Jorge Dobon Montagut is CEO and co-founder at Demium. His aim is to match the best local talent with global business opportunities to create startups from scratch. He helps to create over 100 startups per year across 6 countries in Europe with 11 incubation hubs in fast-growing markets: Belarus, Ukraine, Poland, Portugal, Greece, and Spain, and investment hub in London (UK).
How it's all started? How you decided to enter the venture investment business?
I am 30 years old right now, so it started when I was 23. I'm from Madrid, where I started my first company when I was 20. But I failed. It wasn't a startup, just a traditional company in the food and beverages with my two friends. I was in the university by that time, and it failed, with personal debts when I was 22. It became the tipping point in my professional career. I found this startup called {xsystem} - a much more scalable company, where investors and VCs would take much more of the financial risk. I have decided to start my first company - a venture builder as an entrepreneur. In 2012 I joined the Sonar Ventures. I was there for a year and learned the basic topics of the startups and VC. Then I decided to start my own incubator to spare other entrepreneurs all the mistakes that I have made in my first two companies, to support them and to help them avoid the same mistakes. That was the reason I decided to join the startup ecosystem and the VC world.
What was the most unusual startup you ever supported? Or, maybe, your favorite or memorable?
All companies, I am proud of all of them. There are companies from Valencia, or Malaga, or Bilbao - those small ecosystems in Spain, where there is not too much access to capital. The same happens, for example, in Minsk, Belarus. When I started in Valencia in 2013, the largest VC there was 3m Euro fund (in Belarus right now the largest VC has 6m Euro funding). In places like those there is a lot of entrepreneurial talents. You can find some unexpected entrepreneurs, who can create global companies from those small ecosystems. One company in Valencia that we have invested in at the end of 2014 is called Voicemod. For almost 5 years it was only 7 people team, doing voice-changing and modulating software for the video game industry. They have now over 1.5 million active users, raising for 10 years only 300k Euros and having very good situation there. You could find this kind of companies only in smaller ecosystems. It is better to try to find those kind of incredible companies then to compete for good companies in places like Berlin, London or San Francisco, where the competition is tough.
How many startup projects do you review per year?
We operate in 6 different countries - in Belarus, Ukraine, Poland, Portugal, Greece, and in different cities in Spain. In all countries we create the deal inflow from scratch. We see entrepreneurs in pre-team and even pre-idea stage. We help to find the right co-founder and right business opportunity or idea, then we support entrepreneurs for 6 months, and at the end of the process we decide either to invest or not to invest into the company. We have created from scratch 450 teams in 7 years, about 180 - the last year. We had done 110 investments in 7 years, around 50 of those over the last year. This year we will invest in around 75 companies from over 300 teams that we will create. Source of this deal flow is individual entrepreneurs, who arrive to our hackathon events. The last year we had over 9000 entrepreneurs applying to different hackathons, this year we expect over 15000 applications.
How you select startups to support? What are your criteria?
We select the talents through the hackathon events we organise 6 times a year in every city we work called AllStartup Weekends. So, in the 10 cities last year we have organised 45 events and are going to organize 60 events this year. Also during COVID19 we changed to do this online and was a great success. Before these events we meet talents, do different interviews, watch team dynamics. Only 30 entrepreneurs out of 300 applicants participate in the hackathon, and out of those 30 we select 10 to 12 to participate in our 6 months program of physical incubators. We drive them using our methodology and Demium software, developed in house. And then at the end of 6 months we decide either to invest or not in the best companies we’ve created.
What industries you’re interested in?
We're totally agnostic in terms of the markets and business models. The most important part for us is whether an entrepreneur is talented or not. So we do selection regarding the skills and personality. We are looking for people who can be leaders, who are resilient, who are ready to work hard, who can work in team - we evaluate these qualities with our experts. The idea itself is not the most important part for us - we are agnostic here. We look for a global company, despite our location in Europe. And we invest in companies that could reach potential evaluation over $100m. So we are looking for big global companies, not for small local businesses.
What is your due diligence procedure and how long does it take you to cover the whole way from the first meeting with founders to contract and check signing?
We do not invest into companies we didn’t create. That’s why our due diligence process is our 6 months program itself, and we make a decision about an investment during our work with founders. We don't do anything in terms of a company performance, because we don't invest in companies that are already incorporated in the market.
How many Xs do you expect on exit for your investment?
