The practice of Good Governance encourages investment in digital companies

The Good Governance and Shareholders Forum, led by ATREVIA and the IESE Business School, reunited representatives from digital companies and investors in the sector to analyze good practices and current challenges in the round table “Good Governance and digital companies”, in a moment when the rise of these companies and the entrance of investors into these types of projects which are becoming increasingly important.

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The CEO and the managing partner of Axon Partners Group, Francisco Velázquez de Cuéllar; founder and CEO of Next Chance and anchor investor in La Nevera Roja, Nicolás Luca de Tena; the director general of the Spanish Association for Digital Economy (Adigital), José Luis Zimmermann; as well as the CEO and co-founder of Klikin and BuyVip, Gustavo García Brusilovsky agreed on the need for these companies to be prepared to allow new shareholders to enter.

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At the beginning of the debate, Susana Graupera, Financial Communication director at ATREVIA and coordinator of the Good Governance Forum study, stated that this profile of companies is very specific: “They have advanced activities and technological knowledge. They are currently startups or SME’s and the majority of them have only existed for a few years. They also have a founder and a directing team who come very prepared” he explained. “All of this means in the search for investors, it is necessary to have a corporate government that is already holds the same culture of the company”. The co-president of the Good Governance Forum and lecturer from the IESE Business School, José Ramón Pin, highlighted the importance of not introducing a board of directors from the beginning of companies “because it slows down activity development”.

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Francisco Velázquez de Cuéllar stated that “Good Governance unifies the interests of those who execute the decisions in a company and the investors and shareholders in the same way”. This makes Good Governance practices favor investment in digital companies. Additionally, the key aspects to attract investment are the inclusion of Good Governance practices and the generation of dividends for shareholders as compensation to the risk that they assume”. In this way, he concluded that “a founding team that is not capable of aligning the interests of the project with those of the shareholders is doomed and will see their project disappear”.

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Likewise, José Luis Zimmermann has clarified that “digital companies are born with a structure in which at the beginning, it is necessary that a members pact should be formed based on the principles of Good Governance”. “It is not necessary to form a board of directors until the company is no longer new and enters into the growth phase”, added Velázquez de Cuéllar.

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The participants explained that for a newly created company to capture the interest of an investor, they must show that they think like a shareholder, introduce basic norms of corporate Good Governance and understand the value of investment. In this sense, Nicolás Luca de Tena confirmed that “we invest in risky, up-sight projects with a very ambitious team”. Additionally, he added that “the conflict between the entrepreneur and the shareholders is positive in order to generate value and true growth within companies in the digital environment”.

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Additionally, Gustavo García Brusilovsky signaled that currently venture capital funds are limited to investing in projects within some set and known parameters: “Venture capital has disappeared in Spain; currently the risk is assumed by Business Angels”, he explained.

In terms of the challenges in the digital environment, entrepreneurs and investors are in agreement for the need of building an environment that favors creation and growth of new business projects. Spain needs to carry out a deregulation process. In this sense, José Luis Zimmermann signaled that “in Spain, SME’s do not grow by over-regulation, especially in the sectors where it is wondered why they are regulated in general”. According to Nicolás Luca de Tena, “an environment that encourages the creation of digital companies would serve as an engine for the creation of employment, favoring younger sectors. This would serve to solve one of the big challenges in this country”.

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The Good Governance and Shareholder Forum is a joint initiative with IRCO, research centre from the IESE Business School and the communications consultancy ATREVIA. A space for debate was born in order to generate and divulge knowledge in the financial area. Its main objective is to analyze the specific problems of communication between small shareholders and listed companies.

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