Half entrepreneur, half investor: a candid interview with François Derbaix

- September 12, 2014

françois derbaix

With two exits under his belt and more than 20 investments, François Derbaix has become one of the most respected voices in the Spanish startup ecosystem. Born in Belgium, François came to Spain in 2000 to create his first startup, Toprural, with his wife Marta Esteve. Three years later they launched another venture, Rentalia, and in 2012 they were both sold to Homeaway and idealista, respectively.

Half entrepreneur, half investor, he’s now involved in three new startups that he’s helped co-found –Soysuper, Bewa7er and Aplázame– while he continues to invest in companies as a business angel.  In the middle of a hot summer day in Madrid, I sat down with François to talk about his career, the challenges as a first time entrepreneur in Spain and his vision on the evolution of the country’s ecosystem.


It’s often said that kids who grow up in an entrepreneurial environment end up becoming entrepreneurs themselves. Where did you grow up? What was your family like?

In that sense I am a little unusual because in my family there are no entrepreneurs. Most members of my family are environmentalists and left wingers, and so they were never very interested in issues that had to do with companies, ventures or investments.

My father is a civil engineer and he has worked all of his life for other companies. I also have three brothers but they’re also not associated to the world of entrepreneurship at all. One is a musician and the other is a professor of religion, but, interestingly, he’s not a believer and he teaches in a Catholic school that’s mostly Muslim.

The idea of ​​starting my own business came to me when I was maybe 16 or 17 and in high school. My dad had been through various jobs until then and in most of them he wasn’t happy with his bosses and often felt ‘used’ by the companies, something that happens to most employees at some point of their careers. That encouraged me to find a way in which I could be my own boss and hire my father, but thank god that never happened.

So yes, I always wanted to have the freedom of being my own boss and not depend on others. However, I later realized that even when you’re on your own you also depend on others: investors, suppliers, employees, customers, etc. But I’m still glad I took this path of building companies and helping others by investing in them.


Were you already thinking in those terms before going to University, while you were in high school?

I made the decision of studying business and commercial engineering when I was 16. That’s when I thought that at some point I wanted to start my own business and that taking those classes was the best way to prepare myself for it. I studied for four years in Belgium -where I met my wife, Marta- and when I graduated I started working at Boston Consulting Group.

It was a very demanding job, you had to work long hours -60 to 80 hours per week- but it was also very well paid. I remember I was making about 80,000 euros, which is a very good salary for a recent graduate. I didn’t go crazy with that money though; I still lived as a student, sharing an apartment with some friends from school, and that allowed me to save a ton of money that I ended up using to build my first two companies. I got promoted after two years and then Marta and I decided to move to Spain. I had never been to the country but I was ready for the challenge.

Looking back I realize those were two very intense years, but I learned a lot and it got me ready for what was to come.


When did you decide to start Toprural?

While I was working at BCG I got in contact with a French hotel booking company. They wanted to open a subsidiary in Spain and they thought I’d be a good candidate. This was in the late 90s.

Toprural's team in the summer of 2000

Toprural’s team in the summer of 2000

I analyzed the business, I did some market research but in the end they didn’t get the funding to set up the business because of the dotcom bubble. When that happened the company told me I could do it on my own if I wanted to. They encouraged me to start the business and they promised they would invest in it if things improved. But I thought… “why don’t I start the business on my own, with no external help?”. And that’s what I did.

The market research we had done showed us that focusing on the hotel industry was not such a good idea, so we opted instead to focus on a niche, a smaller market, that ended up being rural tourism. I had no idea of the industry and had never stayed at any rural house, but I saw that most of Marta’s friends in Spain were very interested and active in the market, renting cabins for weekends, reading magazines offline and online, etc. That was a sign to us that there was an opportunity and we started working on it.


So it was more that you saw a market opportunity and not that you were passionate about the industry, right? I ask you this because in previous interviews you’ve said that passion in entrepreneurship is overrated. Do you still think so?

Yes, I think ambition matters more than passion. Being an entrepreneur is hard, you feel lonely at the beginning and there’s a great chance that what you’re building won’t scale or won’t even take off. So you need a lot of strength to face the challenge, the journey, and I think that ambition is a better engine than passion to make bold business decisions and it allows you to focus on your customers instead of the product.

