Cristobal Alonso is a serial entrepreneur and early-stage startup investor that leads Startup Wise Guys, Europe’s most experienced B2B accelerator-fund, as their Global CEO. Cristobal is hands on with coaching startups, focusing on purpose, culture and fundraising. He is also co-author of Perform, the Unsexy Truth of (Startup) Success, a Tim Ferriss-like book in which he makes sense of lessons from successful (startup) founders.
How did you end up in the startup world to begin with?
I have always been driven by the entrepreneurial spirit instilled in me by my grandfather and father – they were both entrepreneurs. I genuinely believe that business is a force for good, helping to promote and grow an economy that is financially sustainable and contributes positively to society by providing jobs and tax revenue.
I came to Startup Wise Guys with over two decades of experience in business leadership and investment. As Global CEO, I lead the efforts to expand the our reach and launching partner acceleration programmes across Europe and Africa.
It is positively contagious to be working with hundreds of young, passionate founders and helping them on their way to scale their businesses and make a difference.
And what were you doing just previous to Startup Wise Guys?
After getting my start in business consulting with Accenture, I honed my craft in the telecommunications industry, first overseeing the UK expansion of Greenwich Consulting. Then I moved to Prague, where I led the acquisition of Oskar by Vodafone, an experience that laid the foundations of an extensive business network in Eastern Europe.
Following an interlude which brought me to the world of startups — successfully leading Spanish startup mmCHANNEL through Series A funding of €2 million — I headed back East, taking over as CTO of Baltic-based Bite Group, leading a team of more than 200. C-level stints at Norwegian multinational Telenor were followed by another successful startup venture, this time joining MoboFree (Lithuania-based startup) and helping it grow to the biggest mobile social marketplace in Africa.
By the way, I’m also an INSEAD MBA graduate and president of the Spanish INSEAD alumni association, as well as a former professional basketball player.
What does it actually mean to be an accelerator-fund?
You can look at this question from different sides. For a startup, it means that we are a relatively easily accessible investment and extra brains at an early stage of their development. We usually are one of the first investors in most of our portfolio startups, or you can also say – first believers. On the other hand, for us, it means really getting our hands dirty (in the best possible way). We invest and help startups so early that it is both hard work but also bears amazing fruit if the startups grow successfully.
Typically when people hear the word accelerator, they imagine an equity-free “incubator-like” program. It’s where the word “fund” comes in – and it indicates that we both run excellent mentorship programs but also invest and provide long-term support after the investment.
Our accelerator program is vertically focused on giving the most added value to startups. It is up to 22 weeks long, taking place in a hybrid model with 10% on-site and 90% online attendance. We help startups with their most pressing needs to build up traction and develop the companies, so they are prepared for the next round of funding, where their valuation is much higher.
Accelerator funds also get the opportunity to follow on their investments in these rounds or perform direct investments if the company is performing well enough.
How much do you invest in each startup?
This amount has varied and increased dramatically in the last 5 years. In 2017 we would invest €20-25k and take equity on a percentage basis (around 8%).
Nowadays, we invest up to €100k, giving €30k for the program participation and €70k net cash directly to the company. The companies entering our programs are valued at around €500 thousand to €2 million, and we exchange money for equity in the following range: 3% to 9%.
The maximum invested in a company could be around €400k, including follow-on rounds. In our approach, we like to involve other investors, making the investor pool larger.
What are you looking for in startups?
Although we do have specific geographic locations where we invite startups for the on-site program part, we are geographically agnostic and are proud to have more than 60 nationalities among our almost 350 portfolio startups.
Our most robust footprint historically has been in Central and Eastern Europe. However, with the impact of Covid-19 and moving the program primarily online, lately, we have received applications and invested in startups also from Latin America, the US, Australia and more.
SWG has offices in Estonia, Spain and Italy. We are also represented with partners and programs in the Baltics, Poland, Ukraine, Turkey, Denmark, Romania, and numerous African countries.
With very few exceptions, we invest in business-to-business (B2B) startups. Regarding verticals, our programmes mainly focus on SaaS, fintech, cybersecurity, XR, and sustainability, and we are about to launch new verticals early next year. For instance, our team has just finished a new program in Malaga focusing exclusively on augmented reality, extended reality, and virtual reality software startups, aka XR.
Sustainability became a meaningful focus for us in the previous year. I see it as a vital pivot which saw sustainability becoming its own “vertical” tackled in acceleration – but also baked into everything they do as an accelerator and investor. Furthermore, SWG has currently undergone an internal audit, incorporating SDGs and accountability processes into our activities.
And what does SWG look for in founding teams?
Although traction and other business metrics are assessed, SWG focuses on founder personalities, team dynamics and matching our values. Therefore, the process for pre-selected teams involves a lot of online interviews with our team. These calls are usually a form of mentoring and giving valuable feedback, even if the team isn’t selected. Unlike other accelerators, the SWG team is very people- and team-oriented. So there is a lot of human interaction with founders.
Why should startups choose SWG?
We basically support startup founders from cradle to exit and provide access not only to knowledge and capital, but also to a thriving, truly global community of other founders, mentors and investors.
We’ve been running accelerators for ten years, constantly iterating and listening to founders’ feedback. Beyond accelerating and investing in startups, we are passionate about helping early-stage founders to become business leaders. This approach is a significant change compared to the past, as initially, Startup Wise Guys and other early European accelerators were focused on pure sales and business skills.
