem for start ups because, as we know, most of them fail. So, for example, if you start a company in Europe, try hard for five years to make it, but run out of money in the end, the company is not perceived as a bankrupt company in the American sense of the word. In Europe going bankrupt is the same as firing all the employees and you as the founder, PERSONALLY owe the money that has to be paid to the employees for letting them go, even if the business has done nothing wrong. I know, it sounds crazy, but this is the case. So Spain, for example, had a construction boom for the last 5 years that ended in a bust, and now entrepreneurs are having to close down businesses. But when they do, they have to sell their home or do whatever to pay the severance pay of the employees. Because in this case not only the employees can sue you (through the Seguridad Social) and force you to sell your home, car, and deprive your own family of whatever they need, but if you don’t have money to pay now, they can hunt you down for the rest of your life. You never recover, you can never declare bankruptcy. You can never start anew. If you start a new business and begin to do well, whatever you make then goes to pay for your past losses in your past business. Spanish law ties your future endeavors to your past endeavors. You never get a clean slate. If you had say 1000 employees, which is what I have had in my other companies, you could owe tens of millions of euros for the rest of your life to them. Even though you did not do anything wrong other than failing to generate a profit, you are held personally liable for poor market conditions. This is an enormous risk for a start up entrepreneur. A risk that grows larger, the longer you are in business, as severance liabilities are not related in any way to employee performance and only related to their duration with the company.
And even if you are lucky enough not to go bankrupt in Europe there are other conditions that dissuade an entrepreneur from starting a business. One of the reasons of the higher unemploymentin Europe than in America is the extremely high social charges. These are 50% higher than in the States. In Spain, a starting level employee who takes home 1000 euros after taxes costs the entrepreneur almost twice as much. In Europe the government takes so much money in between the entrepreneur and the employee that, while take home pay is many times absurdly low, employee cost is generally high. And not only are social charges very high, but salaries are deceiving because, by law, in Spain and in general in Europe you are forced to pay employees 13 or sometimes 14 months for 11 months of work (a year minus a month of mandatory vacation plus an extra month or sometimes two of a mandatory state bonus regardless of performance). So if you are an American entrepreneur and you come to Europe and find out that there are no stock options and bonuses and want to pay them as I have done, you should realize that, even though it appears that there isn´t additional compensation, in reality there are hidden forms of compensation such as extra months and accumulated liabilities through mandatory severance and these are secured by none other than your own children´s college funds, your home and your car. And this is not all.
In Europe for example, medical doctors play a hard to explain role in business. If, in America, the ghosts for entrepreneurs are injury lawyers, in Spain, France and Italy they are medical doctors. How? If a person does not feel like working, they go to a friendly doctor who declares them “depressed” and they can stop working and still get full paid for up to 18 months. At Sybilla, a company that I invested in, we now have many of such employees, all declared depressed by their friendly doctor, and company productivity is seriously suffering. Interestingly the same law does not apply to entrepreneurs. As an entrepreneur you are not allowed to be depressed. This is illegal. If you are nobody pays you. And even when your business fails, you, the entrepreneur (or admistrador in Spain), are not allowed to collect unemployment insurance even if you contributed to the Seguridad Social. In Spain and some other countries entrepreneurs are presumed guilty by default and, in case of failure, everything is seen as their fault even if they truly had a case of mental illness. Mental illness or depression cannot get an entrepreneur away from his obligations to pay, but very commonly gets employees away from their obligation to work.
So while some European countries do have great advantages to start businesses among them, no capital gains tax on businesses owned and sold in over 5 years, starting a business in Europe is riddled with danger. Having built businesses in the States as well, I know that USA has its negative aspects. One would be the “legal tax” of doing business. Legal expenditures for the average business in Europe are in my experience 70% less than in USA. Moreover in Europe you don´t need to worry about frivolous lawsuits nor insure yourself against them. But in Europe we have all sorts of entrepreneur obstacles such as net worth taxes, which are as high as 2% of your global net worth per year, we have a medical system in cahoots with employees, we have social charges that are twice as high, and lifetime liability for business failure.
So what do European entrepreneurs do? Many times they find loopholes but these loopholes even though they are sometimes legal, because we live in the black and white world of Napoleonic laws, they are pathetic to say the least. For example in some case entrepreneurs in Spain are not the legal administrators of their business but find instead people with no net worth to take the job so if things go wrong they are off the hook. And I heard worse things. In some instances, entrepreneurs in the construction industry ask all new employees to sign blank pieces of paper when they join so the entrepreneurs can force them to resign without severance should they need to do so. I know that it sounds insane to an American used to courts that interpret the intent of the law that a simple trick like that would work, but in Spain it works. Another common trick that is illegal but almost normal is that when employees want to resign for their own reasons they ask the entrepreneur to fire them so they can collect unemployment insurance. Another one is that employees who are collecting unemployment insurance offer to work for cash pay but not on the books so there´s no proof that they are working and collecting unemployment and entrepreneurs go along because they save social charges. And this is but a small list of tricks, illegal maneuvers and loopholes that the system of rigid laws, high social charges, and forced severance has created. So when you see unemployment statistics in Europe they tend to be inflated in the sense that there are a lot of people in Europe who are both working and collecting unemployment insurance. The problem is that the employment statistics are also inflated in the sense that there are a lot of fake sick people in Europe who are supposedly employed but who are not working.
