High-Impact Entrepreneurship

By Jacob Ritvo

Jacob is an MBA student at the Yale School of Management and is spending his summer as an eMBA with Cinemagic in Mexico.

Working in another language is hard. Basic skills that are second nature in English become taxing in Spanish—reading takes longer, listening demands greater concentration, and writing and speaking require considerable thought just to form a cogent sentence. Plus, there is the challenge of learning colloquialisms (por favor becomes porfa) and growing my business vocabulary (it turns out EBITDA is also EBITDA in Spanish). And yet, my first two weeks as an eMBA with Cinemagic in Puebla, Mexico, have been nothing short of wonderful.

My first assignment was to prepare a series of presentations on Cinemagic’s business model and CSR programs—two for a pair of case discussions on Cinemagic with international students at IPADE Business School, plus one for a session on disruptive technologies and products that Roberto Quintero, the founder, will participate in at the Endeavor Entrepreneur Summit in San Francisco. Researching and assembling the presentations proved to be a great vehicle for better understanding our business model, customers, and industry. Although I still don’t know Cinemagic inside and out, I know it well enough to now set my sights on tackling some of the challenges we face with regard to competitive, financial, and customer strategies.

Roberto and his co-founder Pepe Irigoyen have been gracious about including me in top-level meetings, seeking my opinions as a consultant and introducing me to the way business is done in Mexico. I’ve joined them at a pitch to investors, negotiations between Cinemagic, a real estate developer, and the mayor of a city where we want to build a cinema, a conference on social responsibility with business leaders from across Mexico, and the aforementioned sessions with IPADE students.

Roberto, Pepe, and my other coworkers have also been extremely welcoming and hospitable, taking me on tours of Puebla and neighboring Cholula, inviting me to break bread with their families, and introducing me to local culture. Tonight, we’re off to las luchas (Mexican wrestling) as an office, and there is much more interesting work and fun activities in store.

This past spring, 12 graduate students from the University of Michigan’s Ross School of Business spent the end of their first year gaining hands-on business experience through the school’s Multidisciplinary Action Project (MAP) program. This mandatory experiential learning program is a hallmark of Ross’ curriculum, which allows students to engage in live cases by working with a small team inside a company for the last seven weeks of their first year. About half of the projects are domestic and half international, with the common goal of exposing students to real life business problems and giving them the opportunity to devise solutions.

This year, MAP partnered with Endeavor to connect students with three companies run by Endeavor-supported companies, including TOP Systems (Uruguay), Aguamarina (Chile) and PIWorks (Turkey). Student teams of four worked with these businesses providing consulting skills—and immersing themselves in the countries’ cultures, languages, and professional customs.

For the first of a two-part series on the MAP Program, I spoke with MBAs who worked at Top Systems, founded by Endeavor Entrepreneur Alvaro Domínguez. The following post features students who worked with Aguamarina. Students from the PI Works team could not be reached, but look out for future news on this rising mobile network optimization company.

Check out some of the photos from the various MAP trips on Facebook!

What drew you to Top Systems?

Santiago: I chose this project because it involved entrepreneurship and venture capital. Interested in information technology, and also interested in Uruguay, this was a great option for me. Based in Montevideo, Top Systems develops office software for banks. Our project involved a new initiative to leverage cloud-computing technology to develop back-office software solutions for microfinance organizations.

What were some of the challenges you faced?

Rytas: One of the issues we ran into was that we initially had to do a lot of research on microfinance and cloud-computing in South America, which was not as easy as we thought it would be. Resources were not readily available due to the lack of transparent governement regulations and reported data within those industries and countries. If we were to have taken the same project on in the U.S., it would have been much easier.

Also, we had to deal with the language barrier, which was challenging at some points. Fortunately, CEO and Endeavor Entrepreneur Alvaro Dominguez spoke English very well, as did some of the staff. I think this is one of the inherent challenges you face when dealing with international companies. That said, we were fortunate to have Santiago, a native Spanish speaker, to help us!

What role did Endeavor play in your experience?

Rytas: What Endeavor offered us was not only a place where entrepreneurs would provide an institutionalized business experience, but it also gave us experience determining a specific project and how that project was going to be accomplished. It was a very symbiotic relationship in that it paired us—students looking to apply our skills—with a company in need of those skills. Endeavor put us together in what was really a perfect partnership.

Santiago: I love how Rytas phrased it—a perfect partnership. I was actually familiar with Endeavor before we got into this project, having worked with them in Argentina. Knowing about the mentorship and coaching that Endeavor does and the resources they provide to their affiliate companies, I had high esteem for Endeavor, which is one of the reasons I chose this project.

Final thoughts?

Santiago: Our team thrived on the program because we had the drive to excel and because we wanted to make sure we provided quite a bit of value-add to the project. Ultimately, this is why Endeavor initially engaged with the MAP office: we are part of the overall resources that Endeavor offers these exciting companies.

Rytas: I think the project went very well overall, and we’re keeping in touch with TOP Systems to follow the progress. We left them with a framework to launch the program, and though they weren’t ready to launch it while we were there, they’re hoping to implement it shortly. In addition to the business work, the people we met were very accommodating, which made our stay enjoyable and an overall fantastic experience.

