Deporvillage: Our First Investment, Our First Home Run & Some Learning Curves

Whether as an investor, an entrepreneur, or in everyday life, luck plays an important role. I think this is one of those strokes of luck. We are extremely happy to announce that, after just a little more than 5 years of founding Samaipata, our first investment ever — Deporvillage — is going to help us return the vast majority of our first fund’s investment to our investors and we still have 13 active companies in our portfolio (with an 80% graduation rate). Our first fund of €29m is set up for promising results.

Thank you

For this success, we are incredibly thankful to Xavier, Angel, and the team, who deserve all the credit for their drive, hard work, and resilience.

We consider ourselves just a partner who has been lucky enough to work with them as their lead investor for the last c.5 years. Together, we did our best to add value, learned plenty, celebrated whenever we could, and even suffered a bit from time to time :) Nobody said this would be easy! But it was really worth it. This post is about that, our side of the story, our learnings, and our thoughts about this amazing journey. Of course, all these have been shared with the Founders and they strongly resonate with our learnings and thoughts. I hope you find them interesting!

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The exit

Deporvillage has been acquired by ISRG, a subsidiary of JD Sports, one of the world’s leading sport retail brands and a listed company with a market cap of €12b. They plan to leverage Deporvillage to become the European leader in the online sports category. Deporvillage is the undisputable leading player in Southern Europe in big sport online categories such as cycling and running, even above Amazon or any other online retailer, with c. €180m in sales in 2021 and growing at +50% annually for the last few years.

The beginnings

A bit more than five years ago, just days after La Nevera Roja was sold, we founded Samaipata, and -in the same week- we got in touch with Xavier (founder and CEO of Deporvillage). We had just read in the press that they had closed the previous year with 6 million euros in sales selling sports equipment online (mainly cycling, running and outdoors), a category with strong secular growth. They had achieved such traction with just a couple of hundred thousand euros in funding, operating in an extremely efficient way from an unusual place (Manresa, a little town in Catalonia), completely isolated from all the VC noise in the big cities and with a strong determination.

After a few phone calls, we decided to meet in person at their offices in Manresa. It was the first time I had been to Manresa and the most unforgettable — we visited their headquarters, their warehouse, smelled their culture and values and, of course, really got to understand the way they thought about their business. Thinking back, I would have defined them as the opposite of a flashy startup back then. They weren’t entrepreneurs because it was trendy or cool, they were seriously passionate and determined. It was clear from the very first moment: Xavier and Angel were both one of a kind and probably -as I’ll explain later- the key success factor in this journey.

After reflecting on our visit and researching into the market, we decided to lead a €2m round — or what we would call a seed round these days.

We didn’t have our first fund raised by then, — we were a startup ourselves — it was just our own money and friends’ and family’s that came from La Nevera Roja. It was even scarier because we were a fund with no fund and with only one investment — quite highly concentrated :)

As the round was too big for us -remember, we had no fund- we started working in a syndicate with our closest network: Mediaset (led by Toni, a friend and previous investor at La Nevera Roja), Hugo Arevalo (great business angel and also a good friend who also brought some of his friends) and our friend Andrea at P101 to complete the syndicate with whom we’ve been co-investing ever since then. As it was the very first Samaipata deal, it took longer than expected but we were finally able to close it — not without a couple of last-minute surprises to handle. (Now that we have closed more than 70 VC deals, I have to say we are more efficient…).

The learnings

The more I learn about early-stage investing, the more I think this game is about identifying superpowers, extreme personality traits, founder-market fit, and founder-strategy fit. Obviously, the Trend matters, the Why now matters, the size of the market matters, and luck matters, but much of the success will be driven by the ability to do a few things so extremely well that it seems crazy. Sometimes this ability is linked to certain personality traits and/or skills of the founders/teams. Sometimes it is just a matter of laser-sharp focus (some sort of tunnel vision) AKA picking your battles to win the war — something that I find more and more relevant these days.

One of the reasons I think this is paramount is because, in the early days, these characteristics of the founding team are hardwired into the company’s culture and DNA. Deporvillage’s success has a lot to do with that.

More specifically, there are 5 values that I think played a critical role: i) Frugality, ii) Independent thinking iii) Passion iv) Ruthless decision making and v) Attention to detail coupled with a data-driven mindset and a hands-on mentality. Of course, all of these are beside the fact that Deporvillage rode two strong secular trends — growing online penetration and sports activities — but I think those are secondary in any case.

Here are my thoughts on each of them…

i) Frugality: When I first saw this picture from the early days of Amazon (although it was already a +$1b co.) I instantly thought of Deporvillage. The picture completely captures one of the key values at Amazon: Frugality, which has also been one of Deporvillage’s values from the beginning and I truly believe it is one of their key success factors.

Frugality may seem uncool or even weird most of the time, but I think it is a value that is underrated these days and so it has become a superpower for some companies.

Being frugal throughout the lifetime of a company is really tough. On many occasions, such as after raising a large round, it is really hard to keep this frugal and down-to-earth mentality. Having a lot of the money in the bank account can lead to reckless spending, big mistakes, a lot of noise, a false sense of having ‘made it’ etc. and that all leads to a waste of resources and lack of focus — sometimes totally derailing or even causing bankruptcy.

