The $750 Million 'Mistake'
Wences Casares, an entrepreneur and investor who's been described as the "Peter Thiel of Latin America,” thinks today's youth have it all wrong. He says there's too much focus on building and selling companies, too much focus on raising capital, and not enough pure, unadulterated, crazy ambition to build something that actually solves a problem. And selling, he says, ultimately represents a failure. And he has plenty of experience in that department. Casares's most recent company is Lemon; it makes an app that lets users keep track of their expenses by digitally filing pictures of their receipts. Before Lemon, he co-founded Bling Nation, a social rewards company, Lemon Bank, a Brazilian retail bank for the poor, Wanako Games, a video game company, and an online brokerage, Patagon, which was sold to Spanish bank Santander for $750 million. He's also currently the founding partner of private investment firm, MECK. Inc.com's Eric Markowitz spoke with Casares about start-up funding, entrepreneurial groupies, and what he finds wrong with being a serial entrepreneur.
What's all this about you being uncomfortable with the idea of being a serial entrepreneur?
I'm not embarrassed by being a serial entrepreneur, but I am not proud of having sold so many companies. I would have much preferred to build one company and take it to its full potential. If someone tells that they want want to be a serial entrepreneur, I would be embarrassed to be someone they want to imitate.
So do you think that there is too much focus or praise given to entrepreneurs that have built several companies?
I think that sometimes making the serial entrepreneur a role model is not healthy. It's a little bit like being single and aspiring to be married many times. It would be weird, right? Sometimes I think it's a pity when I talk to first-time entrepreneurs from emerging markets who are coming for advice or inspiration and I hear them say "I want to be a serial entrepreneur." I think that being a serial entrepreneur should be at best something that happens, but not something you strive to be. You want to build the best company possible.
You sold your first company, Patagon, for a pretty staggering sum. Is this something you regret?
Sometimes there's just not many options. Sometimes you have investors and you have a really attractive offer on the table, and that's what happened to me. The offer on the table was so attractive that the investors didn't want to take the risk of not accepting. You knew that could happen when you accepted their money, so you have to go with them. There are different ways to do it, though. You can take the company public, or sometimes you can replace VC investors with private equity investors.
What about your employees?
When you have an offer to be acquired, you as a founder may be willing to take on that risk because you believe it can be a stand-alone company and make it much bigger. But it's also fair that when some of your key people may say "Hey, this equity would change my life, and it would make me very uncomfortable to put it all at risk for a few more years."
As a board member of Endeavor, you're also pretty vocal about up-and-coming entrepreneurs. What's your advice to then?
You often see entrepreneurs go to investors with an attitude of "Hey, if you give me money, I will build this." It's a proposition that very rarely will work with any investor. Investors need to have proof points of how you are as a do-er. Being an entrepreneur, after all, is really just being a do-er. It's impossible to judge your capacity to get things done by a PowerPoint or how articulate you are as a talker or how polished your pitch is. The only thing that hints to how you are as a do-er is by looking at what you've actually done.
So do you think young entrepreneurs should do more "doing" and less fund-raising?
Yes. When two entrepreneurs meet, the No. 1 question is "Are you funded?" If you say "yes," they put you in one category where they give you more status and take you more seriously. I think that's unfortunate, because it produces excessive focus on funding. The reality is that what you can do with no capital has increased dramatically in the last 15 years. Right now with no capital or very little capital you can hire developers or designers all over the world for almost no money, you can have servers where you're just paying for usage, you can do targeted marketing for 100 bucks—things that were unthinkable. It's curious that despite all of those changes, we're more focused on raising capital instead of less.
As an investor, what are you looking for in a founder?
When I meet an entrepreneur for the first time, I realize in the first five minutes what kind of entrepreneur they are. The first is a real entrepreneur who is driven by a market need and by some passion and vision. The second is what I call "entrepreneurship groupies." They'll be at every conference and they'll pitch as many investors as they can. You'll meet them in January and they'll be pitching one thing, and then another thing in March, and another in July. They have this idea that they want to do something, but they're not really sure what. They're focused on raising money, and that's how they judge their success. It's, "if I'm able to raise money, this is successful. And if I'm not, then I'm not successful." The entrepreneurs I admire are ones that have a strong sense of purpose. When you're around them, you almost feel like they're on a crusade. They are judging their success by how many customers they're getting, if they're really having an impact, if they're happy...it's a very clear-cut difference in attitude.