The problem I see with passion is that sometimes it makes you fall in love with your product and listen less to your clients. And ambition does the opposite: it’s what makes you want to change the world, transform an industry or build something that is really big.

Many might not agree but this is what I found throughout my career. While I was doing market research for Toprural I talked to people that were much more passionate about the industry than I was. I ended up in tourism by chance but I honestly think I was more ambitious than most when it came to working full time on my idea, hiring or having international expansion plans.


“Ambition is a better engine than passion to make bold business decisions and it allows you to focus on your customers instead of the product”


Do you think being ambitious depends on education or what you were taught at home or is it something natural, that you’re born with?

Every single person in the world has his or her own personality, but I think it’s important to want to play and to want to win. If you don’t want to win you fight less and this leads you to build smaller things instead of big ones.

Entrepreneurship is intense and you have to be pretty motivated to devote the hours needed to build something, you need to think all the time about the business and the job. It all depends on the individual, on how hungry you are and on whether you need to prove something to your family, your friends, your colleagues or the world in general.

That said, I don’t think everyone has to be an entrepreneur. Being an entrepreneur and building a startup is not a rational decision, it’s more of a necessity. If you rationally think about it you’d never build a company because the chances of failure are very high and you can simply accept a job at a company and be less stressed, have a good salary and, maybe, a better life. I honestly believe people shouldn’t tell others that they should become entrepreneurs at any cost.


Related to that, it seems that the Spanish government and other public institutions have jumped on the entrepreneurship bandwagon, as if it was the only solution to Spain’s economic problems. Do you think it’s fair?

I don’t care what the government says, what bothers me is what they do because they usually tend to annoy more than help. I do not think everyone should try to build a company, but I’m a firm believer that every single person should be self-employed or work as a freelancer at some point in their life. It’s a very valuable experience.

Being independent allows you to become aware of how difficult it is to earn money on your own, to find clients; in essence, to make a living. If you work for a company you probably think that a 1,000 euro salary is very low, but if you’re a freelancer you realize how hard it can be to get to that level.

If a lot of people had this experience they’d have less dependence on their current jobs and more freedom to experiment and, what’s more important, to learn.

françois derbaix interview

François and Marta in their first Toprural office: their own house (2000).


Going back to Toprural for a moment. You and Marta went back to Madrid in 2000 with the idea of Toprural in your minds, but when did you decide to build another company, Rentalia?

In 2000 Marta took a job at a startup -eCircle, Domeus, it still exists today- to have a salary. With that money and what I had saved we could focus more on Toprural, myself on a full time basis and Marta in the evenings and weekends.

In 2002 or 2003 Toprural started growing and we were also profitable, so Marta decided to quit her job and we both started a new company, Rentalia. This might sound crazy, but it was all a consequence of what we were seeing with Toprural. We noticed that many types of houses and properties wouldn’t fit in Toprural because of our focus on our rural and country houses. The owners of such properties were very interested in renting them, so we made the decision of creating Rentalia to take advantage of what we saw as another market opportunity.

From 2003 onwards Marta spent most of her time on Rentalia and myself on Toprural. We’d constantly help each other, but each startup remained independent. This continued until 2012, when we sold Rentalia to idealista and Toprural to Homeaway.


“Business cycles on the Internet are very fast and you are unlikely to maintain a company at the top for 40 years; and if you think you can do it, I think it’s good to accept to manage such a company on its way up and on its way down, and that’s not easy.”


So that means it took you 9 and 12 years, respectively, to sell both companies. Iñaki Arrola recently published a blog post stating that success doesn’t happen overnight and that exits in Spain tend to take a while, more than in other ecosystems. Do you think Spanish entrepreneurs and investors are aware of this?

Someone told me recently that, on average, it takes Chinese companies 3 years to sell, 4 years in the US, 7 in Europe and 10 in Spain.

In the case of Toprural I think we should have sold the company before. We could have sold it in 2007 when we were growing much faster. It was then when I learned that it’s better to sell when you’re growing at high rates than when the growth is slowing down. And also, I know many people who regret not having sold a business, but I don’t know many who regret selling too soon. Growth is more important that profitability when it comes to startup exits and I clearly saw that with Toprural.

When we sold Toprural there was an intense debate in the ecosystem because I said that I had built the company with the intention of selling it, and that clearly clashes with the romantic perception of entrepreneurship. But I think it’s good I was being honest and I think many people share my opinion, although not many are willing to admit it in public.