We have a saying at SWG, “you will never walk alone”. It means that after the 5-month accelerator program, the support continues. While during the programs, startups mostly appreciate the knowledge and mentor support, in the after-care, they value the highest help on further fundraising, ongoing business and personal advising, a sizeable international peer community (700+ founders from all over the world) and a broad network of investors.
Could you give us your take on the CEE ecosystem today? And in the next 5 years?
I would say we are in the 3.0 era of the CEE ecosystem. We started in ecosystems with little capital and experience but many startup ideas. We gained access to more government capital funds in the second period. However, this capital was also tied with many restrictions, registrations and regulations. Anyway, it helped many founders understand the game, allowing GPs to develop. In the third iteration, many funds have disappeared, leaving the surviving funds, those who have managed to raise the most money and experience.
Currently, there is much less money available for early-stage startups since only a few accelerators have managed to survive and create successful funds. Furthermore, angels are not getting too involved with this market environment, which leads to the struggle of many companies. There are a lot of “dry-powder” funds that have raised money in the last two years that need to invest, so let’s see.
What we predict is that the companies who will get investment will get a lot more money than anticipated, at the expense of funding a more extensive array of startups. Therefore we expect companies to take up to two years before hitting steady growth rates. We are still very optimistic about the CEE market. The value for money is still better than in other markets. The valuation of companies is much more realistic than in other countries, and we believe that in the months and years to come, a lot more funding will come from overseas.
How are Startup Wise Guys’ operations outside of CEE going?
We have offices and programs in Italy and Spain, as well as a fully online program in Africa. Interestingly enough, if you compare the Baltics, especially Estonia, to Western European countries where we have started operating, there’s so much they can learn from Baltic founders and ecosystems. On the other hand, they have the scale that the Baltics and some CEE countries lack. Spain also has solid connections and expansion potential with Latin America.
Our portfolio setup is still very much CEE driven, so our top invested countries are Estonia, Ukraine, Lithuania, Latvia and Turkey. However, Italy is catching up as we made almost 20 investments in Italian companies due to our expansion there in 2020.
High expectations have also been placed on our African programme, the second having started in October. Selected B2B SaaS startups are offered access to €65k in funding and an intensive five months of mentorship. This year we have already held the first edition of this programme and saw a very high level of activity in the region and significant prospects for the domestic startup ecosystem.
What startups from your portfolio are you most excited about?
It is difficult to identify some companies in our portfolio – they are all unique and promising for us. To date, our accelerator has made more than 350 startup investments, seen 13 major exits, and achieved an overall startup survival and success rate above 80%.
From the latest batches, I would single out Estonian startup Wolf3D, aka Ready Player Me, that enables creating an avatar from a single photo. They have received accelerator and follow-on funding from SWG and recently raised a €56M round led by a16z.
Other bright stars in our portfolio include Estonian farm management startup Vitalfields (from Batch 1, was acquired in 2016 by Monsanto-owned The Climate Corporation bringing high returns to our first fund) and Soter Analytics, which provides AI-driven end-to-end safety solutions (€13.8M total funding so far). Ondato and Fractory also have considerable potential.
Startup Wise Guys also makes direct fund investments (without the accelerator program), and we are proud of the success of these companies – from the Estonian unicorn Bolt to Vochi that exited to Pinterest, as well as Baltic superstars such as Skeleton, Planet42, Jeff App, and others.
What advice would you give to startup founders in these turbulent times?
Over the years, I have seen too many founders making the mistake of building companies for investors, not customers. When the investment scene or economy slows down in turbulent times, these are usually the first ones to die.
Therefore I would nudge founders to create a business that is extracting and giving value to their customers, with a profitable business model capable of funding its growth. To understand your business model, outline a path to profitability from day one. If there are challenging moments in terms of funding, this should ensure that companies can still survive from their own resources and revenues.
What’s next for Cristobal and Startup Wise Guys?
For Cristobal Alonso, the goal is to keep growing Startup Wise Guys for years to come, thus being able to support even more founders from overlooked markets in their journey towards building great sustainable tech companies. We have seen this effect in the Baltics and want to replicate it further in other European, African countries, and, who knows – maybe on other continents too.
This year we celebrate the 10th anniversary of Startup Wise Guys. As a company, we are facing a beautiful and painful experience of what growth and scale mean. So we can relate to the startups that we work with. Our team has grown from 3 to 60+ people from 20+ nationalities across Europe. We used to run one, max two accelerators per year, and this autumn, we hit a historic milestone running seven parallel accelerator programs on two continents. We are managing one of the most prominent early-stage portfolios in Europe. Keeping the growth but solidifying the company and working smart at scale is definitely what is on my mind right now.
But overall, we want to keep putting our energy and passion into making a global impact. We aspire to be a top-performing VC worldwide to support our follow-on investment rates at 50%. Our aim is to create role models for the world by focusing on overlooked markets and founders. Striving to develop high-growth employment creation and development, we want our global network to reach 1500 founders within the next 5 years.
What’s the best way for people to stay updated with the latest from you?
I have taken up a personal challenge to post more regularly on my social media and share more of my journey as a CEO, mentor and investor.