Deporvillage kept frugality at all times; those restrictions and constraints bred resilience and ultimately led to great economic value creation for the founders and for investors.

ii) Independent thinking and contrarianism: as Ray Dalio says, as an investor or as an entrepreneur you need to bet against the consensus and be right. Earning relevant money in favor of consensus is close to impossible. Consensus is built into the price or — in the startup world — consensus also determines how much capital is available for startups in a given market, therefore destroying margins and ultimately gains in most cases.

It is really hard to be an independent thinker, the most you can do is strive for it. We are wired to follow the crowd but those entrepreneurs — or investors — who avoid it are the ones who are able to create economic value, as in the case of Deporvillage. Deporvillage showed no intent to follow what was trendy or cool, they focused on what mattered. There were few things at Deporvillage that were done ‘by the book’ or following the trend of the moment in the startup world, sometimes this was probably a mistake, but in the long run it was the right thing to do. I think stubbornness is another concept very much linked to this.

Some of the best entrepreneurs are highly determined and stubborn, able to keep going against the consensus and stay laser-focused. As a leader, this is really tough, and it is clearly one of the strengths of the Deporvillage founding team.

iii) Passion: I remember thinking of this just a few months ago. I was speaking over the phone with Angel from a cab, and he was telling me how he was planning to reduce a few cents per order in a certain process of the supply chain and to open up some new suppliers. At that time they were close to 10 years in the journey, making more than 150 million in revenues per year, way above 10 million EBITDA per year and growing at triple-digit annually, but he still told me that with the same passion a first-time entrepreneur has when they pitch during the very first months of the journey.

I think that passion is critical, it gives you the energy and the drive you need when things go south, and things always go south, at least temporarily.

iv) Attention to detail coupled with a hands-on mentality and a data-driven mindset: My partner Eduardo always says that “retail is detail”. I think this has been another key value at Deporvillage and another sign of founder-market fit. Whether it was the fourth line of the 20th clause of the Shareholders agreement or the price of a given SKU, attention to detail coupled with a hands-on mentality has been one of the key characteristics of Deporvillage culture. Add that with a data-driven mindset and the cocktail is very powerful.

These days everybody claims to be data-driven, but I don’t think it’s always true. In the case of Deporvillage, I can confirm that numbers played an extremely important role in its culture.

Founders had a 360 degree quantitative understanding of the business, from orders to margins and cash flow. In fact, Deporvillage has one of the best monthly reporting practices (financial and analytical) amongst our portfolio companies and it may be a coincidence, but I think not.

v) Ruthless decision making: In business and especially in the startup world, there are always plenty of tough decisions to be made. From laying off people to managing tough conflicts… sometimes, it comes with sleepless nights, really bad feelings, pain, and suffering.

But a strong leader needs to be determined and make the right decisions for the company in the long run — even if it hurts.

This is something that the founding team — especially Xavier, as CEO — did very well, sometimes against our own opinion, and he proved us wrong. We respect him very much for that.

Obviously, these are just a subset of success factors that are applicable in this specific case. Each market is different, each startup is unique and each team has different superpowers. What I do believe is key is the alignment of those superpowers and values with both the Market you are competing in and the go-to-market strategy you define.

Final thoughts on the last mile with the Founders

While the whole Samaipata team and I have been very involved since the beginning of our holding period 5 years ago, later on — around 2 years ago — when Xavier asked me for help in the sale process, I told him that my partner Eduardo Díez-Hochleitner (who has been involved in hundreds of M&A deals throughout his career) could be the right person for that role. Since then, Xavier, Angel, and Eduardo have become good friends and have been working elbow to elbow in the M&A process for the last 2 years. Meeting potential buyers across Europe, dealing with the rest of the investors, and fighting for the best interests of the company. As you can imagine, a process like this one is full of tensions, challenges, heated discussions, highs, and lows, but it is worth it.

The most rewarding part for us at Samaipata — besides the great exit — is that despite the challenging journey we’ve been through, like any startup journey, we now have an amazing relationship with Xavier, Angel, and the team. We have mutual respect and we will be sure to (physically) celebrate together soon.

I hope we can keep backing more people like Xavier and Angel and keep healthy and long-lasting relationships over the long run

Thanks, Thanks, Thanks

Acknowledgments:

Apart from the obvious thanks (Founders and team Deporvillage), I’d also like to thank previous business angels who backed the business at an -almost- PowerPoint stage (i.e the seed rocket crew), the business angels who joined the seed round with us (Hugo and the rest), our friends and co-investors (Mediaset and P101), the whole team at Samaipata and especially to my partner Eduardo for the endless working hours during the last 2 years of the process and for letting all of us learn from your experience and values.

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‍At Samaipata, we are always looking for ways to improve. Do not hesitate to send us your thoughts. We strive to partner with early-stage founders and to support them in taking their business to the next level. Check out more ways in which we can help here or for all our other content here.‍

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