Jorge Combe
Co-founder & Entrepreneur
DD3 Capital Partners
Startup Contributor

Why Start Up a Company?

By Jorge Combe | Thu, 06/25/2020 - 09:38

"Why do you always want to sabotage yourself?"

"I don't know, but I've always wanted to do this and I feel like it's my next step." 

That was our first conversation when I told my wife that I wanted to quit Goldman Sachs in late 2016. Goldman had just appointed me co-Head of Mexico for investment banking, and I was quitting to start DD3 Capital Partners along with Martin Werner, who until then was my boss at Goldman. To my wife’s credit, working at Goldman had always been my dream, but upon achieving the position for which I had been working very long hours, it all faded and lost its shine.

Looking back, it is very difficult to understand why one makes these decisions. Months later, through self-assessment, I realized the difference between achievement and fulfillment. Achievement is not always the ultimate thing that you are looking for; usually it is more for social recognition or to tame your insecurities or complexes. I see it as a reflection of Escher’s never-ending ladders, where you set up false objectives that never make you feel fulfilled. On the other hand, fulfillment is what makes you remain calm and with peace. Internally and deep down, we always know “The Moment,” when to jump from the ship: lack of enthusiasm, when you start struggling on Sunday because the next day is Monday, no challenges, no innovation, little personal and professional growth. And as much as I was making what appeared as achievements to others, there was no fulfillment. What turns you on? What drives you up?

Once you make the decision to become an entrepreneur everything becomes chaotic, a puzzle where you do not know where to start. The most common questions start buzzing in your head: Which sector? Solo founder versus co-founder? What are my strengths? What are the market trends? Where are the opportunities? What funding do I need? When is my time to go to market? This is where the battle begins; with questions, doubts and not knowing if you can do it or not knowing if you are made for this. Once you jump into the void, you get into a new dimension where you leave your comfort zone and forego your monthly salary and corporate perks (“The three most harmful addictions are heroin, carbohydrates, and a monthly salary” Nassim N. Taleb). The biggest excuse is that there is no time, but whenever people tell me they don’t have time, usually that means they don’t have time for the new venture. There is always time, not always will.

In our case, we saw an opportunity to provide financing to Mexican residential real estate developers. We identified a niche opportunity and a huge financing need among the developers. We wanted to beta test our type of credit, so we started small and with a developer in which we had a lot of trust. From there, we began a continuous improvement process, to cover the multiple errors that we knew we were making, and to optimize our analysis and product. We began with only the two of us – no assistants, no employees, no help.  Our capital was the first that we risked, as we wanted to have a good product before raising external capital, but very quickly we realized that it would not be enough and that we would need to reach out to potential investors, and fast. 

Our mission from the beginning was very clear: disrupt and revolutionize the Mexican financial sector, one vertical at a time. Three years after we began our journey, we have become a leading real estate investor with over 50 projects financed so far, and right now during the crisis, we are an active player providing debt, mezzanine and equity for residential projects throughout Mexico.

When choosing where and in what sector to start your venture, you need to focus on where the action is.  Hopefully you chose an expanding industry, but even within industries, you can find stable, stagnant and boring segments, and other parts that are fast-moving water. You want to establish geographically in a city and even in a neighborhood where the action is happening because this will create ecosystems and synergies with other startups, potential clients, and also make it easier to recruit talent as you grow. 

The last decision that you need to make (it doesn’t need to be on day one, but I have seen both types of companies grow and prosper) is the business model: a) decentralized pods with as few people as possible and outsource 100% all non-live-or-die positions (e.g. our core is credit underwriting and analyses); or b) integrated with hierarchical traditional structures. At DD3, we made some early decisions: very small team, only top talent, every division to have an empowered leader and an organization as flat as possible, top compensation but most in variable form aligned to the company’s goals.

The last factor to consider is family and friends. Starting a company is a full-time, energy-draining endeavor, and a roller coaster of emotions. It will certainly have an impact on your personal relationships and your everyday life. It means devoting all of your time, even when you sleep as most likely you will be thinking of the problems you are facing, and when you are awake you will not have time to do anything other than solve the unexpected problems that will arise. Setting these expectations upfront with your family and friends is crucial for them to also be part of it and not a dragging force. 

Once you have made all the decisions and jumped into the water, comes Day 0. This is when the action and the real fun begins. 

Photo by:   Jorge Combe