I think it’s important to be honest with yourself, admit your limitations and set your own goals. I knew when I was 25 and founding Toprural I wasn’t going to spend the next 40 years of my career at the company, until I retired. Business cycles on the Internet are very fast and you are unlikely to maintain a company at the top for 40 years; and if you think you can do it, I think it’s good to accept to manage such a company on its way up and on its way down, and that’s not easy.

I see this a relay race. I took Toprural from 0 in revenue to €4.5 million, and from Spain to other European countries. But there comes a time when it’s appropriate for others to take over and lead the company to greener pastures. I think we had reached our limit and we were ready to let another team grow the company. And the same is true about Rentalia.


Besides realizing that you should have sold Toprural sooner, what other lessons did you learn with the two exits you have had?

Exits are like a Masters. By building companies you learn a lot, and by selling them you learn even more.

The most important thing I learned is that what matters the most to sell a business is growth. I used to think our selling price would be based on our profits and EBITDA, so I spent a lot of time optimizing for EBITDA instead of growth. Classical valuations models claim that it all depends on the current value of future cash flows, but in a sector like the Internet this is sometimes not true. As the online economy grows, I think it’s more important to focus on market share than current profits. Amazon is a great example of this; they have billions of dollars in revenue each quarter, but they barely turn a profit.

After I sold Toprural it was great to stay in the company for 9 more months as an advisor. I got to see how others managed the business and I learned a lot from them. The top priority for them was growth instead of profits, and I still believe that should be the case for more startups.

There is also something else I try to instill in the startups in which I invest and in others that I advise. Many entrepreneurs want their companies to turn a profit to be able to have some liquidity for themselves, to cash-out. But I think it’s better to reinvest the potential benefits in the company and let the founders sell 1 or 2 per cent of their stake in the startup per year to obtain liquidity, instead of paying dividends and slowing growth.

Something else I learned is that a sale is not complete until you have the money in your bank account. With Toprural we had previously been in another sales processes and we took it for granted. Guess what? It didn’t happen. The due diligence was done, we were finalizing all the paperwork and we had even agreed on the selling price. But the deal fell through one month before it was supposed to be announced, because of circumstances related to the buyer.

That’s when I realized that even if you think a deal is done, there are a ton of things that can affect the process. So I always recommend entrepreneurs not to take things for granted, to talk in conditional terms and not to make any decisions that might be associated to the company being sold.

derbaix soysuper

Soysuper team, January 2014. From left right: Juan Leal, Raúl Retana, Marta esteve, Alex Eiras, François Derbaix y Mariana Bustamante.


You raised money for both startups many years ago, when the Spanish ecosystem was in its infancy. What’s your opinion on its current status? Has it evolved as much as people say it has?

The main difference I see is that there is much more money. Toprural got founded with less than 100,000 euros and today a great startup might need more than 100,000 euros to start. It takes more money today than 8 years ago to build great companies, but capital is available and also higher valuations. Despite this, there are many entrepreneurs who believe that there’s not enough money in the ecosystem.


Do you think that’s true?

Entrepreneurs say they need more money and investors say that what they need are more and better startups. I think there is an objective way to look at it, and that is that investments in Spanish startups lose money overall.

Take for example Neotec, a public fund that has co-invested in more than 30 funds in Spain and has had an average return of -7% per year. This means that the funds that have invested with them probably have not made any money either, which could mean two things: that we are missing new and good startups or that there is too much money in the market. In my opinion Spain needs more big and powerful startups than more money.

I also believe entrepreneurs should not complain often about the market conditions. Because if they do take they will suffer and they might not assume that their company did not take off because of their own fault. The role of the entrepreneur is to find the best way to dodge bullets and overcome hurdles. And if you fall down and you think it all happened because of the obstacle, you might think it was you that kept you from succeeding.


“I think this is related to the fact that many large Spanish businesses are not large because of being better than the rest or more competitive, but because of having received lots of public money.”


On the topic of entrepreneurs complaining: many entrepreneurs I’ve talked to who have raised money from international VCs tend to say that the conditions imposed by Spanish funds limit entrepreneurs and startups. In essence, they say that term sheets in Spain are much more restrictive than those abroad. Do you think that’s the case?