Now here is an extreme example. The ultimate American start up, the Hewlett Packard, the company that started in a garage would be illegal in Europe. In Europe everything is regulated. People cannot legally work in a garage. In Germany for example there is legislation that defines what a workplace is. I know that it´s hard to believe but there are even laws that do not allow employees to work further than a few meters away from a window so unless this famous garage has a lot of windows already working in a garage can get your business close. Moreover there is almost a concept of bondage involved in the employee company relationship with a set of rights that creep in and build over time that go against the basic principle of the start up namely of trying new business concepts that may fail. Even eager start up employees who understand that a start up has risks and want to be part of the adventure are not allowed to waive any of these rights. If an employee wanted to sign a piece of paper that said “I declare that I know this is a start up and we don´t have money in this new company to get an office and I accept to work in this garage and I renounce my rights to a window” a government inspector could come and close the whole company anyway. In general I would say that in Europe the concept of trying things out just does not exist, if you try you are liable, if you try you have to behave as an established business. There´s no concept of an incubating business in temporary start up conditions. The moment you are in business you have to abide by the rules of business and this rules are against start ups.
Bottom line, if you are a US entrepreneur or a US company thinking of opening up a branch in Europe you have to learn that while the market here is huge that Europe is a whole new world when it gets to the rules of the game of starting a business. Think less of stock options which in any case are frequently illegal or taxable when they are given out even when they are out of the money, less of bonuses because bonuses are already part of employee compensation and instead interview very very well before you hire because firing is tough and lack of productivity is not reason. In Europe it is not illegal to ask personal questions in an interview, indeed interviewing is much easier in Europe than in America, what is harder is to lay people off. Even if you have a sales person who has been unable to close a single contract it is illegal in Europe to argue that you are laying off this person because he or she produced no sales. In Europe, a sales people are not supposed to sell, they are supposed to show up for work and if they fail to maek sales the fault always, invariably lies with the entrepreneur. When the entrepreneur fires this person it is always a wrongful dismissal that must be compensated for.
Now, to end on a positive note, I can say that in my 13 years of building businesses and managing people in Europe my personal experience has been good. While in one of my portfolio companies there is a high number of people who declared themselves depressed this has only happened with one of the managers who ever reported directly to me. Also, because I never had to close a business, I was not caught personally owing a lot of money to former employees. Employee morale at Fon for example is great and I have not seen any cases of people abusing the system. Moreover, in Spain, and in Europe in genera, there are fortunately very many highly ethical people who don´t abuse the system even if they could. As a result there are many successful entrepreneurs and successful businesses in Europe. But, overall I would say that European society is not business friendly and especially not start up entrepreneur friendly. If you come over, create jobs and do succeed don´t expect the recognition that you get in the States. In Europe, as an entrepreneur, you are much less likely to be seen as an engine of economic growth and more as a person who gained unfair advantage over average folk who are struggling to make ends meet. And, if you are American, even more so. So American entrepreneurs coming to Europe, beware!
As an entrepreneur, I mourn the end of the era of US investment banks. I am sorry that these venerable institutions were first taken over and then blown up by their own traders. Traders should have built their hedge funds and not gamble with the whole investment bank. Entrepreneurs are now left with commercial banks to deal with. These banks have less understanding of our businesses. Here´s a debate by my buddy Brent Hoberman on this issue in the FT.
2007 17
Are Entrepreneurs Hypomanic?
Published by MartinVarsavsky.net in Entrepreneurship with No Comments
My friend Joshua Ramo just introduced me to the concept of being a Hypomanic. I felt at home with it. Both with the good and bad aspects of it. This is what he wrote.
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2006 1
The True Test of Leadership
Published by MartinVarsavsky.net in Entrepreneurship with No Comments
I have been in business for 20 years. Lately I frequently run into former employees who have have become successful entrepreneurs. Indeed this morning I was cycling with a few of them and wondering why is it that I seem to be the last stop to entrepreneurship for so many corporate types. My answer is that, when I recruit, I look for candidates who will run with projects and get them done with little supervision. In many cases, I look for candidates who are better than me at their tasks and I am not afraid to delegate. Corporate executives come to me because they want to do what I do. They see companies that go from idea to global leaders, (Fon has now the largest wifi network in the world) in 6 months and they want to “learn the trick”.
Now my “trick”, I guess, is that they not only learn…they make it happen. And they make enough money through equity in my companies, that the next time they do it on their own, in some cases as much as $50 million. Some examples of very successful former employees now entrepreneurs: Alan Levy, Miguel Salis, Antonio Carro, Christoph Schmidt, Jon Berrojalbiz, Alvy Ibañez, Moises Israel, ex employees of Viatel, Jazztel, Ya.com. And this “learn and start my own” model, is not only true in the case of profit ventures. Rafael Rivera, a social entrepreneur, was one of the first employees of Educ.ar, a very large educational project started by my foundation, and then he went on to being one of the co founders of Red.es, a huge educational internet project in Spain. I once read in Forbes magazine that great leaders are the ones whose followers do well. I would slightly change that. I would say that great leaders are the ones whose followers do so well that they become leaders!