A title that will cause noise for many, will disturb them, because it breaks the traditional patterns learned about investments and project formulation. However, I want to give you a story, a fiction, but based on real events to illustrate how this statement has meaning and sense.
Let's talk about the case of a young adult, already entering maturity ‒ about to turn 30, let's call him Pancho Pérez, in a very cosmopolitan city in his country; who decides to leave his executive position in an investment firm on the stock market, move to another less hectic city, in the 90s of the XNUMXth century, draw up a business plan and start with a company called today e-commerce.
His idea, starting with a list of 20 products - which he then narrows down to five to finally keep one - is to create his internet sales site.
He needs to raise financial capital, so he proposes to a panama, with a ticket, the business, but not before warning him that the risks of failure are around 70% or more. The friend asks him how much profitability you can offer ?, and he, honestly, confesses that zero, at least for some time, only that he does not know how long. You cannot even predict how much it would be when you reach it. The friend who has the habit of obtaining profitability of 50% or more, in a short time, in commercial intermediation businesses, tells him that he is not crazy. So, Pancho keeps asking those who know him, his closest circle, who will accompany him on this adventure; he manages to raise the sum of US $ 250.000, mostly from his parents.
The company started with an online bookstore, in just two months it managed to sell throughout the country and in 45 more countries, with weekly sales of US $ 20.000, its growth skyrocketed.
After 27 years, the company is a global technology giant, with more than 1,2 million employees and US $ 386 billion in annual revenue. Only nine years later, he managed to exceed expenses with his income, what they call the break even, with just US $ 35 million, which sounds like little when compared to the income of more than US $ 5 billion obtained; In other words, it achieved a profitability that did not even reach 1%, averaging 2,67% to date, this before deducting taxes, amortization, depreciation. It may be little for profit hunters, but some indicators are impressive and show the other side of the coin, such as: the company's share that went from US $ 16, in May 1997, when the public offering was made. initial stock, at US $ 3.478, by September 3, 2021, more than 200 times; with a capital market valuation of more than US $ 1,7 trillion and exponentially growing income for more than 25 years; with a brand valuation of US $ 684 billion for the year 2020 (Kantar Brandz report 2021), among many other indicators of value creation, tangible and intangible.
The friend who saw the trajectory of Pancho, learned, and told himself now will not be so incredulous, he will be more diligent and audacious. This time, he is approached by other new panas, also young - 27 years old on average - the kind they call nerds, let's call them Charlie, Esteban and Alí. Charlie is a design specialist, he works with something they call user experience (UX in English), those that seek to achieve the greatest "usability" when designing a design solution, knowing the potential user better, that is, putting himself in their shoes to gain a better understanding of your need and context; and Estebán and Alí, two computer engineering students; Estebán, an expert in information technology infrastructure management, and Alí, a skilled software developer. These young people are employees of a successful technology company but want to start their own business, they meet the friend in a meeting with investors and they tell him about the idea they have to develop a platform to upload and share videos, they ask him if he wants to invest. The friend, no longer asking about how much profitability they can offer, has learned its lesson. What he asks you is how do you plan to monetize that business? What is the income they estimate to obtain ?, to which the young people confess that they hardly have hypotheses of possible sources of income, but without security of anything, that first they must start and test the ground, test the value proposition, the product or service, achieve what they call traction. The corduroy says to himself that there is a lot of risk and marks the mile.
The young people got capital to start up and after 13 months they had already raised an additional US $ 83 million in financing; After launching its beta version in May 2005, three months after it was founded, it already had a daily traffic of 35.000 video viewers; After 6 months, the site already hosted 25 million videos uploaded by common users and recorded about 20.000 daily video uploads. Today it has a traffic of just over 22 billion visits per month. They occupy the number 2 position in the Alexa ranking of the most visited sites in the world. 21 months after it was created, it was acquired by a technology giant for US $ 1.700 billion. In 2020, only in advertising generated US $ 19 billion, with a brand value of a little more than US $ 47 billion (Kant Brandz report 2021)
The question that the friend is asking is: then, what is the criterion?
We could say that in an undertaking the uncertainty is great and inevitable, as in all innovation; that in the early stage, it is more important than profitability and income or monetization, the idea and the team that make up the initiative, how much have they studied and matured the idea? It is more an act of faith, of trust in the talents; In the later stage, the following are key indicators: the added values created, their exponential growth; the organization, its operational and financial performance; and a strategic plan, among others.
The first story resembles a synthesis of the Amazon story and the second, the YouTube story. They, its founders, did not invent anything new, they only got new ways of doing it, they innovated. The established technology majors, no matter how hard they tried to copy them, were not successful. "The one who hits first, hits twice".
Innovating, undertaking requires a change in the mentality of investors in Our America. The dilemma is to continue with modernized economies, but only in consumption, or to make the leap towards a modernization of a new type of production? To live on income or to live on balanced and harmonious productivity?
The street is a teacher, life will come. Let's throw fear behind us and dare to undertake.