09 Mar Andrea Traversone: Looking for the Flame
As part of Innovation City, I get to listen to a lot of cool stories, sage advice and incredible insight from business leaders around the globe. However, If a speaker is not incredibly interesting, my mind very easily starts to wander to amuse itself.
But this was not so when we had a members-only impromptu event with Andrea Traversone, Managing Partner of Amadeus Capital Partners, a Cambridge based VC founded in 1997. This particular short-but-sweet talk provided nuggets of knowledge gold; from his family background owning hotels in Costa Rica, to his personal moment of pride when Amadeus’ investment into Igenomix, the in-vitro fertilisation genetic testing company, saw 10 000 people from all over the world gather to thank the company for providing them with families they would not have been able to have without their help!
But the first question on everyone’s mind was: How does a VC operating for over 25 years stay relevant? According to Andrea, the secret is in reinvention: “Reinventing yourself in terms of new tech advances every 5-7 years helps. Anything but Bitcoin!” he chirped.
“Another thing people don’t consider or usually forget about is that the VC customer is not the entrepreneur but the people behind the money. Every 3 to 5 years, VCs also have to fundraise themselves. Money in Venture Capital is very liquid and fungible, so your numbers always have to be the best,” he added.
Andrea recommends The Power Law: Venture Capital and the Making of the New Future, a book by Sebastian Mallaby. The book details the rise of VC – a must read if you want to get your head around the ins and outs of this somewhat mysterious industry. In it, Andrea tells us, is the sobering stat that any other industry network is based on top performance at 5%, while VCs have to be in the top 1-2% to be considered a successful business. “A VC is a startup until their 3rd fund!” Andrea said.
How does he see business development in Africa? “Development in the past 5 years has been phenomenal, and it’s accelerating all the time. In 10 years’ time, there will be more traditionally tech businesses on the continent. One thing I hope for is that we manage to stop the brain drain; we want skilled South Africans, like the high quality engineers we have here, to stay in SA. Cape Town as a cluster should be bringing back the engineers that went overseas – they will help train, and bring wisdom to startups,” Andrea said.
Just what sets us apart in Cape Town? For one, it’s our quickly developing tech ecosystem: “Here people adapt to local markets in a totally different way, the lack of ample resources and time drives incredibly innovative thinking – it forces you to think differently and affords opportunities to build businesses in a different way to global. It’s very attractive,” he said.
But a forewarning: Not every tech biz is venture backable. At 25-30% cost of capital to the VC, this qualifies out 80% of the deals.
According to Andrea, product-first companies are best, due to their focus on the problem the customer has, and building a product that matches what the customer really needs (he cited AWS as a good example of this). The idea is to build value by focusing strategy on the product. If you have a great deck but not sure what you actually do, and you can’t give your product specs in writing, you won’t get a second meeting. Andrea calls these ‘PowerPoint companies.’ Don’t be one!
He said: “The most common mistakes businesses make revolve around thinking that you know better what a customer needs than the customers themselves. It’s simple: Ask them what they need. Remove biases. Listen to them. We look for the flame: Is the founder holding a flame? Because I’m in the dark and I need light and I need to find any way I can to get to this light.”
The final bits of this amazing talk then took a philosophical turn. We mooted whether people with financial backgrounds were more open minded than those in traditional professions like medicine. It makes sense that this is indeed true if you think about the flexibility, fluidity and foresight of entrepreneurs, versus the rigid rulebooks abided by traditional professions…
Finally, Andrea ended the talk with one last gem: “Do not worry about failure. But be disciplined about product market failure. Ask yourself: Am I going to hit product market fit? If not, don’t be afraid to just STOP. There are at least two or three more businesses left in you.”
I imagined Andrea growing up in Costa Rica, running around palm-treed beaches, laughing open-mouthed, happy, sun-soaked. How did this boy go from a destiny in hospitality to managing one of the most successful VC firms in the world? Maybe because of his inherent open-mindedness. Or maybe because when Andrea talks, you get the sense that in entrepreneurship, everything is connected – your background, the way you approach a problem, the many innovative attempts you make to solve them, essentially, just like in hospitality, you strive to make people happy.
“It’s not about the building, it’s about the experience. People don’t really remember the rooms, the decor, or the pool. They remember the feeling of being in a place,” he said.
Now isn’t that something to strive for?
Sandra Buckingham is a Journalist and Innovation City Cape Town’s Head of Marketing