Our expectation in Demium is at least 20x return. We do not do a different cash out within the lifetime of the company, and we expect to get from 20x to 50x returns at least. Most angel investors expect to lose somewhere between 30% to 70% of their part of the company during the following rounds of raising funds, but they also take bigger risks during the companies lifecycle, so they usually have 20x-30x from the companies that perform the best in their portfolio, which in 1 out of 10-15 companies they support. For VCs it depends on the stage they invest. If they enter at the seed round, they may get 20-25x on exit, if they enter later, it is closer to 10x. For Series B onwards, they should expect from 3x to 10x. It is rare if they get more.
What percentage of ownership of a company is fair to take for investment?
The main problem here is that when you invest at very early stage, it is very difficult to evaluate the commitment of the entrepreneurs to their business. If you invest on later stage, when a company already has 15 or 20 employees, it is much easier. If you’re investing at the talent stage, there are 2 risks. One is the commitment in terms of time and life commitment to the company. The second one is that the founders need to fit different profiles, they need to agree who is the leader, say, who is the CEO. They need to be a team, not competitors. And if you didn’t find the right co-founder, you will probably fail. I think, a startup will need from 2 to 6 rounds of fundraising, depending on the size of a company, the experience of entrepreneurs, etc. At each round 10% to 30% might be taken. At pre-seed round ($200k-$1m) founders loose from 15% to 20%, at Series A round - about 20% for $3m-10m, and at Series B round - 20%-30%. These are typical aquities at different stages.
Have you ever rejected a startup and then regret it?
I think, in our case I don't regret about a company, because a company is not established yet and we invest in talent. For sure, we have rejected so many interesting people who later established their companies. Still I don't have any anti-portfolio companies. We don’t invest into entrepreneurs who aren’t fit with our model, who prefer to go directly to the VCs. And I don’t regret in that cases.
Can you name industries you really like, yet will never invest into?
If I like a model and market, I will invest. I have only typical limitations - we cannot do drugs or any kind of military things. But I’m not attracted to those kinds of markets. I really like CBD market, but we can invest there and have at least two companies that come to my mind in that specific market. So my answer will be that there are many markets I don't feel confident enough yet to enter, but I would like to be, like, for example, the BioTech or the medical devices market. All those markets are really attractive to me, but I don't have the expertise, I don't have the network investors and we haven’t reach critical mass of talents there. Later, I think, we will be doing some deals there, but we haven't done any deal yet.
Have your VC approach changed after the COVID-19 started?
Yes, sure. I think, it's impacted everything. Before COVID-19, we did mostly physical interactions with our startups, and now those interactions are 100% virtual. Doing that, suddenly we had to change because we have different entrepreneurs in different cities, and they all had to start working remotely. Now we have decided to remain some of this virtual approach, and we are going to run partially virtual program, taking the best parts from both physical and online approaches. When you run a physical incubator, the relationships between founders grow stronger, and I think it is something which we will keep. But in terms of scalability we can get very interesting results. For example, there are many interesting tech talents in Ukraine or Belarus and there are a lot of great marketing or sales talents in Spain or Portugal. Using virtual programs, we can create cross border founding teams with co-founders from different markets, and this is a great opportunity for us. That is something we were testing within this quarantine period and something we will keep in our future model.
Talking about founders’ personalities, with who you would prefer to work rather, with Steve Jobs or Steve Wozniak?
Steve Jobs. I like Steve Wozniak for sure, still I would like to work with Jobs.
What books, movies, blogs, events can you suggest to startup founders?
In terms of books I would recommend Siddhartha by Hermann Hesse and Emotional Intelligence by Daniel Goleman. These 2 books complement well to startup founders’ career and personal growth, because you need to self discover yourself in kind of the spiritual way - what is the purpose of life, how to connect with other people and serve the planet.
Can you name three most breakthrough startups in the history?
WhatsApp and WeChat - I think it's important to name these two. And I would add Apple - I’ve hadn’t bought any not Apple device for the last 10 or 12 years.
Are you satisfied with what you do, or do you think to apply your knowledge and skills to something else in the future?
For the next couple of years I will be definitely in the VC world. I would like to add at some point in the following 20 years to the emotional education of the society, either from an investor perspective or, maybe, teaching myself. I think, it is a very important topic, and I’m going to help linking it to the education market.
With which desktop game can you compare the VC business?
I used to play chess, but I think it is more like corporate game with all that politics involved in corporate life. VC is much more about the strategy. But VC is more like social game, where you have to play in team of several people and perform various tasks, like quests, or performing, or painting. VC is quite similar: you need to work together with your team, you need to have mind connection with him or her.
Your favourite soccer team?
I think my team is Atletico Madrid, because they always fight and they don’t have as many supporters as Real Madrid or Barcelona. Everything is always depend on passion for them, every achievement to celebrate - and for us as well.