It is true that in other European countries there is much more competition between funds, so an entrepreneur can negotiate favorable terms. But I do not think the conditions are very different between Spain and other markets. I have seen term sheets from international VCs that are very similar to those in Spain. However, I can’t say this is 100% true because my experience raising money abroad is limited.

What I do believe is that this way of seeing things is conditioned by entrepreneurs and investors not understanding that they have very different objectives and goals. From the outside they both seem aligned, but in practice they are so different that sometimes reaching agreement is very complicated.


Are entrepreneurs too obsessed with raising money? Is it common that they don’t realize that not every single project needs to raise money from external investors?

Yes, of course. Most people identify success with fundraising and that is something that the media helps promote. Many entrepreneurs focus on the fundraising of their competitors and the objective shouldn’t be to raise as much, but to have more clients than them.

I think many companies could operate with less money, giving more importance to customers instead of VCs. Look at Milanuncios. They didn’t raise any money and they have had one of the bigger exits in Spain in the past few years, selling for €100 million.


derbaix seedrocket

Derbaix is also a mentor at Barcelona-based accelerator SeedRocket


Many say that what for Spain to mature as an ecosystem it needs a big exit. Aquilino Peña, from Kibo Ventures, recently told me that he wishes that Spanish multinationals and large corporations would buy and integrate local startups. Do you agree with those two perceptions?

I totally agree with him and I also think that Spain lacks a culture of startup acquisitions. I don’t like to co-invest with industry partners and large companies, but I’d love to sell our businesses to them. This is something that happens very often in the US or London, but not in Spain.

In Spain the big multinationals, instead of buying these small companies and startups, they decide to try to develop those technologies themselves, wasting a lot of money and building worse products. I think this is related to the fact that many large Spanish businesses are not large because of being better than the rest or more competitive, but because of having received lots of public money.

If you look at the Spanish stock exchange, almost all companies in there are from sectors that have some kind of regulation or have received public money: telcos, energy companies, banks, etc. There are some exceptions with with retail companies like Mercadona, Mango or Inditex, but very few.

In the end what we need is a bigger market to see more deals. I’m not sure that what Spain is missing is a big hit, maybe smaller but more abundant sales will do. We have to realize that you can pretty much count with the fingers on two hands the number of exits that take place in Spain each year.


When talking about entrepreneurship many say that the best thing a government can do is stay away from the sector and avoid affecting the game. However, when there is news that public institutions will co-invest with other private funds, not many complain. Is this a contradiction?

I think there is a consensus that it would be better for public bodies to stay on the sidelines, because with these subsidies what they can do is reward agents who are not the best or the most competitive. So I think it’s better for governments not to co-invest.

But once the money is on the table I think it is important to analyze who they give it to. If they give it to my competitor but not me, I’m at a disadvantage and might have a problem.

Take for example Fondico. I think their selection criteria is very poor and they will end up giving money to funds that don’t deserve it as much as others. An amazing case is Cabiedes & Partners; they have probably the best track record in the country, but they haven’t received any money from Fondico and others have. How is it possible to give so much money to so many people and not to one of the best?


You previously touched on the topic of regulated sectors and in the past you have been very critical of the Entrepreneurs Act passed in Spain last year. What measures do you think the government should have undertaken to promote and help Spanish startups?

I think what the government needs to do is make things simpler, and they often do the opposite. They could have lowered taxes, contributions to social security, the fees that self-employed workers need to pay the State and many more things. But they didn’t.

I believe that in Spain there is also a very big problem that nobody wants to talk about in public because it’s not politically correct, and it has to do with laying off employees. For example, if an employee thinks he might get fired they can ask to work part time or fewer hours -it’s a legal right if they have a child under 8- and it then becomes impossible to lay him or her off. Not many people are willing to admit this happens at companies, but it does, and it’s something that can negatively affect both workers and entrepreneurs. This rule was made to facilitate work-life balance, but in the end I think it causes the opposite.

Other issues in Spain are related to sectors where there is a lot of innovation going on and, all of a sudden, the government comes in to stop it. For example with Uber and the taxi sector, where it is protecting an antiquated industry against the interests of users. The same happens with holiday rentals and we’re now seeing local governments giving fines to normal people for renting their own rooms or properties instead of making everything possible to promote these types of new economic activities.


“I can not imagine entrusting part of the education of my children to someone as ineffective as the government.”


Banks, energy companies, telcos… I wonder what you think of the education system in our country and in Europe as a whole.

