Paloma Cañete: Keys for deep tech startups to overcome the “valley of death”

Paloma Cañete is an investment manager at Fides Capital. Her career began in private equity, but has slowly evolved to focus on early-stage tech start-ups. While she doesn’t describe herself as an entrepreneur per se, it’s clear how passionate she is about the entrepreneurs she works very closely with. Paloma spoke to us about her expertise in the field and what she believes is required to be successful in it.

How did you end up in your current role?

I’m an investment manager at Fides Capital, a private investment group that invests in technology companies among other things, but I’m mostly focused on tech companies. I started working here in 2007, and I’ve always loved seeing how start-ups and smaller companies are developing and growing their ideas. So, after several years of working in different areas in the financial sector, I found that what I really like doing is being a part of these start-ups and their entrepreneurial evolution. It’s really interesting seeing how they grow and develop over the years. 

I don’t have it in my DNA – the entrepreneurial spirit, the desire to start a business myself. However, since we invest in early-stage companies, I get to work very closely with them, and it really suits me.

As an investor, what are the three main mistakes that entrepreneurs make when looking for funding?

First of all, we often see a mismatch between the status of the project and financing. There needs to be a balance between the stage in the project and what they are asking for, in order for their funding to be sensible. 

Next is the team. It needs to be strong enough, in terms of both cohesion and talent, for an investor to have confidence in their success. 

Lastly, the pressure to get funding. It is a bad sign if they are looking for money when they are literally running out of cash  to operate their business. It shows that they might not be managing it properly, by not making a correct planning to anticipate future needs . One learning: you´ll be much more successful raising funds among investors when you still have money in the bank!

Do you think investors need deep technical knowledge to invest in deep tech?

Probably not so deep, but you have to understand what they are talking about because you want to make sure you’re getting into something that fits your strategy. 

For example, at Fides we don’t often invest in projects that need a lot of funding, because we don’t, as a rule, put so much money into any one company. So if it’s a very complicated product to develop, we won’t invest. To decide this, we have to have at least basic knowledge of the technology to understand the stage of development and the potential revenue needed to finance it. So I would say yes, it’s important to at least know what the entrepreneurs are talking about in order to understand its current or potential value.

What made you decide to switch your career to entrepreneurship and venture capital? What interests you most in this ecosystem?

My career was first in private equity firms, where we invested in more developed companies. It was different from working with start-ups, but there I learned a lot about metrics, KPIs, projections… probably less about business models, but a lot about numbers. Then I moved to the financial sector, where I got to understand the criteria banks used to lend money to businesses. And after that, I joined a manufacturing company as CFO and learned a lot about the dynamics of the business itself.

Now, working in venture capital, it’s a mix of everything I’ve learned previously. We need to understand numbers, but also how the businesses work because, since we invest in the early stages, we have to get really involved in the start-up.

I appreciate this environment because we’re trying to help each other; we try to add value to the project. It’s more collaborative. For me it feels very full circle, learning all of these elements throughout my career and now using them all at once in my current role. I didn’t seek it out, but I am really glad that this is where I landed.

What are the main keys and tips to overcome the death valley of the initial stages of (deep tech) startups?

The management team is key. There will be many changes along the way, and the team will be the one that will face those challenges. So it’s incredibly important that they have the skills and the motivation to do it. Funding is also fundamental – not only accessing it, but also using it efficiently. If the company is well funded, they will have more time to develop the project and gain traction.

What is your relationship with The Collider and, in your opinion, what’s the unique value provided by The Collider?

I know them because they represent a very interesting part of the ecosystem.

They have been giving support to the space and individual projects for many years. The Collider has provided great opportunities for entrepreneurs to connect with knowledgeable and interesting people that can, in turn, help accelerate or problem-solve for a company. So, the role of The Collider is an important one, because they are helping projects succeed by giving them a spotlight and a voice.

 

What’s the importance of tech transfer? What opportunities does it present to new start-ups? Any predictions for the future of tech transfer in Spain?

I think it’s the future of technology evolution. For me, tech transfer is the way forward, so that we can harness the potential of certain technologies in order to take them to market. This can often be very difficult to achieve because it requires a high level of collaboration between multiple parties, but I think it’s the only way to succeed moving forward. I say this especially because there are so many opportunities for people and companies to share resources for the benefit of both parties.

What’s a quote that you live or work by?

I’m not sure I have one in particular that I feel represented by. As we know, everything is constantly changing, including us in the different stages of our life. You have to build, and you have to adapt.

However, I was thinking about one that I really relate to right now, and that is Bruce Lee’s mantra: ‘Be water, my friend’. I think we should all strive to do this, but especially with entrepreneurs and start-ups. Adaptability is a must, and we have to transform ourselves almost every day to be able to respond to any situation, while still living with joy and happiness. So yes, I love that quote, and I think in the last few years, it has rung more true than ever.

What has been the most rewarding experience in your career, so far?

It’s difficult to pinpoint just one, but I’m very happy with what I have contributed to create here at Fides, with our current portfolio and the relationships we’ve built with our entrepreneurs. It’s great to see them happy when they overcome an obstacle or fulfill a certain goal. The resiliency we have seen them demonstrate over the last few years has been amazing. They evolved a lot, and I’m very proud of them – both our portfolio companies and our entrepreneurs.

What professional advice would you give to those just starting out?

It’s difficult to start something new in this changing environment, so adaptability and flexibility are very important. Listen to people who have more experience and more knowledge, and surround yourself with a strong team. Be positive, yet realistic. It’s a hard balance to strike sometimes, but you have to follow what motivates you. I think that makes all the difference in the world: being passionate about what you do.