About the MBA students

Santiago Garcia-Balcarce: Before coming to Ross, Santiago worked in the Bay Area leading a high-tech business incubator that supported U.S. and foreign start-ups and entrepreneurs. Prior to that, he was part of the investment team of a top-tier venture capital fund also based in the Bay Area.

Rytas Vygantas: Prior to getting his MBA at Ross, Rytas worked in investment banking covering financial institutions. After completing his MBA, he hopes to pursue a career in venture capital and says he looks forward to having a chance to work with driven and successful entrepreneurs like Top Systems.

Nicolas Ramos, COO of Endeavor Argentina‘s Córdoba office, spoke with local newspaper La Voz Noticias on how entrepreneurs can intelligently approach and secure investors.

Read the original version HERE (en Espanol). An English translation appears below.

1. What factors lead an investor to “buy into” a project?

There are different stages in a venture, and each stage has a certain type of investor that would be interested in investing. The seed capital needed to start operations is usually provided by what is called the 4 Fs: Family, Friends, Fools and Founders. They buy in because they believe in the person. They don’t study the business plan; they may look at the return on investment a few years away. Professional investors such as angel investors or investment funds usually invest in companies that are already in operation to some degree. At this stage, the company should have a defined business model and a growth strategy. Angel investors or funds will be interested in the entrepreneurial team and how they problem-solve, their leadership style and their ability to perform under pressure. Investors at this stage also look for an exit strategy. They usually buy a minority stake in the company so that in the next round of financing, equity is purchased by another investor for a higher price. An investor puts money in at this stage for operations — equipment, working capital and other items that grow the business — and not for the entrepreneur to take home. It is important to clarify that investors in the early stages of a venture are usually not interested in joining the management team of the company.

2. What are the most common mistakes entrepreneurs make when pitching their projects to an investor?

It’s important to keep the pitch professional; the entrepreneur is not asking for help, but asking for money. It’s especially important to define the terms of the investment. Also, entrepreneurs often concentrate on the specific product or service they are developing, rather than on the business. An investor needs to know what the company produces and what makes it competitive, as well as the business side of it — who’s the target customer, what’s the market demand, who are the competitors, etc. A great product can have a terrible business. I usually advise entrepreneurs looking for investors to ask them to contribute more than money. They must look for “smart money,” an investor who will also add a network of potential investor contacts, or knowledge and experience.

3. Is it true that it’s especially difficult to get financing in Argentina?

Both funding and investors are scarce in Argentina. For some enterprises, there are many government programs that can contribute financing for companies, such as non-repayable contributions or loans with subsidized rates, such as SEPYME (Nation) or the Ministry of Industry of Cordoba. I cannot comment on bank loans. A network of professional investors is just beginning to develop with some success, but of course, there is less of this than in countries like Chile and Brazil.

4. What’s your best advice for entrepreneurs?

One important thing is to focus on the strengths of the entrepreneurial team. Another key issue is developing a simple way to explain the potential for business growth: the more attractive the business opportunity, the more investors will be interested in participating.

David Auerbach, the author of the following post ran Partnerships, Policy and Outreach at Endeavor from 2006-2009. Inspired by Endeavor Entrepreneurs, he decided to go to business school two years ago and just won the MIT100K Business Plan Competition for his new initiative, Sanergy. Also be sure to check out Elmira Bayrasli’s profile of Sanergy on the Forbes blog.

I left Endeavor two years ago to go to business school at MIT-Sloan. Endeavor Entrepreneurs have inspired me more than they could possibly know. Some of them are people who just knew that they could do their specific expertise better than the status quo. They got fed up with convention and so they re-wrote the rules. Others are dreamers who have the craziest ideas. And others basically saw an idea in one country and said, “Hey, I can make that idea work in my country.” I’d like to think that all three of those “types” played a part in shaping what I’m up to now.

With a new venture, Sanergy, we are trying to tackle the sanitation crisis in urban slums. We are doing this by building low-cost toilets (made of thin cement), then collecting the waste, and converting it into fertilizer (which we can sell to flower farms) and electricity (which we can sell to the grid). We are also creating local jobs because each toilet is owned by a local resident, who can operate it as a viable business charging people to use the toilet (which is commonplace). We are starting with the slums of Kenya, where 8 million people lack access to a good toilet and resort instead to undignified experiences.

We’ve got a great team. There are three of us from MIT’s business school and then, over the last two years, we’ve found engineers and designers across the MIT campus (and now the University of Nairobi, Chicago and Georgetown), who share our passion for sanitation and have helped us design and deploy the toilet. So far, we have two toilets that are operating in the slums and 150 people are using them every day. We’re headed there in June to scale our enterprise up and start producing fertilizer. Within five years, we aim to be serving 500,000 people with high-quality sanitation.

Last week, my team won the MIT100K Business Plan competition. This is a prestigious competition and, much like becoming an Endeavor Entrepreneur, gives us new credibility with investors and partners. It’s great step for us and we are thrilled. Winning the MIT100K is a big deal to us for a number of reasons. Of course, the money doesn’t hurt. But more importantly, in the grand scheme of things, I am hoping that this is a big win for business with purpose. This competition is traditionally won by companies that have the next great idea in software, on the web, or in pharma. The idea that a business can be profitable and have an expressed social mission and win this competition gives me so much hope for the future!

You can learn more about Sanergy by following us on our blog.