Education nowadays is better than 20 years ago, but it’s more separated from the world than before.

My kids go to a school that has a completely different approach to education, giving students more freedom, and that is not controlled by the government. This to me is very important because I can not imagine entrusting part of the education of my children to someone as ineffective as the government.

I think it’s good that public education exists but I think it’s not good that there is a state-controlled education system. An education system that kills creativity, that teaches you to memorize instead of learning and encourages the creation of an army of public workers. And this is worrisome because the current education system has many supporters in Spain. Many go through a system that brainwashes you and makes you a defender of that system, even if it’s as inefficient as the one we have.

For me the ideal situation would be to deregulate the current system and to continue to offer public education for every single citizen, in the sense that they help you study where one sees fit and not in centers that are 100 per cent controlled by the state.


After successful exits with Toprural and Rentalia, you are now working on new startups and also investing. In a previous interview you said that out of 21 investments, 13 were successes. That’s not very common among investors. Is this success real?

I shouldn’t have said that because I was probably wrong. Over the years I’ve learned that when you invest there is a false sense of success, that things might seem to be going well because it’s early. I saw that with my first five investments. I remember talking to someone at SeedRocket and telling him how happy I was because all of my five investments were successes. But then he asked me if I had had any exits and the answer was no. And he simply explained how wrong I was.

So out of the 25 investments I’ve made so far, I don’t think I’m going to make money on 13 of them. There are some that a few years ago looked great and not so much these days, and the opposite is also true. Little by little I’ve learned that the strategy when investing is very different; when you start a company you want to focus 100% on it, and when you invest you want to diversify your portfolio as much as possible.


“The Really Late Booking experience was a disaster for both the entrepreneurs and the investors. It was a total destruction of value on eDreams part.”


When it comes to investing in startups, more entrepreneurs and companies are taking money from corporations and big enterprises. Some say these types of investments are not good for the entrepreneur because the corporation tends not to have the same interests as a traditional VC. You invested in Really Late Booking which took money from Odigeo eDreams and then got sold to Hot Hotels. What was that situation like? What do you think of corporate VCs?

I can honestly say I don’t like to invest with corporates. The Really Late Booking experience was a disaster for both the entrepreneurs and the investors. It was a total destruction of value on eDreams part. They had veto rights to block any deal and interests that were not aligned with the entrepreneur, and a startup should not accept those kind of terms from investors.

There is another big issue with corporate VCs, and that is that sometimes they can block an acquisition of the startup. If the business is going well they can keep it, sending a bad signal to other potential companies that could be interested in acquiring the same startup. And this affects entrepreneurs in a very negative way.

The same happens with the investors. Very few wanted to invest in Really Late Booking because there were no drag-along provisions and Odigeo could block a possible exit. What this causes is that startups end up becoming terrible targets for other investors, destroying a lot of value.

I wrote a post on my blog regarding these type of investments, and the main conclusion I drew was that I’d not recommend any startup to accept money from a corporate that could end up being the company that acquires your business.


derbaix bewa7er unai asenjo

Unai Asenjo and François Derbaix, co-founders of Bewa7er


You’re now active at Soysuper, Aplázame and Bewa7er. And, on top of that, you’re also actively investing in startups. How do you manage your time?

It’s complicated. My idea right now is to allocate 40% of my time to Bewa7er, 10% toy Soysuper and 10% to Aplázame. The rest of my time goes to the companies I’m an investor in.

In the near future I think that I will dedicate more time to those three projects and less to investing. Investing professionally is very time consuming, especially when you need to meet with entrepreneurs and startups all the time. So in the future I’m thinking of investing more money in fewer startups; at the moment I usually own stakes that go from 1 to 2 per cent, but I might start aiming at 5% and no more than 5 companies per year.


It’s often said that you should not try to build a business with friends or family, because those relationships might take a hit. However, you’ve done it on several occasions with your wife. What is that like?

I would also not recommend it. Starting a business with a friend can weaken your friendship and doing it with your partner can also have the same consequences. However, Marta and I have always been good at separating our roles in the companies we participate in. Toprural was my company and Marta helped me with various things; with Rentalia and Soysuper is the other way around. She leads those projects and I support her in any way I can.

Jaime Novoa

Jaime Novoa is the Founder of Novobrief. He is a technology writer turned investor at Madrid's K Fund. He was also a data analyst at